BusinessDay 22 Oct 2018 by BusinessDay

news you can trust I **MONDAY 22 OCTOBER 2018 I vol. 15, no 166 I N300

businessday market monitor FMDQ Close

Everdon Bureau De Change

Bitcoin

NSE

Foreign Exchange

Foreign Reserve - $42.7bn Biggest Gainer Biggest Loser Cross Rates - GBP-$:1.31 YUANY-N52.77 Nestle Dangcem N210 1.94 pc N1370 -2.14 pc Commodities 32,841.69

Cocoa

Gold

Crude Oil

US $2,156.00

$1,229.80

$80.33

₦2,281,580.80 Powered by

-0.15 pc

Buy

Sell

$-N 359.00 362.00 £-N 468.00 476.00 €-N 409.00 417.00

Market I&E FX Window CBN Official Rate Currency Futures

($/N)

Spot ($/N)

364.02 306.50

0.10 12.91

0.25 13.60

0.04

NGUS DEC 26 2018 364.27

Rising population, dwindling jobs put Nigeria on brink of socio-economic crisis LOLADE AKINMURELE

obs are shrinking in Nigeria, despite a fast rising population, fanning fears that a country on track to becoming the third most populous nation in the world by 2050 is on the brink of a deep socio-economic crisis. In a sign of thinning jobs, companies listed on the Nigerian Stock Exchange (NSE) employ less number of people today than they did nine years ago in 2009 when Bloomberg started tracking the number of people employed by listed firms. Data compiled by BusinessDay from the Bloomberg terminal show that listed firms employed 154,403 people as at the end of September 2018, the Continues on page 46

fgn bonds

Treasury bills

15.13

NGUS MAR 27 2019 364.72

10 Y 20 Y 0.02 -0.03 15.29

15.14

NGUS SEP 18 2019 365.62

2019: Uncertainty in CUPP over Obi’s emergence as VP ... as consensus presidential candidate emerges soon OWEDE AGBAJILEKE, Abuja

T L-R: Biodun Adesanya, MD, Degeconek, technical consultants to Polaris Bank Limited; Adetokunbo Abiru, GMD/CEO, Polaris Bank Limited; Amieyeofori Felix, executive consultant, operations, Pan Ocean Oil Corporation (Nigeria) Limited; Seyi Oladapo, CFO, Pan Ocean Oil Corporation (Nigeria) Limited, and Tutu Alu, group head, corporate banking, Polaris Bank Limited, at the facilities tour of Pan Ocean’s flow station and Ovade-Ogharefe Gas Processing Plant II in Delta State.

he joint presidential PDP ticket of Atiku Abubakar and Peter Obi has created uncertainty over moves by the Coalition of United Political Parties (CUPP) to field a single presidential candidate for the 2019 general elections. Both Atiku and Obi are PDP presidential and vice presidential candidate. BusinessDay gathers that while most of the coalition members have agreed to accept Atiku Continues on page 46

2 BUSINESS DAY NEWS

C002D5556

Monday 22 October 2018

How Nigerian businesses can prepare for an uncertain future – Nestle CEO MICHEAL ANI

ith the heightened political tension in Nigeria and uncertainties in the build-up to the 2019 general elections, Nigerian businesses can still thrive if certain measures are put forward by the firm, Mauricio Alarcon, Nestle’s CEO, said at the ninth edition of BusinessDay CEO Forum, recently in Lagos. “For a company to operate in a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment, it must apply four main strategies, which include proximity, innovation, measurement and direction,” Mauricio said, while giving the keynote address at the event. On proximity strategy, he says CEOs and the management of firms must ensure they are close to the business, and understand what happens at every level of the organisation. This also includes breaking down the limiting structures and hierarchies. Dismantling the ‘oga-at-thetop’ system, engendering one-on-one interaction and making real connections by being in touch with reality – with this, Mauricio says management of companies will get to know what is really going on by connecting with their people on a real level. On innovation, he describes it as agility, rapid testing and rapid prototyping, speed to adapt, build systems and processes that encourage and reward innovation “The success of a company is not the CEO but the employees in the team. Set up a structure that enables innovation at every level of the organisation,” the FMCG boss says. On measurement as a strategy, he notes that management of firms should leverage technology, data, continuous measurement and analysis in the operations of their firm. In a VUCA world, he notes that management in setting the direction of their company, should no longer depend on telling the future or on long-term planning, but should be about setting out a clear purpose and vision with guiding principles, that possess the agility to adapt to the realities of their environment, working out the path with people as the company moves on. “It is not the largest or most intelligent companies that will survive, but those who are able to adapt to the environment through innovation,” se states.

Nestlé is the world’s largest food and beverage company in the work with operations in over 180 countries around the world and has been in operation for over 150 years with over 2,000 brands. Its Nigerian arm has been over 57 years in operation and with staff strength of over 2,300 direct employees, three manufacturing sites, eight branch offices and a head office located in Lagos. Mauricio discloses that the firm has continued to succeed due to combination of factors that have been put in place, ranging from longterm perspective, development of people, continuous brand building, quality and trust, development of the community it operates, creating of partnership, nutritional products and consumer centric innovations, among others. Nestle, he says, sources over 80 percent of its material locally. Also, the company has reached out to over 34 million households with micronutrient fortified products. Over 30,000 local farmers, he says, have been empowered to improve grain quality over the last three years. The firm has also been in the business of empowering youth with technical skills at the Agbara and Abaji plants. He notes also that over 2,100 microbusinesses have also been empowered through ‘My own business.’ A critical look into Nestle’s financials shows that the company performed better in the first half (H1) of 2018 than the same period in 2017. The FMCG firm reported a profit after tax (PAT) of N21.5 billion in H1 2018, representing a 30 percent increase from the N16.5 billion that it reported the same period in the previous year, on the back of a relatively stable exchange rate environment that was witnessed in the first half of the year 2018 in Nigeria. As a result of the stable value of the naira against the US dollar, the company was able to cut down heavily on its Net foreign exchange loss by 99 percent during the period. As of H1 2018, Net foreign exchange loss was as low as N50.19 million, compared to as high as N5.17 billion it lost due to foreign exchange in H1 2017. Interest expenses on financial liabilities and finance expenses also declined by 52 percent and 85 percent, respectively. Analysis reveals that Nestle reduced levels of borrowing from financial institutions and intercompany loans.

L-R: Adekunle Oyinloye, MD/CEO, The Infrastructure Bank plc/guest speaker; Mercy Oluwatoyin Ojo, chairperson, Association of Professional Women Bankers (APWB); Uche Olowu, president/chairman of council, Chartered Institute of Banker of Nigeria (CIBN); Funke Ladimeji, chief operating officer, FBNQuest Merchant Bank/chairperson, dinner planning committee, and Kayode Akinkugbe, MD/CEO, FBNQuest Merchant Bank/keynote speaker, during the 2018 of APWB annual corporate dinner with the theme “Funding Infrastructure Development in an Emerging Economy” in Lagos, at the weekend. Pic by Olawale Amoo

9mobile sale: Stakeholders question silence on Teleology takeover ... as telco loses about 1m subscribers monthly Jumoke Akiyode-Lawanson

xperts in the telecoms industry have raised concerns over the drawn out sale process of 9mobile, as Teleology, preferred bidder, awaits operationallicenceandfinalconclusionofthe deal by the Nigerian Communications Commission (NCC). The delay and postponement of the deal finalisation of 9mobile, which is constantly losing subscribers and is experiencing revenue downturn, is holding back the growth of the country’s telecom sector, which contributes about 11 percent of economic output. “Right now, the drawn out process will send out the wrong signal to likely and future investors. The uncertainty, doubt surrounding the way and manner that this is being managed may already set in fears that Nigeria is becoming a very difficult and very risky investment environment,” Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), told BusinessDay. According to Teniola, there are 195 different countries in the world seeking funding from investors, and

although we have a large population, other countries with same population size or greater are more attractive in terms of doing business. Although Teniola confirms that the deal is in its final stages leading to closure, however, “it is taking longer than we all expected but we are hopeful that it will happen soon because I don’t think an approval from the Security and Exchange Commission (SEC) will be an issue.” Statistics from NCC show that 9mobile currently has 15.4 million subscribers, a drastic decline in numbers from the 21.6 million subscribers recorded in November 2016. The debt ridden telecoms operator has seen a steady decline in numbers, from 2017 after the initial investors in Etisalat (EMTS) pulled out and the telco was taken over by the owed banks. The telco continues to lose about 1 million subscribers every month since the crisis, as numbers dropped from 20.1 million in February 2017 to 19 million in April, 18.5 million in May, 17.6 million in July and by December 2017, the telco had 16.9 million subscribers using its network. The loss of subscribers continued throughout 2018, and as of August 2018, when the figures were

last updated on the NCC website, the telco had 15.4 million subscribers, 9.6 percent market share of Nigeria’s telecoms sector. Industry stakeholders are worried about the future of 9mobile and the possible impact of these huge losses, not just to the industry, but also to the Nigerian economy. “At the time that we went in to pitch for 9mobile, because we were also interested in buying the company, the figures in their data room show that the company had only 13 million subscribers in December 2017 due to the crisis as opposed to the numbers recorded by the regulator. This is a big drop from the about 21 million subscribers that the telco recorded in past years. “9mobile have lost more than 7 million subscribers and they have a network built for at least 21 million subscribers, what will happen to all this capacity, will they ever be able to gather that many subscribers without some sort of consolidation or partnership?” Ernest Akinlola, CEO of nTel, said in an interview.

•Continues online at www.businessdayonline.com

Nigeria to miss out on $3.3trn investment in oil, gas failed reforms Olusola Bello

igeria will miss out on a total planned capital expenditure (capex) of $3.3 trillion across oil and gas value chain from 2018 to 2025, unless it carries out over due reforms of the sector. The country is already missing out as total capex of $545 billion is expected to be spent in 2018, but will elude Nigeria because of lack of policy clarity in the sector. Of the $3.3 trillion planned capital spend, about 45 percent would go on midstream projects, and 22 percent on crude oil refineries while 24 percent is expected to be spent on the major planned and announced production fields. The petrochemicals sector is expected to account for 9 percent

of the global total. Petrochemicals are set to drive growth in world oil demand and Nigeria can benefit in the long run, if it acts fast and creates the enabling environment to attract private sector investment into its petrochemicals industry, analysts say. Nigeria built three petrochemical plants in Eleme, Warri and Kaduna. These plants have combined capacity to produce 240,000 metric tons of polyethylene; 130,000 metric tons of polypropylene, and 18,000 metric tons of carbon black per annum. Eleme Petrochemical Company, which the country sold to Indorama Petrochemical, is the only plant functional and it is operating at an average capacity of 99 percent. The company recently completed largest single-train fertilizer plant in the world. While privatised Indorama is building a pet-

rochemical hub in Africa at Eleme, the other two governments owned plants are currently moribund. Dada Thomas, immediate past president, Nigeria Gas Association, and also the managing director of Frontier Oil and Gas, said for Nigeria to be able to benefit from this huge investment opportunity her environment must be attractive to investors that have money, and there should be a win-win situation that must be created by the government for the country and the investors. The non-passage of the Petroleum Industry Bill could deter such huge investment from coming to Nigeria. The country, he said, must keep to the sanctity of agreements, which is very key in business dealings. “We must improve our reputation in such a way that investors must have access to justice when they go

court to seek redress over certain matters. Also, improvement on security of lives and properties so that investors can come and everybody does business and makes reasonable returns,” Thomas said. Speaking in the same vein, Godwin Izomor, managing director of MG Vowgas, said creating an enabling environment by the government would attract investments into the oil and gas industry, saying there was no structure on ground that would enable Nigeria benefit from such global investments. He urged President Muhammadu Buhari to reconsider his position on the Petroleum Industry Bill (PIB) and sign it into law, as this would expose Nigeria to a lot of investment opportunities. Nigeria, he said, must reduce the current political tension to the barest

minimum. “Also, the frequent policy summersault in the country, which does not give investors any confidence to come and invest in the country, should be reduced.” Bank Anthony Okoroafor, president, Petroleum Technology Association of Nigeria (PETAN), said the government should pass the PIB completely so that confidence could be restored and our oil and gas fiscal terms be clear to all investors. Investors are not sure of the fiscal terms. Research conducted by the University of Benin, Nigeria, identified the reasons for collapse of the petrochemical plants to include irregular importation of feedstock, poor maintenance and lack of technical and managerial capacity.

•Continues online at www.businessdayonline.com

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

8 BUSINESS DAY NEWS

C002D5556

Monday 22 October 2018

CSOs task Presidency, National Assembly on pending anti-graft laws KEHINDE AKINTOLA, Abuja

oncerned Nigerians and civil society organisations have called on President Muhammadu Buhari and the leadership of National Assembly to prioritise the enactment and implementation of relevant anti-corruption legislations, particularly before the National Assembly and waiting presidential assent. The five bills are: Proceed of Crime bill, 2017; Mutual Assistance in Criminal Matters bill, 2016; Money Laundering (Prevention & Prohibition) bill, 2017; Public Interest Disclosure & Witness Protection Bill, 2017 and Whistle Blowers Protection bill, 2016. BusinessDay checks reveal that the Mutual Legal Assistance is an Executive bill, which has been passed by the National Assembly but is awaiting President Buhari’s assent. The stakeholders allege that President Buhari’s refusal to assent to the harmonised Proceed of Crime bill, which was passed and transmitted by the National

Buhari to unveil ECOWAS border post at Seme on Tuesday JOSHUA BASSEY

resident Muhammadu Buhari and his Republic of Benin counterpart, Patrice Talon, will on Tuesday perform the official handover of the new Economic Community of West African States (ECOWAS) border posts at Seme-Krake and Neope-Akanu in Badagry. A statement on Sunday signed by Habib Aruna, chief press secretary to Governor Akinwunmi Ambode of Lagos State, said the President would be accompanied to Seme border by Governor Ambode. According to the statement, all necessary arrangements to ensure hitch-free unveiling ceremony have been firmed up. It noted that the governor would receive the President at the airport and thereafter proceed to the event venue. “Already, all necessary security and logistic arrangements have been concluded by the state government in partnership with relevant Federal Government agencies. “To this effect, the Lagos State government is soliciting the usual support and cooperation of residents throughout the visit,” the statement said.

Assembly on assumption of office in 2015, constitute a major setback to the ongoing fight against corruption. While giving update on the status of various antigraft bills before the House, Kayode Oladele, chairman, House Committee on Financial Crimes assured that the House will fast-track the passage of the bills before the end of 8th session of the National Assembly in June, 2019. “I can tell you that section 14 of the Nigerian constitution is very clear on this, that the security and welfare of Nigerians shall be the primary responsibility of the

government. So when talking about security and welfare, we cannot talk about both when we have corruption in place, because corruption is antithetic to the movement. Definitely what you are doing is something that is very clear to everybody within and outside the government. “I can also assure you that the five bills that you are talking about are receiving attention. You want us to pass these bills? Let me start with the Process of Crime bill. I will tell you the Proceed of Crime bill was introduced in the House of Reps by me so

I sponsored it, and I worked with all the civil society organisations on this matter and also the Attorney General of the Federation before I sponsored the bill. “I can tell you today authoritatively that the Process of Crime bill has been passed by the National Assembly. It has passed third reading, and we (House) don’t have anything to do with it again. We have sent it to the Senate for concurrence. Even though we have sent to the Senate, the Senate has passed it through the second reading and it is before the Committee of Whole House.

“But because of urgency, because we have passed it, the Senate will have to concur leaving the Committee of the Whole House activities aside now. So it is awaiting concurrence by the Senate, and ones this is done, it would be sent and transmitted to the President for his assent. You all know that it is in place of Process of Crime bill that we have the Executive order. “Once that is done definitely the Executive Order would be taken care of, because some people have been asking me questions on that, but as it were today, Process of Crime bill has been

passed by the House, sent to the Senate for concurrence and that concurrence bill, will come as soon as before long so that the President can assent to it before the end of this eighth Assembly. “On the issue of the Whistle Blowers bill, again the Whistle Blowers bill is a bill that I sponsored in the House of Reps, and I did not just sponsor it, we worked together. We had a stakeholders’ forum where we all agreed on the bill. I introduced the bill and it has passed second reading before the Committee on Financial Crimes and for public hearing.

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

C002D5556

COMMENT

comment is free

Send 800word comments to comment@businessdayonline.com

Morality versus indifference

BASHORUN J.K RANDLE Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants Continued from last week

he classic summation of the consequences of the conflict between morality and indifference has been provided by Pastor Martin Niermöller’s vintage poem: “first they came for the socialists and I did not speak out – Because I was not a socialist Then they came for the trade unionists, and I did not speak out – Because. I was not a trade unionist. Then they came for the Jews and I did not speak out - Because I was not a Jew. Then they came for me – and there was no one left to speak for me.” Those poignant lines will haunt us for eternity as Martin’s confessional testament regarding the cowardice of German scholars who witnessed at first hand the rise of the Nazis (led by Adolf Hitler) to power and the subsequent extermination of their targets, segment by segment and group after group. Thankfully, not everyone has taken the oath of silence, the first Military Governor of Plateau State, Nigeria, and a leader of the defunct National Democratic Coalition [NADECO], Ambassador (Air Commodore) Dan Suleiman (Rtd.) has served us notice: “Life back in the days of General Sani Abacha, Nigeria is on the edgeof a precipice. Nigerians are divided along various fault lines – religions, tribal and so on. It is not a situation where

EMEKA GBULIE Gbulie, a public affairs analyst, writes from Abuja

ome weeks back, the Murtala Muhammed Airport 2 (MMA2) was shut down by the aviation unions over their dispute with the operators of the terminal. Airlines, Banks, shop owners and services providers at the terminal said they lost over 1.5 billion for what they described as ‘insensitive picketing’ of the terminal. Unfortunately, the unions do not understand the difference between picketing and shutting down. While you have a right to picket, you do not have the right to shutdown the operations of key player such as MMA2. This is a terminal that plays an important role in the economy of our nation and these unions still decided to shut it down irrespective of a subsisting court injunction. How lawless can we be as a nation? In a lawful country those union leaders should be in jail by now. In other climes, you would expect the main regulator of the sector which is the Nigerian Civil Aviation Authority NCAA to have intervened before the matter got to the extent of picketing but not in Nigeria. It still baffles me how the NCAA and FAAN looked the other way, while their staffs who are known members of these unions shutdown a critical service industry? The NCAA watches

anybody will be happy to live in. we have had better days in Nigeria before but these are worse times.” We also have the incisive intervention of a former Governor of Anambra State, Nigeria, Mr. Peter Obi who declared on CNN: “Nigeria’s economy remains on life support. The national debt may spiral out of control. When you keep borrowing for consumption, it gets to a stage when you cannot control it. Some people take the simplistic approach of comparing debt to GDP [Gross Domestic Product]; but our GDP is low. Therefore, we should be looking at debt to revenue.” It was “ThisDay” newspaper of September 21, 2018 which spilled the beans with its front-page report: “NBS: Domestic, external debts hit N15.63 trillion, U.S. $ 22.08 billion in Q2” “Nigeria’s total domestic and foreign debt stock stood at N15.63 trillion and $22.08 billion respectively, as at June 30, 2018, the National Bureau of Statistics (NBS) has stated. This is as the statistician general of the federation/chief executive, National Bureau of Statistics (NBS), Dr. Yemi Kale, Thursday promised that the days when agencies of government published poor statistical figures and got away without questions being asked were gone. According to the Nigerian domestic and foreign debt (Q2 2018), posted on its website, out of the N3.48 trillion total domestic debts borrowing by states, Lagos accounted for 14.88 per cent, while Anambra had the least debt in the category with a contribution of 0.08 per cent to the total domestic debt stock. However, the foreign borrowing consisted of $10.88 billion from multilateral agencies; $274.98 million from bilateral (AFD) and another $2.12 billion bilateral from the Exim Bank of China, JICA, India and KFW, while

‘

Nigeria’s economy remains on life support. The national debt may spiral out of control. When you keep borrowing for consumption, it gets to a stage when you cannot control it

’

$8.80 billion was commercial. Lagos State had the highest foreign debt profile among the 36 states and the Federal Capital Territory (FCT) accounting for 34.17 per cent and 6.57 percent in national share. Its external and domestic debts were recorded at $1.45 billion and N517.36 billion or 14.88 per cent of share in state total. Edo accounted for 6.57 per cent of external loans at $279.02 million; Kaduna, 5.48 per cent or $232.96 million; Cross River, 4.56 per cent or $193.79 million and Bauchi, 3.18 per cent or $134.90 million. The foreign debt profile of Bayelsa, Benue and Borno stood at $57.25 million, $34.75 million and $22.29 million respectively. The Statistician General of the Federation/Chief Executive, National Bureau of Statistics (NBS), Dr. Yemi Kale has promised that the days when agencies of government published poor statistical

figures and get away were gone. He noted that the public has become better enlightened as “they question and interrogate every figure or information we publish.” Speaking at the opening of the sensitisation workshop for the conduct of the 2018/19 National Living Standard Survey (NLSS), which held in Keffi, Nasarawa State, he harped on the need for quality data representation going forward. “As Statistician General of the Federation, I can easily estimate that, I spend about 50 per cent of my working day, and sometimes weekends, explaining and defending numbers or information that we publish in NBS. “People now want to know where we got the numbers, how we got the numbers and what the numbers mean for them as individuals, businesses or for their communities. “While we welcome this new enthusiasm and public engagement in statistics, we also have no alternative but to do all in our powers to get the best quality numbers possible.” He said the NLSS had become critical in view of all the visible socio-economic challenges being experienced in the country, particularly security, unemployment and environmental constraints. He said government and partners at various levels require the household survey “to help them understand what is going on, particularly how these challenges are affecting households and communities in the country. “If we ever needed to generate reliable and good quality information, that time is now.” According to the SGF, the survey which determines poverty index was critical not just for the statistical system but also the country in general. Kale said: “Among the plethora of socio-economic variables and indicators it provides, it is from this exercise

that we derive statistically sound indicators for measuring poverty and inequality in Nigeria. “It also serves as a major source of data for the 2030 Sustainable Development Agenda for tracking Nigeria’s attainment or otherwise, of the Sustainable Development Goals (SDGs).” However, he said the NLSS, would for the first time be carried out using electronic means of data collection. Also, the daily calorie threshold used in computing the poverty rate had been dropped to 2,500 from the previous 3,000 calories per day in the current exercise. He said: “The last time this survey was carried out was 2009/2010, it’s meant to be done every five years but due to funding and some challenges we were not able to conduct it in 2014. We have been working on this for three to four years. “It’s a year long stuff, ordinarily you will not find poverty estimation until 12 months and the reason is, as we all know we all have spending patterns at home and they are not the same every month, so we have to take the overall expenditure for the whole year so that the periods of high and low expenditures are captured. “So it’s going to take one year for us to get the final poverty and inequality numbers. But like I mentioned earlier there are some indicators that we can be publishing quarterly as we go along but the poverty numbers will not be ready until 12 months.” What has sent alarm bells ringing is the wake-up call by the Bishop of Sokoto Diocese, Nigeria, Bishop Matthew Kukah on the theme: “HOW to make democracy work for africa”

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com

Minister, NCAA, and police complicity in MMA2 shutdown everything in limbo and acts like it doesn’t exist. When the chief regulator looks the other way when it should stamp its authority, then we are in for more shockers! Now this is the main problem with concessions in Nigeria. If a major investor in the mold and pedigree of Dr Wale Babalakin can be subjected to such humiliation, how do we expect to get more local investors, let alone foreign investors? We are yet to recover from a failed Nigeria Air project which we all know never got a single investor and the NCAA and FAAN are still adopting a ‘siddon look’ style? From the look of the whole MMA2 and Union brouhaha, it is obvious the NCAA, FAAN and the Police were all in support of the impunity exhibited by the unions. How else can one describe the inability of the police to disperse an unlawful gathering / trespass at MMA2 even with a court injunction? And they were all happy seeing outlets at the terminal shut, passengers missing important business or professional engagements, banks shut and airlines losing millions and threatening to downsize? Are we not tired of the level of job losses under the present administration? It was such a dark day for Nigeria, concessions and the rule of law! Recently, an aircraft belonging to overland caught fire while undergoing maintenance at its hanger at the General Aviation Terminal

(GAT). The video of how the aircraft burnt beyond repair went viral and it exposed the inefficiency of FAAN and NCAA. It was a shameful sight to behold. I felt like crying for Nigeria and the aviation industry while watching the video and I asked: what if there were passengers onboard, we would have lost precious lives as a result of the ineptitude of these agencies. Voices in the background of the video confirmed that, apart from the fact that the fire fighters got to the hanger late, they ran out of water. Shame! And this is supposed to be a Category 1 Airport recently certified by NCAA! I am inclined to request what emergency management program the NCAA put in place to manage such emergency situations? When was the last audit inspect carried out on the hanger? Was this part of the audit carried out by NCAA? How did the hanger get an AMO certificate? FAAN is complicit in all of these as performance of the airport fire service fell short of a CAT 1 standard. Our CAT 1 regulators NCAA and FAAN need to tell us when last they trained and bought equipment for their emergency services officers and staff? Who knows, they may have embezzled the monies set aside for these programs and were caught unaware with the recent fire incident. A supposed Category 1 airport as large as what we have should have a minimum of 4 fire service teams; 1 each at mma2, GAT, MMIA and Cargo to meet the ICAO 3 minutes recommended stand-

ards to put out a fire incident. A member of the Aviation Round Table, John Ojukutu, while querying the last time the NCAA conducted an inspection or audit on the maintenance hanger also asked, ‘’what is the category of the MMA fire service that could not put the fire out on a passenger aircraft of less than 40 seater? What would have happened if it were a B777 or even a B737? I heard people in the background of the video screaming no water! no water! But where were the water hydrants in the NCAA certified airport? Does the hanger where the incident happened not have emergency management program for such incident? Is the emergency management program for the hanger not an NCAA’s audit or inspection checklist? if the answers to these questions are negative, then it’s a big shame for a regulatory agency that prides itself with the FAA CAT 1.’’ He advised the NCAA to review its checklist for hanger inspection and audit Unfortunately, both the Minister of State for Aviation Hadi Sirika and the NCAA DG Muhtar Usman have refused to issue a statement on both the MMA2 and overland aircraft fire incidents. I gathered from reliable sources that both were outside the country lounging somewhere in Canada while the country or their sector rather was on fire. These are the kind of people we have at the helm of affairs of a critical sector such as aviation and nobody seems to be

auditing their affairs. With the level of mismanagement, ineptitude and inefficiency that these agencies and even the ministry have exhibited in recent past, also with the handling of the failed Nigeria project; I will strongly recommend a total review of their operation and activities. At the moment, I can tell you for free that nobody checks or audits these agencies and you cannot be the judge in your own case as there is tendency to compromise. We deserve better as a nation and it starts with total restructuring of not just our country but the aviation industry. For us to have a robust industry, distant from what we are presently experiencing; there is need to move agencies like the NCAA, AIB, NIMET, NAMA, and FAAN from the oversight of the ministry of Aviation to the presidency for direct monitoring and to avoid the overt interference of the ministry in these agencies . The case of the overbearing influence of the former Minister of Aviation, Ms Stella Oduah, on these agencies is very fresh. We all remember how she used her office to extort money from the agencies and this is one out of the many reasons for recommendation.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com

Monday 22 October 2018

C002D5556

COMMENT

BUSINESS DAY

comment is free

Send 800word comments to comment@businessdayonline.com

Africa-China debt crises: Who is next victim after Zambia

VINCENT NWANI Dr. Nwani is an Economic & Business Analyst and lives in Lagos Feedback email: vincent_nwani@ yahoo.com

Introduction everal African countries confronted with perennial revenue shortfall to fund acute infrastructure deficits have recently found respite in China’s capital investment programme for the continent. The Chinese government has rolled out relatively attractive cheap loans and advancements to countries in Africa, which seek to increase domestic infrastructure stock and create more public goods. The uniqueness of the Chinese funding model lies in its strategy that gives priority to financing physical infrastructure projects as well as public goods that would drive economic growth and development of the nation in particular and the continent in general whilst spreading the Chinese economic, political and cultural interest. One thing that is clear is that the relatively cheap infrastructure loans come in kind to benefiting countries while the repayment is cash-based. In addition, the Chinese lenders, set out technical specifications together with terms and conditions for projects, in a manner that appeals to Chinese interest. China Remain the Single Largest Bilateral Infrastructure Financier

in Africa According to the McKinsey and Company, the total sum of loans Beijing had made to the continent increased threefold since 2012. For instance, in 2017 alone, the newly signed value of Chinese contracted projects in Africa registered US$76.5 billion. This has made China, “the single largest bilateral financier of infrastructure in Africa, greater than the Africa Development Bank (AfDB), the European Commission, the European Investment Bank, the International Finance Corporation, the World Bank and the Group of Eight (G8) countries combined”. This drive has created a monetary impact on the infrastructure projects visible all over the continent, with new modern airport terminals, good road networks, modern rail facility, seaports, high-rise buildings among others. This is also creating commercial opportunities for local businesses as well as the muchneeded jobs for the population. Countries at the “border line” of Chinese debt crises in Africa? The Chinese approach has the potential to help Africa’s bridge the infrastructure gaps, but at the same time, it has led small-sized economies, to accumulate debts extensively. In April 2018, the International Monetary Fund (IMF) warned that not less than 40% of low-income countries in Africa are either in debt distress or at high risk. There are rising concerns that the ability of most African countries to service their debts as well as repay huge loans from China may soon frizzle, thereby creating a debt crisis with the attendants’ political and economic consequences. Zambia The incidence of Chinese loans high risk of actual debt distress is most significant in Zambia, Dji-

‘

The Chinese approach has the potential to help Africa’s bridge the infrastructure gaps, but at the same time, it has led smallsized economies, to accumulate debts extensively

’

bouti and the Congo (Brazzaville). Other countries that have accessed huge infrastructure loans from China include Ethiopia, Angola, Kenya, South Africa, Sudan, Uganda, and Nigeria. The China-Africa Research Initiative in August, at the Johns Hopkins School of Advanced International Studies, emphasize that about 73% of Zambia’s debt stock of US$9.3 billion as at March 2018, was borrowed from Chinese lenders. Following the inability of the nation to service its liabilities, Zambia has fallen victim of the Chinese “debt-trap” diplomacy, being the first country in Africa, that have allegedly handed over some of its strategic national assets to Chinese companies in the form of long-term leases. To put things in proper context, the Africa Confidential in a report titled ‘Bonds, bills and ever bigger debts’ published on September 3, 2018, observed that the level at which Zambia is losing strategic national assets to China is worrisome and

could rob the nation its sovereignty if the trend continues. “Zambia continues to default on repaying Chinese loans, hence Chinese companies are gradually taking over Zambian public assets and a whole lot other economic interests. The Lusaka Airport, all tollgate plazas and East Park Mall are run by Chinese companies. Similarly, Zambia state-owned Television and radio news channel ZNBC is already Chinese-owned while the electricity company ZESCO is already in talks about a takeover by a Chinese company”. Djibouti Like Zambia, Djibouti appears to have got itself also into a serious debt quagmire and in the days ahead, might be surrendering some of its priority national assets to Chinese companies. The small East Africa country with very weak revenue base, has procured more loans from China than it can possibly pay back in the near time. At the end of 2016, Chinese financiers held 77% of Djibouti’s debt. In fact, Djibouti case is more precarious as well as complicated. The nation currently maintains a huge public debt totalling 88% of the country’s small Gross Domestic Product of US$1.72 billion, with China owning the lion share of the debt, the Center for Global Development stated. Public debt stock in Djibouti, have exceeded the debt sustainability threshold set by the IMF for a country in its category. Democratic Republic of Congo Though the true picture of the Democratic Republic of Congo indebtedness is ambiguous, it is, however, evident, from all indications that the country, has taken more loans from Beijing, than it could repay. According to a working estimate, Congo is reputed to be indebted to China to the tune

of US$7.1 billion. The situation is further compounded by an alleged preponderant official rigidities and high hydria corruption in the internal debt management system of the economy. Kenya An analysis of the infrastructure projects funded with Chinese loan in Kenya reveals a very interesting interplay. There is a public outcry that the returns on the public goods produced with the Chinese infrastructure loans are insufficient to repay the loans used to finance the projects. Except for the fanfare, political acceptance together with the emotional dividends that greeted the inauguration of the US$3.2 billion railway connecting the capital Nairobi to the port of Mombasa, the railway has failed to generate the expected revenue to finance the repayment. If the trend continues, Kenya, might either use its annual budget to finance the repayment or surrender some national assets to Chinese companies. Sierra Leone Chinese-funded projects are riskier in poor revenue generating countries, hence small economies in Africa, with loan deadweight, might continue to forfeit priority state asset to the Chinese companies. In fact, some African countries are beginning to scrap infrastructure loan deals with China. For instance, in October 2018, Sierra Leone revoked its $318 million airport deal with China citing heavy burden and unrealistic terms. Will Nigeria exposure to Chinese capital loans hurt the economy?

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com

Achieving board effectiveness using board committees

BISI ADEYEMI Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng.

he composition, mix and structure of the Board of Directors of a Company and the effectiveness of the decision making process are key elements of sound corporate governance. A Board Committee consists of Directors mandated to carry out specified functions assigned by the Board. The establishment of Board Committees is one way of achieving greater efficiency in the performance of the Board’s oversight functions, thereby strengthening the Governance structure. The Companies and Allied Matters Act (CAMA) allows the Board to exercise its powers through Committees consisting of such members of the Board as it deems fit. Section 9.1 of the SEC Code of Corporate Governance for Public Companies provides that the Board “should determine the extent to which its duties and responsibilities should be undertaken through commit-

tees”. It goes on to recommend the establishment of governance and remuneration committee, a risk management committee and any other committees that the board may deem appropriate, depending on the size, needs or industry requirements of the company. The various industry codes have similar provisions. The exposure draft of the Nigerian code of corporate governance recommends the establishment of the nomination and governance, remuneration, audit and risk management committees. It further recommends that each Committee should be composed of at least three members with a majority of independent non-executive directors. The board may combine any of the responsibilities of board committees, taking into consideration the size, needs and other requirements of the company. All members of the Audit committee should be financially literate and should be able to read and interpret financial statements. At least one member of the committee should be an expert and have current knowledge in accounting and financial management Beyond regulatory compliance however, board committees if properly structured are indeed quite useful to the overall efficiency and effectiveness of a board. Generally, board committees focus on specific areas, thereby allowing the board concentrate on more strategic issues.

An effective committee structure allows the board to focus expertise where it can best be utilized, and also manage the flow of information so Directors are not unduly burdened with too many details that may hinder rather than facilitate effective decision making. Committees are usually charged with drilling down on specific issues; generally assume responsibility for forming an opinion on such issues and making recommendations to the Board. They are at liberty to seek independent professional advice at the expense of the company and seek clarification from senior management as required. An effective board is composed of directors with diverse experience, skills and expertise. To maximize the benefits of this diversity, committees should comprise of Directors with relevant skills and competences in specific areas. Membership of committees also affords directors the opportunity of gaining better insight into the business of the company in respect of which they have oversight responsibilities. When used effectively, committees can increase the board’s ability to carry out its mandate. It is however key to note that while the Board may delegate some responsibilities to committees, the Board as a whole retains ultimate oversight responsibility over the affairs of the company whilst committees would make recommendations to the Board based on extensive

consultations and deliberations, the Board has to approve such recommendations before they become effective. To ensure the effectiveness of the committee structure, the board should ensure that Committees are composed of directors with the relevant skills and who are able to devote sufficient time to committee work. The board should also ensure that the requisite information is made available to its committees timeously. Below are some of the elements that would ensure board committee effectiveness: Committee charters It is recommended that board committees have specific charters or terms of reference setting out their roles and responsibilities in the area of membership, quorum, scope of work, as well as authority and reporting obligations. Effective committee chairs As with the chairman of the board, the role of the committee chairman is an important one and the effectiveness of the incumbent ultimately determines the effectiveness of the committee. Thus the board should carefully select committee chairs, taking cognizance of availability, strength of character, relevant skills set (knowledge, experience, proven leadership and people’ management) respect from peers, etc. Accountability to the board

The board must clearly communicate to committees its expected reporting format, substance and frequency of receiving such reports. Usually, the expectations of the Board are encapsulated in the committee charters. The board should ensure that the performance of its committees is evaluated annually to ensure that they continue to be effective. An emerging trend that makes for even greater effectiveness is the attendance of non-committee members of the board at committee meetings. This practice ensures that deliberations at the Board meeting are more inclusive as the noncommittee members would have had the benefit of the reasoning that went into recommendations by the committee to the board. To retain the utility of the committee system, it is important that the composition be refreshed periodically whilst ensuring that directors with relevant expertise and experience sere on committees to which there experience and qualifications are best suited. On Thursday, 25th October 2018, DCSL will be hosting a master class themed “Beyond compliance - The role of the internal audit & compliance function in business sustainability”. Kindly contact ntaiwo@dcsl.com. ng or 08037699347 for registration and further details.

Send reactions to: comment@businessdayonline.com

BUSINESS DAY

C002D5556

Editorial PUBLISHER/CEO

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

Bashir Ibrahim Hassan

Monday 22 October 2018

Can Nigeria avert a fiscal crisis?

ast month, the budget office of the federation released the 2017 budget implementation report. According to the report, the federal government’s revenue for 2017 was N2.7 trillion, about half of its projected revenues for the year and 36 percent or one third of its projected expenditure of N7.44 trillion. Faced with the sharp fall in revenues, the government had to cut its expenditure to N6.5 trillion in 2017. The government spent almost a trillion naira less than it planned to spend in 2017 but the final N6.5 trillion spent was still N3.8 trillion more than the federal government’s total revenues for the year. To fund the deficit, the government had to borrow a total of N2.5 trillion to help fund its financial obligations for the year. The government borrowed N1.2 trillion from the international capital markets and borrowed the balance of N1.3 trillion from the domestic capital markets,

an amount that is more than the net increase in lending to the private sector in 2017 from financial institutions. The government got about three times more money from the banks than the private sector got from the banks. However, the N2.5 trillion that the government borrowed from the banks to fund its deficit was not enough to plug the N3.8 trillion it created spending more than it earned in revenues in the year. This has left the government with a N1.3 trillion hole that it could not close in 2017. This means that there are some contractors sitting out there that have done jobs for the federal government that have not been paid and do not know when they will be paid or if they will ever be paid. The government obviously could not raise the money to pay these contractors. It could have taken on more loans to pay these contractors but apparently felt it was already too over burdened with debts to take on more loans. Contractor debts do not attract interest rates and the government can

usually take its time repaying even though the businesses owed tend to suffer, with some collapsing while waiting to be paid for jobs duly executed. But the government has a reason to be concerned about its debts that keep piling up. As at the end of December 2017, the country’s total debt stock stood at N22 trillion, which is the equivalent of US$71 billion, data from the Budget Office show. The debt stock went up by US$4.4 billion or N1.4 trillion in 2017. A breakdown of the debt shows that US$18.9 billion is owed to external lenders while the balance of N15.9 trillion is owed to domestic creditors. Already, the federal government has exceeded its own target of ensuring that the country’s total debts do not exceed 19.39 percent of economic output or GDP in any year. When the government closed its books in 2017, country’s total debt stood at 20.12 percent of GDP. However, what would have given the government more concern is the rising debt service burden which is beginning to eat up two thirds of govern-

ment revenues. Debt service consumed a total of N1.8 trillion in 2017. This represents 75 percent of the government actual revenues in 2017. The government is spending an average of eighty kobo of every one naira it earns servicing the debts it is accumulating. The amount spent on debt service is higher than the N1.6 trillion released for capital expenditure in 2017, of which N1.4 trillion was the amount actually utilized. The country is now spending more money servicing debts than putting in place the infrastructure that will help grow the economy to repay those debts. This is enough to set off alarm bells, but there seem to be a conspiracy of silence. Yet the government has continued to borrow. The federal government is currently seeking a fresh $6 billion from the China Exim Bank for the construction of the Ibadan-Kano rail line. At the current rate, Nigeria may be unable to service its debt in the near future and we would be fully back to the debt trap that we exited in 2005.

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

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

ENQUIRIES NEWS ROOM 08023165438 08169609331 Lagos 08033160837 Abuja

}

ADVERTISING 01-2799108 08034743892 08033225506 SUBSCRIPTIONS 01-2799101 07032496069 07054563299 DIGITAL SERVICES 08026011296 www.businessdayonline.com The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 LEGAL ADVISERS The Law Union

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

OUR CORE VALUES

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

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018 In Association With

Don’t turn around

Unwanted Beyond boomred andnotice bust?

Britain’s chancellor prepares to raise taxes

America’s shale industry faces constraints

Philip Hammond is hemmed in by his manifesto, but must find the money somewhere

The limits of being an oil superpower

N EPISODE OF “The Simpsons” ends with a tragicomic moment. Homer Simpson has bungled his new role as Springfield’s sanitation commissioner, leaving rubbish piled high in the streets and spewing from drains. A native American, unaware of the litter-strewn city behind him, picks up a discarded packet of crisps and sheds a tear at man’s disrespect for nature. “Do yourself a favour,” counsels his friend. “Don’t turn around.” Philip Hammond is in a similar position as he prepares for the budget on October 29th. The chancellor’s immediate problems look bad enough, but they are nothing compared with the mess looming behind him. The defining domestic policy of British governments since 2010 has been cleaning up the public finances. In that year the budget deficit (spending minus tax) was 10% of GDP, the biggest since 1945. Eight years of austerity later, it is down to 2%. Mr Hammond hopes to keep it below that level. If he succeeds, and nominal GDP grows by at least 2% a year, the ratio of public debt to GDP, currently 85%, should fall. In his quest to reduce the debt pile, Mr Hammond has recently received some good news. The latest figures put annual nominal GDP growth at nearly 4%, above expectations. Between April and August the government borrowed £18bn ($24bn, around 1% of GDP), putting it on track to borrow £10bn less over the fiscal year than was expected by the Office for Budget Responsibility (OBR), the fiscal watchdog, when it made its forecasts in March. Yet in other ways, his task

HE HISTORY of America’s shale industry is brief and dramatic. In just a decade the country has seen the spread of innovative techniques to extract oil and gas locked inside shale rock; the lifting of a decades-long ban on crude exports; a price crash that seemed to decimate the industry— and now a price recovery. Next year the shale boom will account for the biggest surge in one country’s oil output since the International Energy Agency began keeping track. America is now the world’s top oil producer, surpassing Saudi Arabia

has become trickier. Theresa May announced earlier this month that “the end is in sight” for austerity. She has promised that the health service will get a £20bn boost and that fuel duty will be frozen for the ninth year running. Tory MPs, meanwhile, are calling for universal credit, a big welfare reform, to be made more generous. All this extra spending imperils Mr Hammond’s plans. There is little scope for trimming departmental budgets, most of which have already been cut to the bone. So the chancellor is considering tax rises. But here he is constrained by last year’s Conservative manifesto. Mr Hammond has already hinted that he might break a promise to increase the tax-free allowance from £11,850 to £12,500. (The need to fund extra health spending, he explains, was “something that we didn’t anticipate at the time we wrote our manifesto.”) Freezing that threshold until the end of the

parliament might raise £5bn a year, but would kick up an almighty fuss within the Tory party. The manifesto also promised not to raise VAT. But applying the tax more broadly might not quite amount to breaking a promise. It would also be economically wise. VAT is an efficient tax but Britain’s system is leaky, with myriad exemptions. The government could start charging it on food (raising up to £20bn). That would hit the poor, but a more generous universal credit could offset the damage. Other options may be politically easier. Cancelling a planned cut in corporation tax from 19% to 17%, to raise £5bn, would break another manifesto commitment but might not face as much parliamentary opposition. Rumours swirl that Mr Hammond wants to restrict income-tax relief on pension contributions to the basic rate of 20%, rather than the saver’s marginal rate. Do-

ing so could yield £10bn a year. Mr Hammond would be pleased just to get himself out of the latest fiscal hole. But like Homer Simpson’s piles of rubbish, bigger problems are mounting. The first is Brexit. Though the OBR has taken some account of the damage that leaving the European Union will cause, it seems to be banking on a soft exit. It assumes that trade will continue without much disruption and that immigration will remain fairly high. Yet Britain is on course to leave the single market and end free movement, and the possibility of a “no deal” exit is growing. The second problem is demographic. Within a decade the ratio of pensioners to working-age folk will move rapidly in the wrong direction, as the baby-boomers retire. If current fiscal policy were maintained, by the 2060s public debt would be worth 250% of GDP. Not only is austerity not yet over; it has really only just begun.

and Russia. America’s strides are all the more striking because they coincide with wobbles elsewhere. Output from many giant petro-states looks shaky at best. Exports from Iran are plummeting and due to sink further when American sanctions take effect next month. Venezuela’s production is in freefall. Supplies are vulnerable in Libya and Iraq. Even before the fallout over the disappearance of Jamal Khashoggi, a journalist last seen entering the Saudi Arabian consulate in Istanbul raised questions about the kingdom (see article), many analysts doubted its ability to boost production quickly. Saudi oil exports are already near their peak of the past five years. The upshot is that the world increasingly relies on American shale. In June America produced 13% of global crude oil, nearly twice the proportion of June 2008; that share will probably rise. This shift is extraordinary, to be sure, but the power it hands to America can also be exaggerated. “The United States is the dominant energy player,” Larry Kudlow, Mr Trump’s economic adviser, boasted this week, able “to cover any shortfalls”. In fact, shale is also bumping against its limits. In the short term, these limits Continues on page 15

Monday 22 October 2018

C002D5556

BUSINESS DAY

In Association With

China v America

The way China arrested...

The end of engagement

Continued from page 18

How the world’s two superpowers have become rivals

OR THE past quarter century America’s approach to China has been founded on a belief in convergence. Political and economic integration would not just make China wealthier, they would also make it more liberal, pluralistic and democratic. There were crises, such as a face-off in the Taiwan Strait in 1996 or the downing of a spy-plane in 2001. But America cleaved to the conviction that, with the right incentives, China would eventually join the world order as a “responsible stakeholder”. Today convergence is dead. America has come to see China as a strategic rival—a malevolent actor and a rule-breaker (see Briefing). The Trump administration accuses it of interfering in America’s culture and politics, of stealing intellectual property and trading unfairly, and of seeking not just leadership in Asia, but also global dominance. It condemns China’s record on human rights at home and an aggressive expansion abroad. This month Mike Pence, the vice-president, warned that China was engaged in a “whole-of-government” offensive. His speech sounded ominously like an early bugle-call in a new cold war. Do not presume that Mr Pence and his boss, President Donald Trump, are alone. Democrats and Republicans are vying to outdo each other in bashing China. Not since the late 1940s has the mood among American businessfolk, diplomats and the armed forces swung so rapidly behind the idea that the United States faces a new ideological and strategic rival. At the same time, China is undergoing its own change of heart. Chinese strategists have long suspected that America has secretly wanted to block their country’s rise. That is partly why China sought to minimise confrontation by “hiding its strengths and biding its time”. For many Chinese the financial crisis of 2008 swept aside the need for humility. It set America back while China thrived. President Xi Jinping has since promoted his “Chinese Dream” of a nation that stands tall in the world. Many Chinese see America as a hypocrite that commits all the sins it accuses China of. The time to hide and bide is over.

This is deeply alarming. According to thinkers such as Graham Allison of Harvard University, history shows how hegemons like the United States and rising powers like China can become locked into a cycle of belligerent rivalry. America fears that time is on China’s side. The Chinese economy is growing more than twice as fast as America’s and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech. Action that is merely daunting today— to stem the illegal acquisition of intellectual property, say, or to challenge China in the South China Sea—may be impossible tomorrow. Like it or not, the new norms governing how the superpowers will treat each other are being established now. Once expectations have been set, changing them again will be hard. For the sake of mankind, China and America need to come to a peaceful understanding. But how? Mr Trump and his administration have got three things right. The first is that America needs to be strong. It has toughened the rules on takeovers, to give more weight to national security. It has extradited an alleged Chinese intelligence officer from Belgium. It has increased military spending (though the extra money going to Europe still dwarfs that going to the Pacific). And it has just boosted foreign aid in order to counter lavish Chinese investment abroad (see article). Mr Trump is also right that

America needs to reset expectations about Chinese behaviour. Today’s trading system fails to prevent China’s state-backed firms from blurring the line between commercial interests and the national interest. Government money subsidises and protects companies as they buy up dualuse technology or skew international markets. China has used its state-directed commercial clout in smaller countries to influence foreign policy in, say, the European Union. The West needs transparency about the funding of political parties, think-tanks and university departments. Third, Mr Trump’s unique ability to signal his disregard for conventional wisdom seems to have been effective. He is not subtle or consistent, but as with Canadian and Mexican trade, American bullying can lead to dealmaking. China will not be so easily pushed around—its economy depends less on exports to America than Canada’s and Mexico’s do and Mr Xi cannot afford meekly to disavow his Chinese Dream in front of his people. Yet Mr Trump’s willingness to disrupt and offend has already wrong-footed China’s leaders, who thought they could count on America being unwilling to rock the boat. For what comes next, however, Mr Trump needs a strategy, not just tactics. A starting point must be to promote America’s values. Mr Trump acts as if he believes that might is right. He shows a cynical disdain for the values America enshrined in global institutions after the second world war. If he follows

that course America will be diminished as an idea and as a moral and political force. When America competes with China as a guardian of a rules-based order, it starts from a position of strength. But any Western democracy that enters a ruthless race to the bottom with China will—and should—lose. The strategy should leave room for China to rise peacefully—which inevitably also means allowing China to extend its influence. That is partly because a zero-sum attempt at containment is likely to lead to conflict. But it is also because America and China need to cooperate despite their rivalry. The two countries are more commercially intertwined than America and the Soviet Union ever were. And they share responsibilities including—even if Mr Trump denies it—the environment and security interests, such as the Korean peninsula. And America’s strategy must include the asset that separates it most clearly from China: alliances. In trade, for example, Mr Trump should work with the EU and Japan to press China to change. In defence Mr Trump should not only abandon his alliance-bashing but bolster old friends, like Japan and Australia, while nurturing new ones, like India and Vietnam. Alliances are America’s best source of protection against the advantage China will reap from its increasing economic and military power. Perhaps it was inevitable that China and America would end up rivals. It is not inevitable that rivalry must lead to war.

include bottlenecks in the pipeline infrastructure needed to get oil to market. Companies in the Permian Basin, which spans west Texas and south-eastern New Mexico, are producing more oil than they can pipe out (see article). New pipelines due late next year should help. Other problems are harder to resolve. Extracting oil from shale has become more efficient since 2014: the median break-even price for producing a barrel is $46. But costs are rising. Executives complain about a long-term labour shortage. Productivity gains in some regions are slowing as wells are drilled closer together. To blast more oil out of rock, companies are now using eye-popping amounts of water and sand. For a single well, hydraulic fracturing (fracking) can involve a total of nearly 65m litres of water, the volume of 25 Olympic swimming pools. That creates logistical and environmental demands. Pumping water back into shale formations is cheaper than carting it away, but that can cause small earthquakes. Colorado is considering new limits on fracking. Other states may decide to follow suit. International oil companies have the size and logistical expertise to cope with some of these problems. Even as many of them cut spending on complex, long-term projects, they are putting more money into shale. Costs are more predictable and the timeline far shorter than for a giant project offshore. Chevron, BP and ExxonMobil all own large swathes of America’s most productive basins. Their entry makes further consolidation likely, as shale specialists seek the benefits of scale. Those specialists that remain are beholden to investors, not to politicians bent on pursuing energy dominance. And their investors increasingly demand that shale firms earn a profit, rather than merely grow. As the industry matures and costs rise, in other words, recent leaps in output will probably become more modest. For the first time American shale companies will this year earn more from operations than they spend on new projects and dividends, reckons Morgan Stanley, a bank.

BUSINESS DAY

C002D5556

Monday 22 October 2018 In Association With

One of Africa’s oddest places

Redemption city is the anti-Lagos What happens when Pentecostal churches become urban planners

HE NEW church in Redemption City is only half-built. Already this great aeroplane hangar of a building measures 1.5km by 1km. Compared with it, Tesla’s “gigafactory” is a poky warehouse and St Peter’s Basilica is a quaint parish church. Yet the church is not the most extraordinary thing about Redemption City. In 1983 Enoch Adejare Adeboye, a former maths professor who had become General Overseer of the Redeemed Christian Church of God, acquired a small patch of land north of Lagos, Nigeria’s biggest city. At first it was used for occasional prayer meetings. But as the church grew into one of the world’s largest under Mr Adeboye’s charismatic leadership, the prayer camp turned into a permanent settlement. Today about 12,000 people live in Re-

demption City, which sprawls over at least 2,500 hectares. The population is expected to double by 2036. Most African cities are messy, especially around the edges. Suburban roads are invariably crooked, unpaved and unsigned. Houses are plonked down wherever people can acquire land. Many homes are half-built, because their owners

have no land titles and so cannot take out mortgages. To deter scammers, some of them are spray-painted with messages like: “This property is not for sale. Beware fraud”. In Redemption City the streets form a grid. The roads are signed, with names like Hallelujah Close and Praise Close. Some have speed bumps— things that would be wholly

redundant on a normal African road. Every plot is the same size: 21.3 metres by 21.3 metres. There are few half-built houses, because the church checks that families have enough money to complete them, and sets a strict time limit. All the homes are in gated communities, numbering 15 so far. Everything tends to work. Whereas Lagos hums with diesel generators, Redemption City has a steady electricity supply from a small gas-fired power station. It also has its own water supply. “We make life easy,” says Pastor Fola Sanusi, the man in charge of Redemption City’s growth. The city also makes rules, of the kind that could never be enforced in the hurlyburly of Lagos. “No parking, no waiting, no trading, no hawking”, reads one sign. In theory, Redemption City is for members of the Redeemed

Christian Church of God. When a family wants to move away, it is supposed to sell its house to the church, which will sell it on to a suitably pious person. Each house is supposed to have a “mission room” for the use of a church worker. In practice, however, the properties seem to be finding their way onto commercial estate agents’ websites. It is an odd place but not entirely exceptional. On the road between Redemption City and Lagos, other Pentecostal churches, such as the Mountain of Fire and Miracles Ministries, are building godly cities of their own. In Lagos, the large Deeper Life Bible Church has constructed traffic lights and a bridge, and has turned some parishioners into traffic wardens. Pentecostal Christianity has already remade many Africans’ spiritual lives. Now it is remaking their cities.

How to spend it

How to plug budget holes by managing public wealth better Getting the most from government assets requires a new perspective on fiscal policy

ROPONENTS OF sovereignwealth funds like to say that returns from publicly owned assets could in theory displace taxes. In countries that have not struck oil, however, the chance of politicians building up savings rather than running up debt seems remote. Yet states may not need to save in order to enable at least some tax-free spending. Most already have plenty of assets. The problem is that they do not sweat them hard enough. Most public wealth falls into one of four categories: land and natural resources; property and infrastructure, such as ports and roads; public firms, such as utilities and state-owned airlines; and financial assets like those held by public pension funds. In estimates covering 31 economies released on October 10th, the IMF put the total stash at $101trn, or 219% of GDP. The Fund’s estimates of governments’ assets and liabilities cast their fiscal health in a new light (see chart). Several rich countries’ governments have negative net worth, partly because of massive pension obligations to retired public employees. The picture would look still worse if the estimates included state pensions and other promises to ageing populations, such as to

provide health care. Although it is rarely quantified, investors are not oblivious to such risk. The IMF finds some evidence that government-bond yields respond to the health of public-sector balance-sheets, as well as to debt and deficits. But a bigger point is that, with so many assets on the books, it would take only a small increase in yields to raise a lot of money. Dag Detter, a consultant who has co-written a book on the subject, says that increasing the return on public assets by a mere 2% would enable governments worldwide to double the amount they spend on basic infrastructure. What would it take to make that happen? The yields for society from

some assets, such as national parks, are non-monetary. Turning schools and hospitals into cash-cows seems implausible. Yet there are plenty of examples of inefficient government use, in particular of land. Mr Detter and his co-author point to Boston’s Logan International Airport, which sits on prime waterfront and could be moved inland. Even schools can be put in better or worse places. One of Rio de Janeiro’s sits on the Copacabana beach-front, wedged between pricey hotels. Putting it somewhere else and charging a market rent for the site could create new revenue for the education budget. A recent review found that 166 of the roughly 230 trusts making up England’s National Health Service report owning land they do

not need. Some countries seem to get much more from their balancesheets than others. Take financial assets. The IMF calculates that a country moving from the 25th to the 75th percentile for risk-adjusted returns would raise 2% of GDP in new revenue (it spares policymakers’ blushes by keeping the leaders and laggards anonymous). Boosting returns might involve pooling investment portfolios in order to reduce fees; charging more for being an insurer of last resort, for example for bank deposits or flooding; and using offices and other types of property better. Improving the profitability of public firms—think of post offices and the like—could raise another 1% of GDP, the IMF says. Middling government-run firms produce average returns of 1.9%, but better ones manage 4.3%—which is still only half the level of companies in the private sector. Some stateowned firms do much better. SNCF, France’s public-sector railway, earned a return on capital of 7.9% in 2017. For many physical assets, the first step is working out the value of what is on the books. That is not always easy, because governments are bad at keeping track of their

balance-sheets. Assets, such as the land on which Boston’s airport is built, often linger at historical cost rather than market value. But some countries are making progress. Since 2011 Britain has produced “whole-of-government accounts” that follow international accounting standards. They show assets of £1.9trn ($2.5trn or 96% of GDP). The government is combing through its balance-sheet to find ways to boost returns; it will report the results in its budget on October 29th.

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

CityFile

Operators laud Lagos lawmakers on directive to resume refuse collection JOSHUA BASSEY

ssociation of Waste Managers of Nigeria (AWAM), otherwise known as (PSP) operators has lauded the directive of the Lagos State House of Assembly asking them to resume refuse collection. AWAM’s spokesperson, Olugbenga Adebola said in a statement, weekend, that the assembly had lived up to the expectation and yearnings of well-meaning Lagosians. Adebola said that the association looked forward to sitting with the relevant authorities to discuss and workout the implementation of the resolution.

“We welcome the resolution of the state House of Assembly on Thursday, October 18, 2018. We want to appreciate the entire members of the assembly; they have all lived up to the expectation and the yearnings of all well meaning Lagosians. “In particular, we will like to thank the speaker, Mudashiru Obasa, for his tenacity and consistency in speaking the truth always. “We equally want to thank Gbolahan Yishawu (Eti-Osa constituency 1) for listening to the general complaints by Lagosians on the current waste management regime in the state. History will not forget this heroic act,” he said.

Imo: Traditional rulers want abolition of Osu caste system

raditional rulers in Ikeduru local government area in Imo State have expressed their willingness to abolish the Osu caste system in their communities if there is a law to that effect. The traditional rulers spoke through the chairman of Ikeduru council of traditional rulers, Marcel Egemonu, the Ebi of Ebikoro, during their council meeting held at Ikeduru local government secretariat on Friday. Egemonu said that the Osu system brought with it a lot of acrimony, disaffection and discrimination among people of same community and language in Igboland and as such should be abolished. He urged the traditional rulers to rise up to the occasion through re-orientation and creation of awareness on the negative impact of the practice among their various communities. The traditional ruler said that although the system was as old as their forefathers and they as custodian of culture

and traditions of the land, yet there was the need to discard practices that violated human rights. “The Osu system is a chain reaction attitude and has psychological effect on people. Igbo traditional rulers should rise up to the challenge and fight the system. This discrimination against our brothers and sisters should not be allowed to continue. “There is also the issue of stigmatisation on those discriminated against, especially in marriage and award of chieftaincy titles. “There should be a pronouncement on it and the people made to understand the need to abolish the practice,” he said. Contributing, Levi Ezeala, the traditional ruler of Nneise Ugiri- Ike autonomous community, corroborated the stance of Egemonu that the practice should become a thing of the past. He suggested that any initial law on the issue be resurrected to be carefully and positively deliberated upon.

Kano approves mandatory drug test for civil servants ADEOLA AJAKAIYE

ano State government has approved compulsory drug test for political appointees, civil servants and students seeking admission into the tertiary institutions. The commissioner for information, Muhammad Garba, said the decision was arrived at by state executive council and aimed at mitigating drug abuse in the state. “All political appointees, civil servants particularly the ones that are due for promotion and students seeking admission will henceforth undergo compulsory drug test in the state,” he said. Garba said the council also approved N332 million for the treatment of malnourished

children for the period of six months in 2018. According to him, the council also approved N67.3 million for the construction of drainages in Warkai village in Warawa local government area in order to avert flooding. “The council also approved over N240 million for the maintenance, renovation and procurement of diesel for traffic lights and street lights for the months of April, October and June. “The council approved N70 million for electrification works at Kofar-Mata, Sanka and Yakasai quarters in Kano metropolis,” he said. He added that the council approved the release of N16 million for state contingents to participate in the 2018 Agric show in Kano, Nasarawa state.

A cross-section of submerged houses along the creek in Otuoke community, Ogbia Local Government Area of Bayelsa on Friday. NAN

Regulation of trucks will end Apapa gridlock – Operators

perators say it will be difficult to end the gridlock being experienced in Apapa and its environs unless there is a transit parks and an effective regulation of the movement of trucks by relevant authorities. Remi Ogungbemi, president of Association of Maritime Truck Owners (AMATO), said there was still no mechanism to regulate the movement of the trucks to Apapa ports despite the overwhelming need for it. “There is need for a mechanism that will regulate the movement of these trucks so that all the trucks will not just be coming at

the same time,” he said According to Ogungbemi, there was provision for transit parks in the port master plan which was tampered with by authorities. “But for reasons best known to those in authority, they removed transit parks from the original plan and use those places for other business activities. “Since government has chased trucks from its original parking places, that is why you see trucks all over the place. It is not even in the interest of the truck owners or the drivers to be parking on the road. Parking on the road and bridges is an aberration. “It could reduce the

lifespan of the bridges and even the roads; drivers are not happy being on the road that is the truth,” he added. He said the drivers were exposed to danger being on the road for several days without sleeping, refreshing and eating. Ogungbemi noted that such agonies affected the behavioural attitude of truck drivers, and called on the government to regulate and automate movement of trucks to the ports. He said this would prevent trucks from coming at the same time to the port, adding that the current system which allowed trucks to access the ports indiscriminately was not the best.

“Truck owners don’t possess land. Going by the Land Use Decree, land ownership is vested in the state. No individual, group or association has power over land. “On our own, we identified a place four years ago which the state government gave us provisional approval. “We had started work on this piece of land with sand filling at a time but the government changed its mind after we had committed millions of naira to the place,” he said. Perennial gridlock in Apapa and its environs has remained major headache to government, motorists, commuters and residents.

Police warn of cloned certificates, ATM cards in circulation JOSHUA BASSEY

an Okoro, Commissioner of Police (CP), AntiFraud Unit, Federal Criminal Investigation Intelligence Department (FCIID) Ikoyi, Lagos, has put the public on notice over cloned certificates and ATM cards in circulation. Okoro raised the alarm while briefing journalists on the discovery of some cloned certificates by the syndicate which specialised in printing fake documents of banks, government and corporate organisations. He said that the syndicate had been using the cloned documents to defraud banks, government, corporate organisations

and individuals, stressing that some bank officials were collaborating with the suspects for the crime. A m o ng d o c u m e nt s cloned by the syndicate included CBN, presidential clearance certificates, IMF and court documents. “I advise members of the public against cloned certificates, ATM card and other important documents currently in circulation. I want members of the public to keep their pin numbers, passwords and ATM safe. “We have some documents recovered from one suspect arrested. We are investigating the documents and some bank staffers allegedly collaborating the syndicate. “It is only the bankers

that have details of every deposit in the bank. Our investigation revealed that some bankers give information to the syndicate on how much customers have in every account. “The syndicate cloned documents and transferred such money to another account, particularly; accounts with ATM cards are their easiest target. “Many crimes are going on in different banks, unfortunately, the bank management will not allow the public to know about it because they want to keep their customers trust,” he said. Okoro said the unit was able to detect some of the documents through the assistance of a foreign cyber security firm based in La-

gos using forensic analysis equipment to unravel the identities of the syndicate members. He noted that cyber crime was a global challenge, stressing that the unit was synergising with the foreign firm for capacity building for officers and men in the unit. The commissioner said the suspect arrested was currently in the hospital after he collapsed during search of his house and many incriminating materials, including hard drugs were discovered. “The suspect is a web site designer. He designed many of the cloned documents. We are on the trail of other members of the syndicate,” police chief said.

Monday 22 October 2018

C002D5556

BUSINESS DAY

Live @ The Exchanges Stocks gain over N140bn in one week

PEARL Awards Nigeria tasks capital market regulators on restoring investors’ confidence

IHEANYI NWACHUKWU

igerian equities garnered about N141billion in the trading week to October 19 as bargain investors moved into Custom Street in search of value stocks. Though the much expected third-quarter (Q3) earnings season has taken off lately but investors seem not too excited about the scorecards. Twenty (20) equities appreciated in price during the review week, lower than twenty-nine (29) in the preceding week. Forty (42) equities depreciated in price, higher than forty (40) in the preceding week, while one hundred (107) equities remained unchanged higher than one hundred (100) equities recorded in the preceding week. The NSE All-Share Index (ASI) appreciated by 1.19percent to close the review week at 32,841.69 points from 32,456.98 points recorded the preceding trading week while the value of listed stocks increased to N11.990trillion from N11.849trillion. All other indices finished higher with the exception of the NSE-Main Board Index, NSE Consumer Goods index, NSE Oil/Gas Index, NSE Industrial Goods Index and NSE Pension Index that closed lower by 0.57percent, 0.63percent, 0.87percent, 0.55percent and 0.59percent respectively.

L–R: Tinuade Awe, executive director, regulations, The Nigerian Stock Exchange (NSE); . Bola Adeeko, head, shared services division, NSE; Mary Uduk, acting director general, Securities and Exchange Commission (SEC), and Oscar N. Onyema, chief executive officer, NSE, during the NSE Market Data Workshop 2018 held in Lagos, weekend.

A total turnover of 1.380 billion shares worth N15.149 billion in 13,478 deals were traded in the review trading week by investors on the floor of the Exchange in contrast to a total of 915.856 million shares valued at N9.835 billion that exchanged hands the preceding week in 14,033 deals. The Financial Services Industry (measured by volume) led the activity chart with 1.237 billion shares valued at N9.725 billion traded in 7,404 deals; thus contributing 89.62percent and 64.19percen to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 62.505 million shares worth N1.689 billion in 2,560 deals. The third place was Oil and Gas Industry with a turnover of 26.341 million shares worth 2.447 billion in 1,213 deals. Trading in the Top Three Equities namely – Sunu Assurances Nigeria Plc, Zenith Bank Plc and Guaranty Trust Bank Plc, (measured by volume) accounted for 772.902 million shares worth N7.841billion in 2,050 deals, contributing 55.99percent and 51.76percent to the total equity turnover volume and value respectively. The NSE notified inves-

tors about the lifting of suspension placed on the trading in the shares of Thomas Wyatt Nigeria plc and Union Dicon Salt plc. Thomas Wyatt Nigeria Plc and Union Dicon Salt Plc were amongst the companies suspended by the Exchange for failing to file the relevant accounts by the expiration of the Cure Period. But the Exchange said these companies have now submitted their Audited Financial Statement for the year ended 31 March 2018 and Unaudited Financial Statement for the period ended 31 March 2018 respectively to The Exchange.

Vetiva Fund Managers reviews Nigerian Sovereign Bond space, performance of VS&P Bond ETF IHEANYI NWACHUKWU

etiva Fund Managers Limited recently presented its review of the Nigerian Sovereign bond space and the performance of the Vetiva S&P Nigerian Sovereign Bond E xchange Traded Fund for the third quarter (Q3) ended September 30, 2018. Michael Famoroti, Vetiva Chief Economist in the presentation, highlighted: “Activity in the primar y market was largely bearish in Q3 with yields rising circa 103basis points ( bps) across the yield cur ve in the period. This was as a result of heightened uncertainty causing investors to play

more heavily on the shorter-end of the yield cur ve and the increased rate of interest rate hikes by the U.S. Federal Reser ve—even as global trade remains in limbo.” Speaking on the outlook for the rest of the year, Famoroti offered, “G oing into Q4’2018, we anticipate further yield advances (another circa100 bps uptick). We also expect bond supply to stay flattish, while noting the intention of the Federal G overnment to issue $2.8 billion in Eurobonds, which, due to the rising Fed rates, would come with a significant increase in external borrowing costs.” In addition, Oyelade Eigbe, Head, Investments, Vetiva Fund Managers Lim-

ited, noted that the VS&P Bond ETF is an optimized bond ETF that replicates, to the best extent possible, the price and yield performance of the FGN Bond securities constituting the FMDQ/S&P Nigerian Sovereign Bond Index “the Index”. The ETF had returned 4.81percent Year-To-Date as at 30th September 2018. According to Eigbe, “The performance was driven majorly by the bearish sentiments witnessed in the bond space during the quarter.” She attributed the upward shift to three major factors: i) three out of ten monetary policy committee members voting to hike interest rates; ii) expected rise in domestic inflation; and iii) a hike in U.S. base

interest rate in late September. The Vetiva S&P Nigerian Sovereign Bond ETF is a Bond ETF issued by Vetiva Fund Managers Limited. The ETF seeks to track the S&P Nigerian Sovereign Bond Index. By owning units in the ETF, an investor obtains market exposure to the most liquid and actively traded FGN Bond Securities. Eigbe went on to say that investors can purchase units of the VS&P Bond ETF on the floor of the Nigerian Stock Exchange through any broker. Vetiva Fund Managers Limited is a wholly owned subsidiary of Vetiva Capital Management Limited and is registered with the Securities & Exchange Commission to carry on business as a Fund/ Portfolio Manager.

he Board of Governors of PEARL Awards Nigeria has urged capital market stakeholders including players, regulators and indeed government to continue striving towards market stability, sustainability and growth. Tayo Orekoya, president/CEO, Pearl Awards Nigeria who led the newly constituted board members, made this call at the 2018 Pearl Awards Nite press conference held Friday October 19. The Nigerians investing in the stock market have recently been undergoing a most harrowing experience with sustained losses in their share values, resulting in huge depletion of wealth to equity holders. Amid this development, they asked capital market regulators in particular to intensify efforts towards engendering restoration of investors’ confidence in the market and deepening the market for enhanced development. He said, “As partner in progress to capital market regulators, our focus is to continue to promote healthy competitiveness, reward outstanding performance, thereby enhancing vibrancy of the market. We are convinced that this will go a long way to compliment the efforts of the regulatory authorities towards returning the market to the desired path of sustainable growth and market development.” The 2018 PEARL Awards holds on Sunday November 25, 2018 at EkoHotel & Suites, Victoria Island, Lagos with the theme “Sustaining the Winning Edge”. The PEARL Awards remains the only Awards in this part of the world that identifies and rewards quoted companies based on empirical data. This is the uniqueness of the Awards, which earned it the endorsement 15 years ago, precisely in 2003 by the apex capital market regulatory authority, the Securities and Exchange Commission (SEC). “This is in realisation of the need to recognise and reward companies that, in spite of the challenges in the operating environment, local and international, have continued on the winning edge, outperforming others and emerging leaders, de-

serving of honour in our capital market,” Orekoya said while explaining the theme. In commemoration of its 20th anniversary in 2015, PEARL Awards expanded its scope beyond the quoted companies and recognised other capital market players aside the quoted companies. “We have since continued to recognise and reward other capital market stakeholders’ institutions including the Stockbroking Firms and Issuing Houses”, Orekoya added. “The Awards in the Main Competitive Awards Category, as in past years, were determined utilizing nine performance indices namely Turnover Growth; Return on Equity; Earnings Yield; Share Price Appreciation; Dividend Cover; Dividend Yield; Net Asset Ratio; Dividend Growth and Profit Margin Ratio. As in the past, in order to ensure fairness, objectivity and authenticity in its assessment, the Research and collation SubCommittee, sourced the required data from the Annual Reports of quoted companies duly filed with the Nigerian Stock Exchange (NSE) and the Stock Exchange Daily Official lists for the year under consideration. The Report of the Research & Collation Sub-Committee was reviewed, verified and thereafter endorsed by the Board’s Technical Committee, which subsequently presented it to the full Board for consideration and approval,” he stated. For the 2018 PEARL Awards, recognitions, honours and Awards are in three main categories: Main competitive Awards Category which comprises Sectoral Leadership Awards, Market Excellence Awards, and Overall Highest Award (The PEARL of the Nigerian Stock Market). Others are: Honorary Awards Category which includes: PEARL Chief Executive Officer (CEO) of the Year Award; Outstanding Honorary Award for Capital Market Development; Capital Market Journalist of the Year Award; and Media Award for Capital Market Reporting. The next category is the: Special Recognition Awards Category which comprises Issuing House of the Year Award, Stockbroking Firm of the Year Award, and Good Corporate Governance Award.

BUSINESS DAY

Monday 22 October 2018

BUSINESS

Monday 22 October 2018

COMPANIES & MARKETS

DAY

UBA sees earnings growth from equity investment in associate company

Pg. 23

C O M PA N Y N E W S A N A LY S I S A N D I N S I G H T

NAICOM’s suspension of Tier-based recapitalisation douses tension in insurance industry MODESTUS ANAESORONYE

ressure and tension that had enveloped many insurance companies in Nigeria as result of the regulatory implementation of Tier-Based Minimum Solvency Capital (TBMSC) policy earlier introduced by the National Insurance Commission (NAICOM) has come down following last Thursday’s suspension of the exercise over court injunction. From sourcing of fresh capital, to mergers and acquisitions talks, as well as not going to participate in certain classes of risks particularly oil and gas, aviation, annuity and group life businesses for the 2019 business year following the Tier classification, a number of companies have been in confusion. But last Thursday’s suspension of the policy over pending court injunction instituted by a group of shareholders has paved the way for the disadvantaged insurers to firm up their strategies and position themselves for the Tier level they want to play in the long run, as well as to enable them participate in top class risks that were to elude them, if the October 1, 2018 implementation deadline had stood. NAICOM on Thursday issued a circular suspending the implementation of the TierBased Minimum Solvency Capital (TBMSC) Policy for the

Akintunde Oyebode, executive secretary, LSETF (l), with Dipo Faulkner, country general manager, IBM West Africa, at the partnership signing of the Digital - Nation Africa (D-NA) Initiative in Lagos State.

insurance industry, pending the determination of the suit filed against the policy by a group of shareholders. NAICOM in the circular to all insurance institutions in Nigeria signed by Leonard Akah, director, Authorization & Policy, on behalf of the Commissioner for Insurance said “In compliance with the ex-

tant rules and the injunction issued by the Federal High Court regarding the Tier Based Minimum Solvency Capital Framework, which was to take effect from October 1, 2018, the Commission wishes to clarify that the status quo will be maintained and insurers are to continue to operate on the subsisting regulatory frame-

work prior to the circular.” The Commission also said in the statement that appropriate regulatory directive would be advised upon conclusion of the suit. A federal High Court in had on September 13 ordered NAICOM to stop the implementation of its proposed minimum solvency capital

Dangote Refinery project to boost economic activities in downstream- LCCI

rganized Private Sector under the auspices of Lagos Chamber of Commerce and Industry (LCCI) has described the coming of Dangote Oil Refining and Petrochemicals as a looming economic transformation of the downstream sector of the petroleum industry the reform. Beyond that, the group said the economic benefits of the oil refinery, when completed would have far reaching positive effects on the lives of Nigeria and her people. Speaking after leading members of the Chambers on tour of the site of the facilities Babatunde Paul Ruwase, president of the LCCI said the project is massive and the impact on the petroleum sector would be too spectacular. Ruwase, who led members of the chamber on a tour of Dangote Jetty, Refinery and Fertilizer plants recently in Lagos, expressed excitement over the pace of work at the Refinery and Fertilizer plants, which he described as a game changer for

the Nigeria oil sector. He commended Aliko Dangote, president/chief executive of Dangote Group, for the enormous investment in Africa, saying, “Dangote’s patriotism remains unparalleled when it comes to investment and that his investments in many sectors have been a key factor behind Nigeria’s improving economy. Dangote is doing so much to positively impact the lives of Nigerians through the production of household products.” He said the world is waiting for Dangote Oil Refinery project to bail Nigeria out from the clutches of importation of petroleum products. “This project is the first of its kind. There is no investor in Nigeria that has developed the courage to come up with such gigantic project. From what we have seen today, we now have a better perception about the project. From what we have seen on ground, it shows that the project is a reality and it is possible for Nigeria to become exporter of petroleum product,” he said.

He also commended the company for building a jetty to carter for the movement of heavy equipment to the refinery site. “This will greatly reduce the congestion at Apapa port and also help to cut down traffic on the Apapa road,” he added. Ruwase therefore appealed to other investors to thread the pact of Dangote by investing heavily in the Nigerian economy. Speaking on the progress made so far, Rama Rao Putta, head, Quality Assurance/Quality Control, Dangote Oil Refinery Company Limited described the project as the largest single train petroleum refinery in the world with capacity to process 650,000 barrels per day of crude oil. He said the refinery will lead to the protection of forex revenue of around $16 billion a year at current market prices and saving of $10 billion a year through domestic supplies of petroleum products. Putta said that the refinery is going to create 100,000 indirect employments through retail out-

lets and ease availability of petroleum products in the country. He noted that the company has completed the training of the first and second batches of Nigerian Engineers in India and that the employees were being acclimatized at site. Speaking also at the event, Anurag Jaiswal, general manager of Dangote Fertilizer Limited, described Dangote Fertiliser project as the largest granulated urea fertilizer complex coming up in the entire fertilizer industry history in the world. He put the investment at $2 billion with capacity to handle three million tonnes yearly. Jaiswal, said the impact on the economy of Nigeria and the entire region cannot be overemphasized. “This is going to be one of the largest single capacity complex in the world producing in total 8,000 tonnes of urea daily. We’ll be having two trains of ammonia and two trains of urea and each train will produce 4,000 tonnes. So in a year it will be 3 million tonnes.

policy scheduled to take effect pending the expiration of a 30day pre-action notice. Justice Muslim Hassan gave the order in a class action brought by some shareholders of insurance companies in Nigeria, challenging the new minimum solvency capital policy proposed by the NAICOM. NAICOM had on July 25, 2018 released a guideline for implementation of the TMBSC, and thereafter announced October 1, 2018 deadline, which was resisted by a set of stakeholders, resulting to legal action against the Commission. Under the new capitalisation structure, life insurance firms need a capital level of N6 billion for Tier 1; N3 billion for Tier 2 and N2 billion for Tier 3: For non-life business, the requirement is N9 billion for Tier 1; N4.5 billion for Tier 2 and N3 billion for Tier 3. While for composite companies (combination of life and general business), the new capital requirement is N15 billion for Tier 1; N7.5 billion for Tier 2 and N5 billion for Tier 3.

Zenith Bank reports N167.3 bn pre-tax profit in Q3 IHEANYI NWACHUKWU

igeria’s tierone lender Zenith Bank Plc reported Profit Before Tax (PBT) of N167.307billion in the third-quarter (Q3) of 2018 from N152.552billion recorded in corresponding third-quarter period of 2017, up by 9.67percent. The bank’s Gross Earnings decline of 10.66percent for the third-quarter (Q3) period ended September 30, 2018 which stood at N474.60billionm, down from N531.26billion in the corresponding pe-

riod Q3 period of 2017. The bank’s thirdquarter results at the Nigerian Stock Exchange (NSE) show Net Interest Income (NII) increased to N228.51billion from N201.49billion, up by 13.41percent. The bank’s share price at N22.55 represented gain of 10kobo or 45percent at the close of trading on Thursday October 18. Profit After Tax (PAT) increased by 11.56 percent, to N144.179billion, from N129.235billion in Q3’17. Earnings Per Share (EPS) increased to N4.59 from N4.11, up 11.72percent.

BUSINESS DAY

C002D5556

Monday 22 October 2018

COMPANIES & MARKETS PwC sees good trajectory for mining sector …as FG announces $3.32bn private investment interests ONYINYE NWACHUKWU, Abuja

eading professional services firm, PwC Nigeria sees a good trajectory for the country’s mining sector as it restates commitment to supporting the growth of the struggling industry in line with the country’s overall economic diversification efforts. Uyi Akpata, PWC’s Country senior partner noted that the firm’s commitment to supporting the sector is to build trust in the society and solve important problems and have also led advocacy for increased focus on solid minerals development to drive a sustainable economy. “On behalf of the partners of PwC Nigeria, I wish to assure you that we are in this for the long term and will continue to support not only the organisation of industry players but also in build capacity in the sector and helping companies invest and operate profitably in it,” Akpata noted at the 3rd edition of the Nigeria Mining Week in Abuja. According to him, PWC has long identified the potential of the mining sector, particularly in diversifying the revenue base of government and creating opportunities for Nigerians, adding however that “government cannot achieve it alone and that is why we

have sustained our efforts in playing our own part in the organisation of this annual gathering.” Organised by the Miners Association of Nigeria in partnership with PwC Nigeria and Spintelligent, the Nigeria Mining Week provides a high-level, strategic mining investment platform, linking investors, project developers, financiers, technology providers and government to share best practices and demonstrate the latest strategies to evolve the sector successfully. In a chat, Cyril Azobu, partner, Head Advisory Unit at the PWC told BusinessDay that their major achievement has been in bringing people together and ensuring a clear understanding between businesses and government. “One of the things we have achieved is bringing the voice of the people to the ears of the government and helping the government to come up with policies that aim to address or speak to the problems that people have. One of the achievements really is direction, the road map is there, policies have been introduced, policies are amended, and in everything we see the direction that the ministry is heading.” Azobu said PWC is proud that its efforts to bring together stakeholders has yielded so much result, culminating

Kevin Ejiofor, executive director, Life in my City Art Festival; Nonny Ugboma, executive secretary, MTN Foundation; Edgar Joseph, duke of Shomolu Productions and Bikiya Graham-Douglas, COO, Beeta Universal Arts Foundation, at the press conference unveiling the MTN Foundation arts and culture initiative in Lagos. Pic by Pius Okeosisi

into a mining week which, in its third year has continued to get bigger and better with increased participation by stakeholders both from within and outside the country. Azobu sees a sector in a place where private sector dominance is becoming very real and finding solution to the funding issues that they currently have, “I see a more formalized sector but that is based on continuity in policy execution regardless of who comes in, in the coming elections. I see a good trajectory for the sector,” he stated.

Air Peace seals aircraft maintenance deal with Embraer IFEOMA OKEKE

est Africa’s leading carrier, Air Peace has demonstrated the premium it places on safety and maintenance of its fleet, signing a multiyear aircraft spare parts deal with plane maker, Embraer. The deal, the airline confirmed in a statement, would cover more than 250 components for the six Embraer 145 jets it recently added to its fast-growing fleet in line with its drive to connect unserved and underserved domestic and regional routes under its subsidiary, Air Peace Hopper. The deal was unveiled at the ongo-

ing MRO Europe 2018 summit in Amsterdam, Netherlands. Air Peace currently has the biggest fleet of Embraer 145 jets on the West Coast of Africa. Oluwatoyin Olajide, Air Peace Chief Operating Officer, described the deal as a guarantee of “efficiency and competitive results”. She said: “The Pool and EPEP+ Programs are natural fit and the best options as they offer sensible, cost effective and practical parts solution to our business, guaranteeing efficiency and competitive results. We recognise very good performance of Embraer’s services and support.” The deal, she said, would make spares readily available for the

airline’s maintenance needs, heavily cut down the time spent on maintenance and increase the number of serviceable aircraft available to operate the airline’s flight schedules. For his part, John Linn, Embraer vice president, Customer Relationship Management (CRM), Commercial Aviation, said: “We are humbled to have Air Peace as our customer in Africa, further reinforcing Embraer’s commitment to customers in the region with TechCare portfolio of solutions. Embraer’s Pool Program leverages increased competitiveness providing repairable solutions through reduced lead times and costs.”

Abubakar Bawa Bwari, minister of state for Mines and Steel Development had announced of private investors’ plans to commit about $3.32bn to fund some projects in the mining sector. According to Bwari, the fund will be used to fund gold mining and refining, foundry works, lead/zinc exploration and production, tin, tantalite and columbite mining and processing. He also assured that the government was making effort to tackle challenges hindering the formal exploitation of gold, tin and lead-zinc as well

stop indiscriminate exports of these mineral commodities to foreign smelters. Bwari said that the ministry had also developed a new Export Guidelines for the Export of Mineral Commodities to ease challenges surrounding the granting of export permits and other licensing issues. “We have strengthened our policy and institutional frameworks for investors in the mineral sector to ease their businesses. Government has released funds from Natural Resources Development Fund for the generation and

provision of necessary geosciences data to attract investors,” he stated. Five exploration contracts and consulting services for gold and platinum group metals, Rare Earth Metals, Base Metals, Barytes, and Iron Ore, were recently awarded through competitive bidding to carry out resource mapping for potential minerals, Bwari also announced. He added that the Electromagnetic survey data for three highly prospective gold and lead zinc zones have also been acquired and are available for interested investors.

Sterling Bank announced as Title Sponsor of Ake Festival 2018

i g e r i a ’s l e a d i n g commercial bank, Sterling Bank Plc, has thrown its weight behind the sixth edition of the Ake Arts & Books Festival s che dule d to hold from October 25 to 28, 2018 in Ikeja, Lagos. The annual literary, cultural and arts event which had previously held in Abeokuta, Ogun State for the past five editions will feature stimulating panel discussions, book chats, art exhibitions, interviews, school visits, film & documentary screenings, a stage play, a musical concert and a night of poetry performance. Book-lovers and visitors will also have access to a range of affordable books at the Ake Festival Bookstore. Commenting on the partnership, Dapo Martins, chief marketing officer of Sterling Bank, said the Ake Arts & Books Festival is a 4-day event that will showcase the best of contemporary

African literature, poetry, music, art, film and theatre. “Our decision to support this year’s edition of Ake Festival is borne from our commitment to develop, promote and celebrate creativity on the African continent at Sterling Bank. This is also in line with Ake Festival’s goal to promote and celebrate creativity across different genres in Africa,” Martins informs. The theme for this year’s edition is Fantastical Futures and will feature conversations focused largely on a re-imagined African future and existing challenges along the following lines : Governance, Gender and Sexuality, Literacy and Education, Health and Wellbeing, among others. The event will also feature trail blazers in the arts space including literar y i c o n s ; Nu r u d d i n Fa ra h, Nn e d i O k o r a f o r, D a v i d Olusoga, Chris Abani, EC Osondu, Sefi Atta, Tomi Adeyemi and Inua Ellams,

among others. Sterling Bank is a keen promoter of literary works because of its conviction that a safe society is imperative for corporate institutions to operate successfully. It is against this background that it recently hosted Nigeria’s only Nobel Laureate and literary giant at its first leadership series titled, “The Corporate-cultural intersection with Wole Soyinka” which coincided with his 85th birthday anniversary. The Ake Arts and Book Festival was founded in 2013 by best-selling author, L o la Sh o n e y i n . Ac c o rd ing to her, she wanted a place where intellectuals and thinkers can come together and talk about African issues on African soil. Although it has featured new and established writers from across the world, Ake Festival has promoted African arts and literature in addition to reverberating performances from indigenous talent.

Monday 22 October 2018

BUSINESS

COMPANIES & MARKETS

DAY

Business Event

UBA sees earnings growth from equity investment in associate company DAVID IBIDAPO & CYNTHIA IKWUETOGHU

BA’s group 49 percent ownership interest in UBA Zambia limited, an associate company’s ordinary share boosted marginally earnings recorded by the bank as at the end of Q3 2018. BusinessDay analysis of the financials of UBA, a tier one deposit money bank in Nigeria, revealed that profit after tax of the bank increased slightly by approximately 1 percent during the first 9 month of the year 2018. According to its financials, the banks’ earnings increased to N61.7 billion in Q3 2018 from N60.9 billion in Q3 2017. A critical look into its result shows that share of profit of equityaccounted investee of the bank increased significantly within the period by 1,433 percent from N33 million to N506 million in Q3 2018.

During the period under review, net interest income of the bank slightly by 1 percent to N150.6 billion in Q3 2018 from N152.3 billion in Q3 2017. Slight increase was largely affected by a surge in its interest expense by 38 percent during the period. Interest expenses increased from N85.7 billion to N118.23 billion. Meanwhile total non-interest income also increased slightly by 4 percent from N84.6 billion in 2017 to N87.6 billion in Q3 2018. This was largely contributed to by an increase in net fee and commission income by 9 percent and other operating income by 22 percent respectively. However, during the period, net trading and foreign exchange income declined by 6 percent. Prior to this period, UBA recorded an impairment loss on loans and advances of N12.9 billion, however, in Q3 2018, loss on impairment was reduced by 17 percent to N10.6 billion. During the period, the bank recorded no specific impair-

ment charge, portfolio impairment charge and portfolio impairment reversal. Meanwhile, write-offs on loans and advances declined by 47 percent from N3.7 billion recorded in 2017 to N2.1 billion in 2018. Erstwhile, BusinessDay analysts have seen banks cut down on loans and advances to the real sectors of the economy in a way to minimize the risk of default due to the peculiarity of the current economy. UBA books revealed that while loans and advances to customers declined by 3 percent during the first 9 month period of year, loans and advances to banks surged by 52 percent within the period from N20.6 billion to N31.4 billion in 2018. Total equity of the bank declined 4 percent from N529.4 billion to N509.2 billion in Q3 2018. YTD analysis of stock performance of UBA stocks shows stocks is down by 22 percent from an opening price of N10.41 to close at N8.10 as at Wednesday.

L-R: Ahmed Ragab, managing director, Mantrac Nigeria Ltd; Timothy Zekeri, AG Dangote, winner of Mantrac excavators training; Peremobowel Agama, 9 years old operator of Mantrac New excavators, and Mohamed Ibrahim, general manager, machine sales, at the official unveiling of the Mantrac Next Generation Excavators in Lagos

Heritage Bank adjudged “Most Supportive Bank of the Year”

eritage Bank Plc., Nigeria’s Most Innovative Banking Service provider has again been adjudged the “Most Supportive Bank of the Year,” barely two weeks it got three awards for its outstanding performance. The current award was conferred on Heritage Bank at the fourth edition of Green October Event 2018, an event organized by Alamode Magazine. Only recently, Heritage Bank was adjudged “Best SME Bank Nigeria 2018” by Capital Finance International (CFI.co) and “Agriculture Bank of the Year 2018” by the Nigeria Agriculture Awards (MAA). Also, the bank was honoured for being the Best CIBN Chapter of the Year 2018 in terms of members’ mobilization and participation as well as sponsorship of the Institute programmes. Speaking about the current

award, Ifie Sekibo, Managing Director/Chief Executive Officer, Heritage Bank, who was represented at the event held at Oriental Hotel, Lagos by Mrs. Ozena Utulu, Head, Brand Management and Sustainability; commended the organizers for the recognition and honour. He explained that his management at Heritage Bank Plc. is usually excited when indigenous entrepreneurs show high level of creativity in their daily routine. “At Heritage Bank, such creativity and determination to standout in the midst of competition by any promoter of Small and Medium Scale Enterprises is given due financial support’, he stated. Sekibothereforeencouragedthe audience present at the occasion to partronise Heritage Bank and benefit from the varied financial services products and services available to meetthedivergingneedsofinvestors

According to him, any SME promoter who may approach Heritage Bank for financial support would not regret doing so; as the bank is endowed with experienced staff whose professional prowess is equal to none. In her remarks about the award, Sandra Odige, chief executive officer/publisher, LaMode Magazine as well as the organizer of the annual awards; said the good works the management and staff of Heritage Bank are doing are well noticeable. She said the testimonies from beneficiaries of the products and services of Heritage Bank too show the commitment of Heritage Bank to its values and promises. Odige therefore charged Heritage Bank not to relent on its oars as posterity is taking note of the contribution it is currently making to lead the nation’s economy to a higher level.

L-R: Suresh Kumar, head, Simba Service; Kyle Liu, leader, KStar Nigeria; Napoleon Idisi, manager, Simba Service, Rajneesh Gupta, chief operations coordinator, at the media launch of Kstar UPS in Lagos. Pic by Olawale Amoo

Technology will help rebuild trust in Accounting Profession – says ICAEW

echnology can be a vital tool to help rebuild trust in the accounting profession. This was the view of Michael Armstrong, the Institute of Chartered Accountants in England and Wales (ICAEW)’s regional director in the Middle East, Africa and South Asia, expressed at the recent 48th Annual Accountants’ Conference. The conference, which was themed: ‘Securing Our Shared Future: A Collective Responsibility’ took place at recently in Abuja. Armstrong, who made a presentation at one of the workshops titled: ‘Accounting Firms of the Future: Challenges and Opportunities’, stated that the accounting profession was set to witness exciting times ahead, in a changing world. He said: “Our profession is currently under a great deal of scrutiny with the media reporting corporate failures, criticism of accountants and auditors, and sanctions being imposed

on what can sometimes feel like a daily basis. All Chartered Accountants are under scrutiny. As defined by our Royal Charter, the fundamental function of bodies like ICAEW and ICAN are the protection of public interest. Due to the loss of public confidence, the key challenge facing the profession and our most immediate concern is the need to rebuild trust.” Following a series of highprofile scandals across the world, many accountants and accounting firms have come under heavy scrutiny by regulating bodies. In this regard, one issue that should be of immediate concern to practitioners is the need to regain public trust and this is achievable with the help of technology. Armstrong noted that the accountancy profession needed to recover its original purpose of assuring investors and the public of the truth, rebuilding trust and ensuring the sustainability of the

profession. The ICAEW director called on accounting professionals to act immediately. “In fact, our (ICAEW) CEO, Michael Izza, describes this as a “watershed moment” – a wakeup call for business leaders, regulators and auditors. As a profession, we have to be prepared to think and act differently in the future. If we don’t address this now, one wonders if we will still have a profession in 20 years’ time”, he said. For Armstrong, who was also a partner at KPMG, one way to improve the credibility of financial reporting is to boost audit quality. He noted that changes, driven by a range of factors, but most significantly technology, will transform all aspects of business and society in the coming years, and reshape the accountancy profession across Africa, Europe, the Middle East and the rest of the world.

L-R, Christos Giannopoulos, MD/CEO PZ Cussons Nigeria Plc, Kola Jamodu, Chairman and Abiola Laseinde, Company Secretary during the PZ Cussons Nigeria Plc 70th annual general meeting in Abuja. Pic by Tunde Adeniyi

L-R, Ayo Adegboye, managing director, BCX; Abiola Adefela, head, network and infrastructure, BCX; Funmi Coker, systems engineer international sales, Cisco Systems, and Olatayo-Ajai, sales director, BCX, at the strategic business forum on how to “ transform your business” organized by BCX and Cisco Systems for technology experts in Lagos . Pic by Pius Okeosisi

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

C002D5556

LegalPerspectives

With

Monday 22 October 2018

Odunayo Oyasiji

Case Review

Bolanle Abeke V. The State (2007) LPELR-SC.271/2005

hat to note: This is a matter that was concluded at the Supreme Court. It bothers on a common occurrence in business or commercial transactions- issuance of dud cheque. This Supreme Court authority will give an insight into its legal implication and further shed light on the criminal aspect to it. Facts Bolanle Abeke obtained a loan of N2000 from Ganiyu Ajani (in the presence of his wife) on September 4, 1981. The purpose of the loan was for her to execute the a contract awarded to her by the Ogun State Ministry of Agriculture. A week after, she approached him for another loan of N2000 but he gave her N1300. He requested that the loan transaction be documented and the appellant decided to give a post-dated cheque of N3300 in favour of Ganiyu Ajani. The appellant being an illiterate sought the assistance of Ganiyu Ajani (in the presence of his wife) for him to help write out the cheque so she can sign. He rendered the help. He (Ganiyu Ajani) presented the cheque on the due date and same was not honoured as Bolanle Abeke does not have enough funds to pay the amount on the face of the cheque. He mounted pressure on the appellant to pay the back the loan but she didn’t. Instead, she sent people to him pleading for more time. In 1989, Ganiyu Ajani discovered that the Ogun State Ministry of Agriculture had paid the appellant on the contract she executed. Yet, the appellant refused to pay back the loan. Therefore, Ganiyu Ajani instituted an action for the recovery of the money. In reaction to that, the appellant reported to the police that Ganiyu Ajani stole her cheque. He was arrested and prosecuted. However, he was discharged and acquitted based on the evidence of his wife and the confirmation by a handwriting analyst that the signature on the cheque belonged to the appellant. Based on the foregoing, Bolanle Abeke (the appellant) was charged and convicted of an offence under Section 1(1)(b) of the Dishonoured Cheques (Offences) Act No. 44 of 1977 by justice Popoola of the High Court of Ogun State, Abeokuta judicial division. The appellant was sentenced

to a two-year term of imprisonment. The appellant being dissatisfied with the ruling appealed to the Court of Appeal. The Court of Appeal dismissed the Appeal and affirmed the sentence of the High Court. The Appellant still not satisfied decided to appeal to the Supreme Court. Issues for determination The appellant formulated one issue for determination. The issue was “Whether the learned Justices of the Court of Appeal were right in affirming the decision of the trial court that the prosecution had proved its case beyond reasonable doubt in the circumstance of this case.” The respondent agreed with the sole issue formulated by the appellant. Aruguement/Submission The appellant’s counsel argued that the court should not view the dishonoured cheque as a means of payment of the loan by the appellant. It is merely meant to document the loan transaction between the parties. It is meant to show that the appellant received the sum on the face of the cheque from Ganiyu Ajani. He stated that this could be inferred from the record of court i.e. “A week later she again begged

for another N2,000.00 but he asked her to come back and he later gave her N 1,300.00 because that was what he could afford. His wife was present on both occasions - but he on the second occasion insisted to have both documented - but accused said instead she would issue a post-dated cheque for both amounts. She opened her bag and brought out the cheque book but said she could only sign her name and put her stamp but could not write and even in the Bank she is always assisted to write her cheques. He obliged her and she signed the cheque and stamped it with her stamp and delivered same to him a postdated cheque dated 29/9/81.” Judgement of Court The Court stated that the defence being put forward by the counsel to the appellant defers from the defence of the appellant herself. Her defence is that she did not issue the cheque and that same was stolen by Ganiyu Ajani. However, in the face of overwhelming and uncontroverted evidence of a handwriting analyst, it became obvious that she signed the cheque. Also, she gave contradictory evidences with regards to reporting the stolen cheque to the police in 1981.

“1.(1) Any person who (a) obtains or induces the delivery of anything capable of being stolen either to himself or to any other person; or (b) obtains credit for himself or any other person, by means of a cheque that, when presented for payment not later than three months after the date of the cheque, is dishonoured on the ground that no funds or insufficient funds were standing to the credit of the drawer of the cheque in the bank on which the cheque was drawn, shall be guilty of an offence and on conviction shall:(i) in the case of an individual be sentenced to imprisonment for two years, without the option of a fine, and (ii) in the case of a body corporate be sentenced to a fine of not less than N5,000.00. 2. For the purposes of subsection (1) of this section (a) the reference to anything capable of being stolen shall be deemed to include a reference to money and every other description of property, things in action and other intangible property; (b) a person who draws a cheque which is dishonoured on the ground stated in the subsection and which was issued in settlement or purported settlement of any obligation under an enforceable contract entered into between the drawer of the cheque and the person to whom the cheque was issued, shall be deemed to have obtained credit for himself by means of the cheque notwithstanding that at the time when the contract was entered into, the manner in which the obligation would be settled was not specified. 3. A person shall not be guilty of an offence under this section if he proves to the satisfaction of the court that when he issued the cheque he had reasonable grounds for believing, and did believe in fact, that it would be honoured if presented for payment within the period specified in subsection (1) of this section.” The Supreme Court dismissed the appeal for lack of merit.

She stated that it was reported in writing and later claimed that it was just oral. The court held that “The issuance of a cheque has certain connotations in law. A cheque issued by a drawer and accepted by the drawee serves two purposes. One is that of documenting the particular transaction. The other is that, it is a medium of payment, the issuance of which has far reaching implications in law. I am unable to accept the argument of appellant’s counsel that the cheque issued by the appellant was to be seen only as a documentation of the loan transaction between the appellant and P.W.2 (Ganiyu Ajani); and that exhibit ‘B’ (the dishonoured cheque) be held not to possess the attributes ascribed by law to such an instrument.” The court further held that the submission of the appellant is not reasonable as it was not her first time of handling a cheque. Therefore, she has Conclusion a full understanding of its This case clearly shows the implication. On this basis, the court held that the standard implication of issuing a dud of the law as to her liability cheque. This is very common in will stand i.e. as stated under our society- especially in busiSections 1(1),(2) and (3) of the ness and commercial transacDishonoured Cheques (Of- tions. Issuance of dud cheque fences) Act, Cap. 102, Laws of is a criminal offence which can the Federation 1990- result into imprisonment.

REAL SECTOR WATCH C002D5556

Monday 22 October 2018

BUSINESS DAY

Nigeria’s manufacturing sector: Beyond the numbers ODINAKA ANUDU

lot of positive numbers have emanated from Nigeria’s manufacturing sector in recent times. The September 2018 Manufacturing Purchasing Managers Index (PMI) released by the Central Bank of Nigeria stood at 56.2 points. This was a decline from 57.1 points reported in August. A PMI above 50 points indicates that the manufacturing sector is expanding, while one below 50 points is a pointer that there is little or low expansion happening in the sector. One may not appreciate this number until one factors in how South Africa, Africa’s second largest economy, ranks. South Africa’s seasonally adjusted Purchasing Managers’ Index (PMI) stood at 43.4 points in August, a 13-month low from 51.5 in July. For Nigeria, capacity utilisation in the manufacturing sector averaged 57.13 percent in 2017, according to the manufacturers Association of Nigeria (MAN). Similarly, Local input preference, which measures the rate at which manufacturers source locally available raw materials, averaged 63.2 percent in 2017, according to MAN data. Again, nominal Gross Domestic Product (GDP) growth of manufacturing in the third quarter of 2017 was 10.32 percent(year-onyear), 13.25 percent points higher than growth recorded in the corresponding period of 2016 (-2.93 percent), but -5.65 percent points lower than the preceding quarter growth of 15.97 percent, , according to the National Bureau of Statistics (NBS). Quarter on quarter growth of the sector was 3.21 percent, while the contribution of manufacturing to nominal GDP in the third quarter stood at 8.55 percent. D e sp i t e t h e s e g o o d numbers, checks show that

things are not significantly improving in the sector as is being reported and ageold problems have refused to go. First, power sector expenditure in the manufacturing sector has been on the rise since 2014/15. Manufacturers spent N51.35 billion on alternative energy sources in the second quarter (H2) of 2017; N66.03 billion in the first half (H1) of 2017; N62.96 billion in H1 of 2016, and N69.99 billion in H2 of 2016, according to MAN. Average daily electricity supply in H1 of 2017 declined to five hours, from seven hours supplied in the corresponding period of 2016 and eight hours in the H2 of 2016. There was, however, a nine-hour average power supply in the second half of 2017. “It is no more news that manufacturers in Nigeria currently self-generate as much as 13,000MW through alternative sources of energy in order to stay afloat. In fact, members of MAN expended over N129billion on alternative energy generation in 2016 and the cost of alternative electricity generation alone constitutes about 40 percent of production cost. With such high costs, made-in-Nigeria products will hardly be competitive,” Frank Jacobs,

immediate past president of MAN, said at a special interactive forum on Eligible Customer Regulation of the Nigeria Electricity Regulatory Commission (NERC) in June 2018. In fact, manufacturers have given up on power distribution companies (DisCos), prompting them to form a corporation known as MAN Power Development Company to cater to their energy needs. Results of survey conducted by MAN shows that the average interest rate banks charged manufacturers in H2 of 2017 was 23.05 percent as against 22.65 percent in H1 of 2017 and 21.4 percent in H1 of 2016. Infrastructure-wise, Nigerian roads are still in bad shape, and only Abuja –Kaduna Railway has been completed, which is not even a major economic rail.

Ajaokuta Steel Complex is yet to be revived as has been the case, prompting manufacturers to seek steel inputs from abroad

Lagos to Kano, and Kano to Kaduna, among others, which can help manufacturers cut logistics costs, are still at the inchoate stage. Today, manufacturers’ 20 to 40 percent expenditure goes to logistics. Also, manufacturers in various states pay 54 types of taxes and levies as against 38 in 2013-14. “These taxes need to be amalgamated into one or a few, since the whole tax cycle is a multiple chain of taxes on the same income stream,” said Vivian Chigozie-Nmonwu, tax expert and lead partner of Vi-M Professional Solution in a recent interview with Real Sector Watch. Ajaokuta Steel Complex is yet to be revived as has been the case, prompting manufacturers to seek steel inputs from abroad. The Federal Government is still dithering on privatising it. “Currently, I am not sure those technologies at Ajaokuta are competitive in steel making. The world has moved on. What is required now is for the private sector to get more and more involved in the downstream and the upstream segments in the steel business,” Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants, told BusinessDay recently.

Africa’s biggest economy’s petrochemical industry is struggling, pushing pharmaceutical firms to scramble for dollars to import raw materials. Foreign exchange crises of 2016 exposed Nigerian manufacturers as importdependent, as even the CBN had to devote 60 percent of the entire FX market to ensure they stayed afloat. Even at that, 54 firms that could not cope went under, according to Jacobs. Today, the tomato industry is in crisis as many players are either shut down or operating at less than 20 percent capacity. More so, the only brakepads manufacturer—Star Auto Industries Limited—is shut down. “We could not continue because we could not compete,” Chidi Ukachukwu, CEO, told BusinessDay after the closure. The automotive industry is struggling, as over 40 firms which planned to set up plants did not do so, owing to an incoherent government policy and harsh business environment. The textile industry today is in terrible shape as almost all the mills are moribund, except for two. Most of what is called textile firms today and numbers emerging from international agencies about

the industry focus on fashion and design, which does not constitute full-fledged manufacturing. “What we need is the enabling environment. We cannot compete with the level of smuggling and counterfeiting going on now. We used to have about 127 textile firms in Nigeria but that has come down to two or three now,” said Grace Adereti, president of the Nigerian Textile Manufacturers Association (NTMA) in Lagos, at a Made-in-Nigeria stakeholders’ meeting in 2017. Nigerian exporters are increasingly losing millions of dollars every now and again at the global market, due to compromise to standards and quality, poor product packaging, engagement of fraudulent freight forwarders, inability to get certification on time from regulatory agencies and Apapa gridlock, experts say. The state of Apapa roads and Nigerian ports are also big hiccups. Exporters shipping 1,700 tons of commodities per day when Apapa road was in good condition now manage to only ship between 100 and 250 tons, Tola Faseru, president of the National Cashew Association of Nigeria said. Out of N4.69 trillion export done in the first half of 2018, crude oil export stood at N3.58 trillion, accounting for 76.3 per cent of the total exports. Non-oil exports amounted to N1.1 trillion, according to data from the NBS. The Europ ean Fo o d Safety Authority rejected beans from Nigeria in 2015 because it contained between 0.03mg per kg and 4.6mg/kg of dichlorvos pesticide, when the acceptable maximum residue limit was 0.01mg/kg. The ban has been extended to 2019. “ Nig e r i a n e x p o r t e r s thank God whenever they are paid at all for their products. This is because products from Nigeria are always downgraded,” Fred Uwheraka, CEO of Frijay Consult Limited, an export firm, said at a recent Lagos Chamber of Commerce and Industry (LCCI) symposium held in Lagos.

BUSINESS DAY

Monday 22 October 2018

Stocks

Currencies

C002D5556

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

BUSINESS DAY

Watchlist

ECONOMY

Lannisters always pays their debts, but can Nigeria follow suit? BALA AUGIE

ouse of Lannister, according to G.R.R Martins bestseller novel book “The Game of Thrones” is a very wealthy and influential family that does not want to be indebted to anyone. This is because there is certain power, respect and independence with being in no one’s debt. Even when they owe, they look at their creditors in the face and say “A Lannister always pays his debts” While the Lannisters have their castle built on gold mines- which gives them the leeway to meet their obligations-, does Nigeria have enough to pay mounting debt given that its revenue generating streams are weak. The debt stock of Nigeria has been rising steadily between 2014 and 2017. The debt stock stood at N22.38 trillion ($73.21 billion based on 305.70 exchange rate/$) as at the end of the second quarter of 2018, from N15 trillion in 2017 and N9.7 trillion in 2014. Federal Government is not done borrowing as it has finished arrangement to float $2.8 billion Eurobond in order to fund the 2018 budget. While the debt profile of the country is about 20 percent of GDP, experts have said that such a steep increase in debt could hurt the

economy. This is because the country is currently spending a larger portion of its revenue in servicing debt.

According to data from the Budget office of the federation, debt service to total revenue increased significantly to 61.59 percent from

29.04 percent in 2014. Analysts at CSL Stock Brokers Ltd are of the view that there is a crucial need for the government to adopt

fiscal consolidation measures that will prevent the nation from experiencing debt overhang. Debt overhang is when a nation’s debt stock exceeds the capacity to repay those debts. “We believe that borrowing in itself is not a problem; it could however pose a serious challenge when the debt burden starts to weigh heavily on debt servicing capacity,” said analysts at CSL Stock Brokers. The table above explains the trend of debt servicing to total revenue. In 2011, debt servicing was taking 20 percent of Federal Government revenue. By 2017 it risen to 61.59 percent. Nigeria’s FG funds up to 60% of its annual budget from the proceeds of oil sales. If federal government share of oil revenue at N1.12 trillion is compared with the associated cost of servicing debt of N1.64 trillion, clearly, the federal government oil revenue is not enough to pay interest on Nigeria’s expanding debt. Volatility or vagaries in oil price means the country’s future revenue is in jeopardy; this means Africa’s largest economy is piling debt on the next generation. Analysts have called on policy makers to diversify away the economy from reliance on oil by investing in infrastructure, Agriculture, and technology.

Snap shot of firms’ third quarter performance as earnings season starts BALA AUGIE

he third quarter earnings season has begun and firms have started posting financial statement on the website of the Nigerian Stock Exchange (NSE). Investors will like to know the major drivers of growth and factors responsible for stinging disappointing results; hence we have decided to provide dig into the numbers of bellwether firms. From the third quarter results of lenders, we found

that interest income has nosedived, but bottom line (profit) got a boost from exceptional items, improvement in impairment on financial assets, and a reduction in interest expense. But for how long will exceptional items continue to add impetus to profitability given that it is end of free money, as yield on short term government security is lower than last year’s while foreign exchange gains are no longer in vogue. The prognosis is however

positive as analysts are of the view that management and board of directors of firms can still make money for shareholders if they are able to generate reasonable

income from noninterest revenue such as fees and commission income and internet banking while curtailing costs. Zenith Bank Plc

Zenith Bank Nigeria Plc recorded an 11.51 percent increase in profit after tax to N144.19 billion as at Sep-

P.E

SHORT TAKES 15 pct Nigeria’s central bank is asking a Lagos court to make South Africa’s MTN pay 15 percent annual interest on the $8.1 billion it claims was illegally moved abroad, according to court documents seen by Reuters. The bank also asked the court to dismiss MTN’s case seeking to stop the monetary authority’s order for the telecoms firm to repatriate the funds back to Nigeria, the documents showed.

N3.9trn The Federal Government has generated N3.9 trillion in tax revenue this year, according to Tunde Fowler, the Chairman, Federal Inland Revenue Service. The Chairman, who spoke at the meeting of the African Union High Level Panel on Illicit Financial Flow from Africa in Abuja on Thursday, said the generated revenue is higher than the N2.9 trillion realised in the same period of 2017. According to the FIRS boss, the improvement was due to the organisation efforts at recovering all monies due to the government and the insurance of tax notification to companies not complying with Company Income Tax. So far, a total of 2,672 demand notices have been issued, out of which 653 of the companies are now filing their returns and paid N2.98 billion already.

36% The Nigerian National Petroleum Corporation on Thursday announced total crude oil and gas export sale of $416.07m for June 2018, which was 35.78 per cent higher than what was recorded in the previous month. Details of the figures contained in the just released June 2018 edition of the NNPC Financial and Operations Report also indicated that the crude export sale contributed $274.95m, which translated to 66.08 per cent of the dollar transactions compared with $244.72m contribution in the previous month. The gas export sale for the month was $141.12m, the report stated. It added that the corporation recorded some ruptured pipelines that supply gas to thermal electricity generating plants across the country.

Continues on page 30

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: DIPO OLADEHINDE, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: SAMUEL IDUH )

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

BUSINESS DAY

C002D5556

Monday 22 October 2018

Markets Intelligence ECONOMY

Oil and gas firm have more cash to spend than other sectors BALA AUGIE

ash is King! So the saying goes. Investors these days pay more attention to the cash position of a firm, because they have come to the realization that the income statement could be easily manipulated by window dressers. A firm with a robust free cash flow is in a better position to meet its obligations to long term creditors, pay dividend and fund future expansion plans. However, it should be noted that a negative free cash flow yield doesn’t mean a firm is in financial difficulty, it simply means it has been spending more on the items aforementioned. Our study have shown that oil and gas firms have more cash to spend than other sectors, thanks to a rebound in crude oil price and the relative calm in the Niger

Delta region. The NSE Oil and Gas Index recorded a free cash flow yield (FCFY) of 16.87 percent in June 2018, this compares with the NSE 30 Index figure of -3.77 percent, according to data gathered from the Bloomberg

Terminal. Bloomberg estimates (FCFY) 13.56 percent in the third quarter of 2018. Seplat Corporation Development Company Plc, the largest indigenous oil firm by market capitalization has a free cash flow of N60.10 billion in the second quarter of 2018 from N18.67 billion the previous year. Banks are also awash with cash as a robust interest income continues to underpin revenue base. The NSE Banking Index, lists of largest firms by market capitalization recorded FCFY of 2.86 percent, albeit Bloomberg estimates a negative FCFY of -5.30 percent in the third quarter of 2018. This prognosis is unsurprising because

a precipitous drop in yields on short term government securities have cast a pall on future profit as evident in lower interest income. The NSE Consumer goods 10 Index; the lists of the largest firms in the sector recorded a FCFY of 2.27 percent in June 2018 from 2 percent the first quarter of the year, while data from Bloomberg Terminal estimates a positive figure of 2.47 percent in the third quarter. However, International Breweries Plc, has a negative free cash flow of N11.01 billion as at June 2018 from N7 billion the previous year. This is unsurprising because the beer maker embarked on aggressive expansion plans with a view to increasing its share of the market.

Snap shot of firms’ third quarter performance as earnings... Continued from page 29

tember 2018 despite a 6.28 percent drop in interest income. The growth in profit was largel y d r i v e n by a 6 9 . 5 4 p e rc e nt reduction in loan loss expenses otherwise known as impairment charge and a 31.03 percent drop interest expense. Guara nt y Tr u st Ba n k ( GTBank) Investors should be asking themselves to what will items outside ordinary operating activities of Guaranty Trust Bank (GTBank) continue to salvage the lender from taking a beating at the bottom line (Profit). The lender recorded a 13.23 pereent increase in net income to N142.22 billion as at September 2018; thanks to a 132.87 percent and 115.77 percent surge in foreign exchange gains and foreign exchange revaluation gains to N16.86 billion and N25.68 billion in the period under review. Interest income, which was a major driver of top lines in the past has reduced by 4.31 percent to N237.54 billion in the period under review, a trend that may continue unless the lender is ingenious in harnessing other revenue generating streams that will magnify shareholders’ earnings. United Bank for Africa (UBA) Income from treasury bills (Tbills) salvaged the lender from disappointing results. A 47.76 percent increase in income from T-bills added fire power to interest income,

which increased by 12.95 percent to N268.23 billion in the period under review (September 2018). We also observe that interest expense was up by 37.173 percent

to N118.23 billion as at September 2018; largely driven by a 44.15 percent and 55.38 percent increase in deposit from customers and borrowings to N79.10 billion and

N25.38 billion as at September 2018. Lafarge Africa Plc The second largest producer

of building material has been grasping for breath as it continues grapple with slow growth in revenue, rising production costs and mounting debt. Fo r t h e f i r s t n i n e m o nt h s through September 2018, the cement maker recorded a loss of N10.37 billion, from a profit of N937.90 million the previous year. The stinging disappointing results is unsurprising because the company’s earnings before interest and tax (EBIT) or operating profit of N19.13 billion got swallowed by finance cost of N34.92 billion. Of course, Lafarge is beleaguered by alarming leverage, as debt to equity ratio has hit 192 percent in September 2018, from 163.42 percent the previous year. It will interest investors that total debt (both long and short term) of N254.51 billion in the period under review, is 46.67 percent of total assets. What’s more, winter is coming, as other reserves arising on business combination and reorganisation of N368.68 billion remains a burden on total equity. However, there is a silver lining for the cement maker, as management and board of directors have embarked on capital raising, aimed at trimming debt. The company plans to raise as much as N90 billion ($249 million) through a share sale in Nigeria, but investors will want more input from parent company, Switzerland-based LafargeHolcim Ltd.

Monday 22 October 2018

C002D5556

This is M NEY A daily guide to your Personal Finance

BUSINESS DAY

• Savings • Travel • Debt & Borrowing • Utilities • Managing your Tax

‘Buy low, sell high’

e’ve all heard the famous maxim, “ B u y Low, Sell High” but it’s easier said than done. It seems so obvious, but many investors often do the exact opposite! Because of a strong aversion to risk and the fear of loss, so many people sit on the sidelines and watch opportunities pass them by. Are you nervous about investing in the stock market? Have you had a bad experience in the past that has kept you out of the market? Here are a few things to bear in mind as you consider investing: What are you investing for? The best way to navigate the investment environment is to have set goals in place and a clear plan on how to achieve them. Your focus will then largely be on accomplishing them and your plan will provide you with direction on the most appropriate way to invest your money. What are you setting money aside for? To fund your child’s education? To make a down-payment on a new home, or for your retirement? When you have concrete goals that you are working towards, you are not as easily swayed by market hype and volatility. Your own unique circumstances should ultimately determine how much, how and when you should

It is a particularly useful tool in a volatile market as you can reduce the average cost of your shares by purchasing more shares when prices are low, and fewer shares when they are high. A consistent disciplined approach takes away the speculative element of investing and reduces stress and fear

invest. Build your knowledge Make an effort to improve your knowledge of investing; this will help you make better financial decisions. There is a plethora of information and research by professional analysts and experts, which will be a good guide. Investment seminars are also available that can develop you and point you in the right direction. Resolve to make the time to educate yourself. How much risk can

times, you need nerves of steel to sit tight when the market dips sharply. It is important to be aware of your attitude to risk. If you are so risk averse that you feel comfortable in only guaranteed investments, bear in mind that when it comes to investing, playing it too safe isn’t necessarily the winning formula. If you invest only in the money market, with rates barely keeping apace with inflation, it will be challenging to achieve even the most modest financial goals. Invest for the long term A mistake that many investors make is putting money that they need next year in the stock market. How much money can you really afford to put away for say 5 years and beyond? When you think of investing in the stock market, adopt a long-term strategy rather than looking to make a quick profit. Avoid investing more than you can comfortably afford to be without during your time horizon. Historically, stocks have generally outperformed other investment classes over the long term. However, in the short term, the market can be unpredictable and carries a far greater risk of loss. It is impossible to predict accurately what the

nomic forecasts, the political situation, investor perception, emotions, greed and fear. “Don’t put all your

you endure? Risk is a fundamental part of investing. Stock market investments are not guaranteed. Some-

stock market will do tomorrow. Many factors come to bear as to the way the market will go, such as market trends and eco-

eggs in one basket!” Don’t put all your money in one stock and don’t invest in stocks alone. When it comes to buying

shares, diversification is essential. Instead of investing all your money in just one or two companies, its best to diversify by buying shares in different companies and sectors. It is also important to diversify your investments across different asset classes including real estate, money market accounts or bonds. That way, if one asset class under-performs, you will have some exposure to other assets that might do well. It is unlikely that all segments will perform in exactly the same way and decline together. Invest in mutual funds If you are new to investing or don’t have that much money to invest, mutual funds are a very convenient way to invest. A mutual fund pools investor’s funds and manages them in stocks, bonds, money market instruments, etc. The benefits of mutual fund ownership include the wide variety of investment types to choose from, having a diversified portfolio of stocks, bonds and cash, and having access to professional management, usually the prerogative of substantial investors. Seek professional advice Most of us do not have the time or expertise to make sound investment choices without the help of a professional. Professionals have the expertise and an enormous amount of information with which they can make well-informed decisions. An advisor will work with you to create an investment strategy that suits your unique situation and your risk profile to ensure that the appropriate investments are in place for your changing circumstances. But don’t take a back seat. You should be involved and understand what is being done for you. Don’t be greedy Don’t be enticed by short-term profits; for every lucky person there are many more who have been badly burnt and lost their entire investment. When you make an investment, you should know your reasons for doing so. Relying upon every rumour of fabulous returns

being made in the stock market in a short period of time is tantamount to gambling. Invest regularly Allocate a part of your investments in a systematic investment plan. Instead of trying to time the market, invest on a regular basis say monthly, or quarterly in an appropriate vehicle, and even when your finances are stretched. It is a particularly useful tool in a volatile market as you can reduce the average cost of your shares by purchasing more shares when prices are low, and fewer shares when they are high. A consistent disciplined approach takes away the speculative element of investing and reduces stress and fear. Be realistic about your expectations of the stock market. Set reasonable long-term profit expectations for your investments. Depending upon your own particular circumstance, your age and the time frame within which you wish to invest and your overall objectives, do consider putting at least part of your money in the Nigerian stock market; it offers great prospects for long term growth. As always, seek professional advice. Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

C002D5556

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: October 19 - October 26, 2018

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.50

Q2 2018 — lower by 0.45% compared to 1.95% in Q1 2018

Broad Money Supply (M2) (N’ trillion)

24.86

Decreased by 0.45% in Aug’ 2018 from N24.97 trillion in July’ 2018

Credit to Private Sector (N’ trillion)

22.47

Increased by 0.94% in Aug’ 2018 from N22.26 trillion in July’ 2018

Currency in Circulation (N’ trillion)

1.93

Increased by 5.69% in Aug’ 2018 from N1.82 trillion in July’ 2018

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

11.28

Increased to 11.26% in September’ 2018 from 11.23% in August’ 2018

Monetary Policy Rate (%)

Raised to 14% in July ’2016 from 12%

Interest Rate (Asymmetrical Corridor)

14 (+2/-5)

Lending rate changed to 16% & Deposit rate 9%

External Reserves (US$ million)

42.78

October 1, 2018 figure — a decrease of 2.83% from October start

Oil Price (US$/Barrel)

82.03

October 19, 2018 figure— an decrease of 4.43% from the prior week

Oil Production mbpd (OPEC)

1.73

August 2018 figure — an increase of 4.48% from July 2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

19/10/18

12/10/18

32,841.69 11.99

32,456.98 11.85

Volume (bn)

0.21

0.16

Value (N’bn)

1.46

2.24

MONEY MARKET NIBOR Tenor

Global Economy In China, the economy advanced at a slower pace to 6.5% from 6.7% growth seen in the last 3 quarters according to China National Bureau of Statistics. It is the lowest growth rate seen since the aftermath of the global financial crisis in the first quarter of 2009, amid intense tariff dispute with the US and alarming off-balancesheet borrowings by local governments. Elsewhere in Eurozone, consumer prices rose to 2.1% in September 2018, above the 2% reported in August. According to European Statistical Office, the increase in price was driven by a surge in the price of energy and processed food. Annual core inflation, which excludes volatile prices of energy, food, alcohol and tobacco remained steady at 0.9%. Among Eurozone's largest economies, the highest annual rate was registered in France (2.5%), followed by Spain (2.3%), Germany (2.2%) and Italy (1.5%). In a separate development, Brazil trade surplus shrank to $4.97 billion in September 2018 from $5.18 billion in September 2017 according to Ministry of Industry, Foreign Trade and Services. Imports increased 4.7% mostly due to fuels & lubricants, while exports went up at a slower 3% on the back of a surge in crude oil sales. Among major trading partners, sales expanded 44.4% to China and 17.9% to the US, but dipped 0.3% to the European Union.

Friday Rate

(%)

Change(%)

Indicators

19/10/18

1-week Change

YTD Change

(%) Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) 30.93 Agriculture Cocoa ($/MT) (34.94) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.) 1.19 1.19

(%)

82.03 3.17

(4.43) (0.31)

27.26 3.73

2177.00 122.00 77.75 13.81 511.50

0.93 5.31 (0.87) 5.34 (1.25)

12.45 (6.30) 0.32 (9.92) 17.99

1227.92 14.65 276.35

0.56 0.14 (1.27)

(6.80) (14.78) (15.70)

19/10/18

12/10/18

OBB

12.6700

19.1700

(650)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

13.3300 13.5000 13.5127

19.7500 9.3750 13.7773

(642) 413 (26)

Tenor

(42)

1 Mnth 3 Mnths

13.43 13.11

12.83 12.68

60 43

6 Mnths 9 Mnths 12 Mnths

13.35 14.50 15.48

13.11 14.22 15.18

24 28 30

90 Days

13.6640

14.0813

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

19/10/18

12/10/18

19/09/18

Official (N) Inter-Bank (N)

306.50 362.54

306.45 362.29

306.30 359.92

BDC (N) Parallel (N)

362.99 362.00

362.99 361.00

362.50 361.00

Friday

Change

(%)

(Basis Point)

19/10/18

12/10/18

3-Year 5-Year

0.00 14.77

0.00 14.52

0 25

7-Year 10-Year 20-Year

15.03 15.04 15.20

14.96 14.88 15.12

8 17 7

Indicators

12/10/18

Friday

Change

(%)

(Basis Point)

19/10/18

12/10/18

2,677.94

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

8.65 5.44

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

9.02 -46.57

2,679.30

(0.05)

8.66 5.46

(0.06) (0.35)

9.07 -46.49

(0.05) (0.08)

TREASURY BILLS (MATURITIES)

Disclaimer

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

(Basis Point)

Index

Tenor 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

(%)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

AVERAGE YIELDS Friday

Friday

(%) 19/10/18

BOND MARKET Tenor

Friday

91 Day 182 Day 364 Day

Amount (N' million) 5,849.03 29,245.17 112,535.64

Rate (%)

10.96 12.69 13.449

Date 17-Oct-2018 17-Oct-2018 17-Oct-2018

Domestic Economy Recently released data by the National Bureau of Statistics, showed Nigeria's Inflation rate increased for the second time in eighteen months. The Consumer Price Index which measures inflation increased by 11.28% yearon-year (y-o-y) in September 2018, reflecting a 0.05% increase on the 11.23% rate recorded in August 2018. Food inflation edged up to 13.3% y-o-y compared to 13.16% y-o-y in July. This rise in the food index was caused by increases in prices of Potatoes, Yam and other tubers, Fruits, Milk, Meat, Vegetables, Fish, Fruits and Bread and cereals. In contrast, core inflation dipped to 0.98% year-on-year in September 2018, from the rate recorded in August at 10%. Data from the Central bank of Nigeria (CBN) shows foreign exchange reserves dipped below $43 billion, losing $1.18 million since the beginning of October. The country's reserves which stood at $44.31 billion as of September 28th, fell to $42.78 billion - the lowest level in six months - on th October the 18 . The depletion in the nation's external purse may not be unconnected to the weekly intervention of the CBN into the foreign exchange market to ensure the stability of the Naira and capital flow reversals arising from rising interest rates in the United States. The International Monetary Fund warned Nigeria to be careful about the use of its foreign exchange reserves, saying oil prices could decline at any time. However the reserves are sufficient to cover the nation import for more than the 3 months recommended figure. Stock Market The local bourse was bullish last week as the market was boosted by increased positioning by bargain hunters in under-valued blue-chip and highly capitalised stocks in the midst of weak macro-economic indicators. The All share Index (ASI) expanded by 1.19% to 32841.69 points from 32,456.98 points the preceding week. Similarly, Market Capitalization increased by a similar rate at 1.19% to N11.99 trillion from N11.85 trillion the prior week. This week, we expect market to tick up slightly as expected Q3 earnings reports assist investors and fund managers rebalance their portfolios, while watching the political space and analysing the actual

numbers that will give insights into expectations for Q3 GDP. Money Market The direction of money market rates trended th downwards for the week ended October 19 2018 due to inflow from Net Open Market Operation (OMO) of about N394 billion. Shortdated placements such as Open Buy Back (OBB) and Over Night (O/N) rates declined to 12.67% and 13.33% from 19.17% and 19.75% respectively the previous week. Longertenured interbank rates, such as the 30-day and 90-day NIBOR further declined to 13.51% and 13.66% respectively from 13.78% and 14.08% the previous week. This week, the liquidity might tighten due to Retail Secondary Market Intervention Sales (SMIS) expected to be carried out at the end of the week. Foreign Exchange Market The local currency took a beating on all market frontiers last week. At the interbank window the naira lost 0.07% to close at N362.54/$ compared to N362.29/$ the previous week. The official and parallel rate also trended lower, settling at N306.50/$ and N362/$ respectively last week relative to N306.45/$ and N361/$ the week before. The relative stability of the local currency continues to be supported by the intervention of the apex Bank. This week, we envisage the naira remaining at prevailing levels, as the CBN continues to support the currency. Bond Market Last week, bond yields inched higher across all maturities as a result of sell-off by investors. The February 2028 bond witnessed the most activity as investors sold it off in anticipation of the bond auction to be carried out within the week. Yields on the five-, seven-, ten- and twenty- year debt papers closed higher at 14.77%, 15.03%, 15.04% and 15.20% from 14.52%, 14.96%, 14.88% and 15.12% respectively the previous week. The Access Bank Bond index declined marginally by 1.36 points or 0.05% to close at 2,677.94 points from 2,679.30 points the previous week. This week, bond yield will be determined by expected bond auction to be carried out by the Debt Management Office. Commodities Crude oil prices tapered as U.S. crude inventories rose by 6.49 million barrels last week according to the Energy Information Administration (EIA). Consequently, Nigeria's benchmark crude oil, Bonny light, declined by $3.80, or 4.4%, at $82.03 a barrel. Conversely, precious metals prices traded upward for the third consecutive week as global stocks were under pressure, with European shares hitting 22 - month lows on the back of a raft of factors including a U.S. - China trade dispute, rising tensions between Saudi Arabia and western powers, stalled Brexit negotiations and concerns over an economic slowdown in China. This week, oil prices are likely to become bullish if Saudi Arabia carry out their promised retaliation if the U.S. sanctions it over investigations being carried out on the death of a prominent Saudi Arabia Journalist. Precious metals might decline as yields on US bonds rise due to hints of a likely hike in rates as revealed in the minutes of the Federal Reserve held recently. MONTHLY MACRO ECONOMIC FORECASTS Variables

Oct’18 Nov’18

Dec’18

Exchange Rate (Official) (N/$)

363

364

365

Inflation Rate (%)

11.30

11.32

11.45

Crude Oil Price (US$/Barrel)

77.00

78.00

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

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

Start-Up Digest

In association with

How Bukola makes money from producing crayons ODINAKA ANUDU

he business of crayons is not popular in Nigeria, but those who are in it always have good stories to tell. Bukola Baruwa is one of the few entrepreneurs in the country tapping into the crayons industry. Bukola runs a company called Yembar Ventures, which she started in 2012. She recently set up a firm— Wurabelle Nigeria Limited—to provide business support services for the micro, small and medium enterprises. When Bukola started the crayon business in 2012, she did not see the big potential in it until 2017 when her eyes were opened to the endless possibilities in it. Today, the entrepreneur produces wax crayons for children between nine months and 10 years. “I was basically doing it for my children. It was in 2017 that I had to do a business plan and somebody opened my eyes to see how big the business was. I went back and looked at Crayola (American crayon maker) and found out that it was big business. I went to Enterprise Development Centre (EDC), which is the arm of the Lagos Business School, where I realised that I was sleeping on a gold mine,” she tells Start-Up Digest. An entrepreneur with a solid financial background and experience, Bukola started with producing party packs at the early stage before being prodded by schools to produce crayons for them. The entrepreneur, who is a 2018 product (mentee) of the Lagos Chamber of Commerce and Industry (LCCI) Mentoring Programme, believes that crayon business in Nigeria has a N9.2 billion market. “The business is a N9.2bn market, because we have up to 300,000 private schools in Nigeria. I assume

Bukola Baruwa

that every school should buy a minimum of five crayons,” she says. “Because of the way I have marketed myself, I now supply to 50 schools. However, I am running away from many of them as I can’t even meet their demands,” she discloses. Bukola explains that she sells to schools, rather than in open markets. “We realised that for most of the schools, it is easier to personalise those brands for them. So, most of the time, we package the crayons in such a way that you can just place them in each class for the pupils to use, without them having to buy extra packaging,” she says, when asked

what distinguishes her from any other crayon maker in the country. But why is Bukola not meeting the ballooning demands of her customers? “I do not have the required machines,” she answers. “I have done two fabricated machines in Nigeria—at Ojota in Lagos—but they are not giving me the required service. Right now, the second one is with the fabricator. The basic challenge for me is the machines. If I have good machines, I can actually do 5,000 packs of 36 pieces of crayons in a day,” she discloses. “I spoke with someone in China who was ready to send me a machine, but the cost came to N50

million. These are things that are really drawing us back. I have contacted the Bank of Industry but they asked me to import the machine before they could approve the loan. The Lagos State Employment Trust Fund (LSETF) is doing N5 million, but this wouldn’t help my case. The only thing that can help my case is anything above N10 million. The two I have at home are actually N500, 000 each. So I have two machines for N1 million sitting there idly. It has actually been a very long journey but at the same time very rewarding,” she narrates. Regarding what motivated her to start the crayon business, the entrepreneur, who is the class president of the 2018 the LCCI Mentoring Programme, says it was down to her children and an inability to get the right crayons while looking for them. “I like colours. There was a time in 2012 when we were looking for crayons. We were only seeing the high-ended ones. We were not seeing the wax crayons. But by the time we saw wax crayons, they were China-made. And the designs were not good enough. One day, while my children were playing with crayons, they did not take the crayons off the cooker. The crayons melted and we had to pour into a tomato paste to solidify.” She says her father, who is an engineer, first taught her how to make crayons. She explains that prices of crayons rose from N250 to N450 in 2016 and have not changed since then, “All the raw materials are imported. When you calculate the kg you buy and what it can produce, by the time you factor in foreign exchange, there will only be little left for you. If you bring in raw materials and produce them here, it will create jobs and give schools more presence because you can use some of those children as brand ambassadors,” she states. Despite the foreign exchange

challenge and weakness of the naira, Bukola says the business is worth doing. “I have done my business plan and if I want to be conservative, I will put the return on investment (RoI) at 40 percent. I have a mentor who has been telling me to take it easy and after we did the RoI together, we agreed to put it at 40 percent,” she tells Start-Up Digest. The entrepreneur has a solid financial background, having worked in different financial institutions for a number of years. She says the experience she garnered from the financial sector has helped her a lot. “The experiences I got from the financial sector has really helped me, because right now, when I am talking, I am able to see the end from the beginning and I am able to think through the process. If I had not worked in the financial sector, I would have practically jumped into anything.” Bukola says she was supposed to get a grant from the Nigerian Growth and Employment Project(GEM) but has not been able to. “It is really disappointing because I would have got somewhere by now. But I had to go back to my small business and I do it from the back of my house,” she regrets. She has some pieces of advice from younger and upcoming Nigerians. “The problems have always been there. I remember when I used to work in a commercial bank, the big issue was still funding. I worked in the financial industry for 25 years. So the problems are always there, but the challenge is that a lot of times, some of the things we need to start with do not require much money. When I started party packs, I got money from family and friends. “So I advise youths to start up something. Take that thing you have thought about, research into it and look for substitutes that will help you get the same value.”

Fintech meets fashion: Fets to sponsor Lagos Fashion Week JOSEPHINE OKOJIE

ets Limited Nigeria, leading mobile money platform, has announced its sponsorship of the 2018 Lagos Fashion Week (LFW). This will be the third consecu-

tive year that the fintech company has supported the LFW, one of the biggest fashion events in Africa. “At Fets. we understand the significant benefits mobile money brings to Nigeria’s creative industries and to the fashion business in particular. Fets is committed to fostering entre-

preneurship and innovation, and we are delighted to see mobile payments already fuelling creative sector growth,” Omotade Odunowo, CEO, Fets Limited, said in a statement made available to BusinessDay. “Fets has established a reputation for innovation. For instance,

our multilingual app is the first of its kind in Nigeria. And in addition to our support for LFW, we have also this year partnered with LFW to award the Fashion Focus Fund. “In March, the Fund awarded a bursary to a very talented young designer Emmy Kasbit. We were delighted to see that in August, during her visit to Nigeria, the British Prime Minister Theresa May wore one of Emmy Kasbit’s jackets. It just goes to show that we have an amazing pool of creative talent in Nigeria – and that mobile money really makes a positive difference,” Odunowo said. The Lagos Fashion Week is now in its seventh year. It is scheduled to hold form the 24th to the 27th October, 2018. As every year, it will host catwalk shows, networking events

and a rich social programme. The event features a food court and retail arena, which for the first time will be entirely cashless, with all payments made through fetswallet, the statement stated.

Start-Up Digest Team ODINAKA ANUDU Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Bummi Bailey Joel Samson Graphics

BUSINESS DAY

C002D5556

Monday 22 October 2018

Start-Up Digest ‘Social media provides the platform for my business to grow’ Okeke Chika is the CEO of BuzzMedia, a company that helps brands grow their online presence. Okeke, a digital marketer, is a graduate of Systems Engineering from the University of Lagos. In this interview with BUNMI BAILEY, he talks about how he leads a team of top-class professional brands to grow their online presence in the digital world. Excerpt:

Tell us about BuzzMedia have a team of topclass digital marketers who help brands grow their online presence by managing and marketing them professionally online through various social media platforms. Our services include: social media marketing, advertising and promotions across the various social media platforms, professional social media account management (Instagram, Twitter and Facebook) for personal and business brands involving growing brand’s online presence as well as targeted followers growth. We also run online trends which involve making things go viral across the social media space. How did you come about the business? It actually started about two years ago when a friend told me that I could get people to pay to promote their business online via my Instagram platform. Before then, I had been using my Instagram page to basically interact with people as well as entertain them by dropping funny posts regularly. I gained about 10,000 followers doing just that and I hadn’t seen it as a medium of making money until this friend of mine enlightened me. I pitched the service of promoting via my page to some people and I didn’t believe when I received my first alert. After then, my ori-

several businesses across the country.

entation about social media changed and I resolved to be more serious and professional with it. I joined Twitter, gained presence there and brands started paying me to promote their services. I also established connections with a set of seriousminded people and formed a team that specialises in rendering such services. That was how the brand, BuzzMedia, came about. How much capital did you start with? I basically started with my Android phone, data subscription and a laptop. That’s the beauty of social media. It’s not so capital intensive. You just need a good gadget and good internet access to start and of course knowledge of what you want to do. It was later I started investing in some professional tools to carry out tasks more effectively and professionally. How can you say the digital industry is performing now? The digital industry is evolving at a rapid rate and it is becoming quite important to keep up, especially as a digital marketer. Speaking from the social media marketing perspective, new findings, methods and innovations are made continuously. The social media platforms are also evolving with new implementations such that it is important

Okeke Chika

for even business owners to keep up with the pace in order to effectively utilise the platforms to the benefit of their brand. What are the skills or tools you need to set up your kind of business? The tools you need, like i mentioned earlier, are a good phone, laptop and reliable internet services. Professionally, you need digital marketing skills, more specifically social media marketing skills, and you can get those skills online. What are the challenges that you are facing in your business?

I believe that business would go more smoothly if there were constant power supply and cheaper data services from our network providers. As digital marketers, we need our phones and laptops to be up and running most of the day, as well as affordable, reliable and fast internet access via our network providers. The low supply of electricity has always been a challenge to most businesses in the country. The high cost of data services within the country is not also encouraging. I believe that once these two major challenges are properly addressed, it would go a long way in

How can the government address these challenges? I believe that solar is the solution to the problem of electricity in this country. The government should invest in more solar projects and effectively regulate the existing ones. Allow smoother and cheaper importation of solar products to favour solar businesses. As regards data services, they should pay more attention to the billing system used by these network providers. Sometimes, it seems like daylight robbery when we pay for data and don’t get the value for our money. Data is too expensive and even when paid, we feel cheated because we are not able to enjoy it. Perhaps, collaboration between the government and the network providers to make data more affordable for its citizens can help. Why do most start-ups fail? Sometimes it is not just about having sufficient capital to start a business or enough funds to keep it going. If you are not rendering a service that is in demand, you’re most likely to not pull through at the end of the day. It is important that you are meeting a need at the appropriate location, region or area where it is needed. There are several other reasons why start-ups fail irrespective of adequate

funding. Who are your mentors? I just have one major mentor, and that’s God. I believe he’s the best mentor anyone can have. What would you tell your younger self? There’s no time to waste, kid, your older self would regret it if you didn’t utilise the time you have now to start working towards your dreams and aspirations. Don’t think you have to get to a certain age to start acquiring some forms of knowledge. Don’t limit yourself; don’t be scared to try out things and fail. You can do more than you think. How would you say your business has grown since starting? I will say some level of growth has been attained even though I feel the journey just started. It is not just me working on my own but I now work with a team of skilled digital marketers under the BuzzMedia Brand. We work together to achieve our goals which centre around effectively promoting and marketing brands and businesses, events and services online. We also give a discount to our first-time clients. From a one-man team to a brand, we have promoted several top brands who were cosponsors of a world record events.

Blessing’s entry into furniture-making business ODINAKA ANUDU

lessing Ohikhena Sule is the chief executive officer of AASIS Resources Nigeria Limited. She is a graduate of Computer Science from the University of Benin. Blessing also holds an Ordinary National Diploma (OND) in Accounting from the Federal Polytechnic, Bida, Niger State. Blessing started with almost nothing. “I started with bed sheet, throw pillows, curtain while in school with just N2000,” Blessing tells Start-Up Digest. “And after graduating, I started with a loan of N30, 000,” she discloses. Blessing was motivated to set up her own business few years ago because she always

wanted to force herself out of poverty. “I have always wanted to be my own boss. I grew up with all men and have always wanted to better my life to kill poverty. One thing I know, for sure, is that if you don’t build your business, someone will employ you to build theirs,” she says. The entrepreneur has always been in love with arts and believes that she will go places with it, despite not yet making it as she would want to. She also feels that furniture-making is not an exclusive preserve of men and that there is a lot of money to make from it. She urges young Nigerians not to be ashamed of making furniture, as there is more to gain from it than lose.

“Well, I don’t think a particular profession is for men alone because women are naturally incubators. Whatever you give to them, they will multiply, give in their best and produce the best,” she states. Through her work, Blessing has courted customers

Blessing Ohikhena

from various spheres of life, including bank workers, civil servants, friends and family. The social media has also greatly helped her, having been marketing her furniture products via Facebook and other platforms, while also putting her handbills on church bulletins. In terms of what is trending in the furniture industry, Blessing says it is what is called ‘Strictly Antique’. “The pressure is off when it comes to only pairing antiques with pieces from the same period. No one will be interested in designing an entire space, let alone an entire home, with a strict period in mind. While it’s great to have a period as your start-off point, you don’t have to adhere to it exclusively. It’s more aesthetically intriguing to

create a look that cohesively mixes of elements from the past and the future,” she says. She states that patronage of locally made furniture is slow owing to consumer preferences and petty considerations. “Family and friends do patronise me, but you know you need big contracts to make it. Sometimes you don’t get that because you don’t know anybody. My handiwork is a testimony and I can handle big contracts,” she says. She states that funding is one big factor that can boost her business. “Well, I know with the sum of N10 million, expansion will be fantastic,” she says, adding that banks hardly give loans to small business. On where she wants to be in five years’ time, Blessing

says she sees herself owning a big factory. She adds that she received some training at Alibeth Furniture in Lagos before starting the business, urging youths to do the same before jumping into businesses. “I was a sales person at the factory, but my boss would always tell me to go and see what the boys were making. That was how I started furniture-making,” she discloses. The entrepreneur, who has three workers, says she is open to partnership with investors. She advises the government to support small businesses with cheap funds, stressing that such will go a long way in creating more jobs and boosting the Gross Domestic Product (GDP) of Nigeria.

BUSINESS DAY

Monday 22 October 2018

Start-Up Digest

Minimising business risks through insurance

eing an entrepreneur can be an exciting life but it is not as easy as it seems. The day you begin to carve a business plan, you realise you will have to go through many hardships with no guarantee of profits or enough revenue to even cover expenses. This is one of the major risks you will face, and what you need is the ability to foresee the risks and planning to manage those possible risks. There are many risks that impact the competitiveness and profitability of Small and Medium Enterprises (SMEs). These include: financial risks, operational risks, regulatory risks, political risks, and risks from natural disasters. While some business risks are practically within the control of the entrepreneur, some are totally uncontrollable. However, the business owner, who carefully identifies the risk of its business and take appropriate action accordingly to mitigate the risk, will be on a stronger path to business success. What, therefore, remains is whether SMEs know their risks and whether they know that most of them are insurable. This is because you cannot control what you do not know. The ultimate resource to mitigate risks relating to businesses is insurance. This article is aimed at providing a high-level summary of some of the common types of business insurance. Common types of insurance 1. General liability insurance: This type of insurance protects company’s assets and pays for the legal fees and support that an entrepreneur needs, should someone (i.e. customer, but not an employee)

ventory and other assets that may be critical to keeping the business running. 6. Fire (& other risks) insurance: With the help of fire insurance, the losses arising due to fire are compensated and the society is not losing much. The fire insurance does not protect only losses but it provides certain consequential losses. Also, war risk, turmoil, and riots, among others, can be insured under this insurance, too. 7. Goods-in-transit insurance: For entrepreneurs that are involved in trading or delivery business, goods-in-transit insurance is definitely another ‘must have’ as it helps to provide cover for the goods while in transit between the vendors and the company warehouse, and from the company’s warehouse and the customer’s location.

Wole Oluyemi

decide to sue for damages while utilising the product or service. It may also cover copyright violations, slander, and libel. 2. Medical insurance: medical bills come big these days and can potentially put an entrepreneur out of business even if it’s a young, healthy entrepreneur. Having the health insurance plan helps to optimise the health costs. 3. Commercial auto insurance: This is an insurance cover for company vehicles such as pool cars, official executive vehicles, delivery vans and shuttles. This

type of insurance is meant to cover vehicle accidents, burglary into the vehicle and for instances when such vehicles are stolen. Comprehensive auto-insurance are usually preferred to the cheap third party insurance. 4. Group life insurance: Entrepreneurs and their employees have families that are indirectly dependent on the business success. Life insurance helps to provide guarantee and cover for all the caring that the loved ones would need in the event of longterm incapacitation or untimely

demise. Getting life or disability insurance covers ensure the entrepreneur have enough to take care of long-term cares of the loved ones. The level of the benefits that can be derived is directly dependent on the premium being paid. 5. Property insurance: In order to start a business, the entrepreneur might probably start with a building or at some computers, whether leased or owned, and product inventory as part of the operations. Property insurance protects the personal property, computers, furniture, product in-

Conclusion Although, having insurance coverage for your small business may seem like an unnecessary expense or an outright waste of money as a new start-up, the security it provides can potentially be invaluable. So, make sure your business is fully insured. Be protected. The above article was co-authoured by Wole Oluyemi and Atanda Waziri. Wole Oluyemi is a chartered accountant and business advisor, with special interests in SME businesses, strategy, finance and tax. He is also a doctoral researcher at Cranfield University (UK) with research focus on corporate political strategy. He can be reached at @WoleOluyemiCo on Instagram, Twitter and FaceBook. Atanda Waziri, the co-authour, is an Associate at the Lagos office of Roedl & Partner.

Nigeria’s Kennie-O Cold Chain Logistics emerges SUN Africa’s nutrition winner …as August Secrets wins Graca Machel Trust Award JOSEPHINE OKOJIE, Nairobi

igeria’s Kennie-O Cold Chain Logistics has emerged at the winner of the Scaling-Up Nutrition (SUN) agri- pitch competition at the first Nutrition Investors Forum in Nairobi, Kenya. Kennie-O Cold Chain Logistics beat other 20 finalists to win the award with its logistics business idea that has a positive impact on tackling malnutrition in Nigeria. “This award gladdens my heart because it is as a result of hard work and would help Nigeria reduce its postharvest losses,” Ope Olanrewaju, chief executive officer, Kennie-O Cold Chain Logistics, said during the presentation of the award. “Logistics is a big problem in Nigeria and we believe that this award will help us provide more solution to Nigeria’s malnutrition challenges as it will ensure

consumers get their food fresh without losing its nutritional values,” Olanrewaju said. Olanrewaju explained that his business has a park house that stores fresh fruits and vegetables using refrigerated cold room facilities. The business started in Ilorin, Kwara State in 2014, after Olanrewaju failed in his poultry business. Olanrewaju will get a technical support worth $15,000 . He will also be representing Africa next year in Bangkok, Thailand, as the continent’s Nutrition Ambassador. Also, Oluwatoyin Onigbangbo, founder of August Secrets, a startup that produces baby food using local recipes, another Nigerian business, emerged winner of the Graca Machel Trust Award worth $10,000 technical support for nutrition. “I feel very excited and validated that what we are doing in Nigeria regarding nutrition and

using social media to push our products is being recognised here today,” said Onigbangbo. Uduak Igbeka, senior associate and team lead, S UN Business Network, told BusinessDay on the slide-lines of the event that

the emergency of two Nigerian businesses, as winners of the SUN Business Awards, will further impact the fight against malnutrition in the country. “I am ecstatic that we have two winners here today. This is a win

Ope Olanrewaju, chief executive officer, Kennie-O Cold Chain Logistics and Oluwatoyin Onigbangbo, founder of August Secrets during the presentation of their awards at the Nutrition Investors Forum In Nairobi, Kenya recently.

for Nigeria,” Igbeka said. “These two businesses are already making impact and would further make more impact to the malnutrition fight with the technical support and training they would be getting as well as financial support to scale-up,” she added. Other winners are Neema Lugangira, founder, Healthy Maisha of Tanzania who won the Bop Innovation Centre Award; Dennis Marangu, founder of Kulamawe Poultry Industries Limited of Kenya who won the Growth Africa Award; and Abdul Cauio, founder of Mikuru Agro Industria of Mozambique won the DSM Award. A total of 500 nutrition businesses entered for the award and 21 of them emerged as finalists representing different regions on the continent. Nigeria’s Soupah, August Secrets, Kennie-O Cold Chain Logistics, Grandios Pap and Vege Victory were among the 21 finalists.

BUSINESS DAY Harvard Business Review

C002D5556

MondayMorning

Monday 22 October 2018

In association with

The art of the elevator pitch CARMINE GALLO

hen asked what their movie is about, successful screenwriters have a ready answer that is clear, concise and engaging. Business leaders are asked a version of this same question throughout their careers: What is your presentation about? What does your startup or product do? What’s your idea? If you can answer in one compelling sentence, you can hook your audience. According to molecular biologist John Medina of the University of Washington School of Medicine, the human brain craves mean-

steps you can take to do so. KEEP IT SHORT. A logline should be easy to say and easy to remember. As an exercise, challenge yourself to keep it under 140 characters, short enough to post on the old version of Twitter (before the platform allowed 280 characters per tweet). IDENTIFY ONE THING YOU WANT YOUR AUDIENCE TO REMEMBER. The “one thing” should cater to the needs of your audience. With one sentence, customers want to know more because his logline solves a specific problem and will make them look like heroes to their bosses. Above all, the logline is easy to remember and gives people a story they can take to other decision-makers in their organi-

ing before details. When a listener doesn’t understand the overarching idea being presented in a pitch, they have a hard time digesting the information. A logline will help you paint the big picture for your audience. “A police chief, with a phobia for open water, battles a gigantic shark with an appetite for swimmers and boat captains, in spite of a greedy town council who demands that the beach stay open.” What makes it work? The logline for “Jaws”identifies the key elements of the story: the hero, his weakness, his conflict and the hurdles he must overcome — all in one sentence. Though mastering the logline is challenging, there are

zations. MAKE SURE YOUR TEAM IS ON THE SAME PAGE.Every person who speaks on behalf of your company or sells your product should deliver the same logline. Loglines attract attention; consistent loglines are memorable and repeatable. Sometimes the language will come to you immediately, other times it might take more practice. Be patient. Once you master the logline, you will be able to easily clarify your ideas and help the audience retain, remember, and act on them.

(Carmine Gallo is a Harvard University instructor at the Graduate School of Design.)

Which types of companies are adding women to their boards, and which aren’t

alifornia recently passed a law requiring public firms headquartered in the state to include at least one woman on their boards by the end of 2019. The proposal has led to criticism that board quotas have unintended consequences. Others have claimed that a quota might be necessary to combat the glacial pace of voluntary change in boardrooms. We have gathered data on every board appointment and resignation filed with the SEC for all public companies with more than $75 million

in market capitalization since April 1. The findings are eye-opening. Between April 1 and Sept. 24, 228 women have been appointed to boards relative to

433 men. Interestingly, when we focus on companies with a market capitalization of $5 billion or more, the male tilt goes the other way. That is, 57

appears to have largely worked in such companies at addressing the gender imbalance. However, when we consider the board composition of firms just going public, only 51 women have been appointed to the boards of firms that went public relative to 455 men. Why such a large imbalance? Venture capital is a notoriously malewomen have been ap- dominated business. pointed to boards of VCs usually invest their such large companies money in startups that relative to only 19 men. go public and hence Hence, pressure from they end up serving the media and large on the boards too. Last institutional investors year, just 2% of venture

capital funding went to startups founded by women and women comprise just 9% of the decision-makers at U.S. venture capital firms. Given that a large fraction of firms going public are based in California, the “quota” might create new opportunities for women directors, especially when the VCs cash out and resign from the boards. VCs and startups deserve more focus among institutional investors, proxy advisers and the media as battlegrounds for gender disparity in the board rooms.

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

C002D5556

43 NEWS

BUSINESS DAY

Minimum wage: Employees can’t dictate to employers - FG tells labour KEHINDE AKINTOLA, Abuja

ederal Government on Friday said it would not bow to pressure from the organised labour to blackmail employers of labour into accepting the N30,000 as the new national minimum wage. Chris Ngige, minister of labour and employment, who gave this position while addressing Timothy Olawale, the new directorgeneral of Nigeria Employers Consultative Association (NECA) and his predecessor, Olusegun Oshinowo, noted that Nigeria could not afford rounds of labour crisis. To this end, he noted that it was imperative for the Organised Labour to accept a new National Minimum Wage figure based on the capacity and the ability of both the government and private sector to pay in line with so-

cial dialogue and the overall interest of the nation. He further appealed to NECA to weigh its influence on the organised labour to accede to the new National Minimum Wage figure mutually agreeable to all the social partners. “We need to arrive at a figure which the employers can afford to pay as an employee cannot fix a figure for the employer. “Rather, it must be based on collective bargaining and mutual agreement by the tripartite partners. It is not a function of moving motions or voting at the National Tripartite Negotiation committee to insist that the figure must be, as the Organised Labour appears to make it look. “There is absolutely therefore no need to heat up the polity. The government’s proposed new Minimum Wage figure is clearly based

on critical facts and indices incapable of causing disequilibrium in the economy or upturning the national social order,” the minister argued. He further charged the new NECA boss to exceed the impressive record of his predecessor. “You have enormous task ahead of you. The need for the establishment of more NECA offices across the country cannot be over emphasised so that more employers association can register with you. “This is in line with the focus of our labour administration as well as in tandem with the economic policies of the present administration. The numerous private sector employers who are informal need to be brought on board the formalised private sector employers’ body.” The minister urged him to ensure that numerous private sector employers

who are members of NECA as well as those not yet registered but are defaulting in payment of the existing National Minimum Wage of N18,000 comply with the law. He also commended the efforts of the immediate past NECA director-general for contributing immensely to industrial peace and harmony in the private sector, by ensuring that Nigeria was brought back to the Governing Board of the ILO employer section. Speaking earlier, Oshinowo posited that his successor was the best man to take over the mantle of leadership, noting that since the formation of the Association, a director-general was sourced from the Association for the first time. He further commended the minister for his opendoor policy despite opposing positions they have had to take on issues in the past.

L-R: Femi Onifade,Ag divisional head, trading business division, Nigerian Stock Exchange (NSE); Saheed Bashir, MD, Meristem Stockbrokers Limited, and Oscar Onyema, CEO, NSE, during the presentation of digital broker of the year award to Meristem Stockbrokers Limited at the NSE Market Data Workshop 2018 with the theme Digitisation, disruption and financial inclusion in Lagos. Pic by Pius Okeosisi

Ondo workers accuse Akeredolu of diverting N20.9bn Paris Club refund YOMI AYELESO, Akure

here is a strong indication that the organised labour in Ondo State may commence another round of industrial action as its meeting with Governor Rotimi Akeredolu was deadlocked on Friday. Akeredolu was alleged to have angrily walked out of the meeting, which was held at the governor’s office, when the labour leaders demanded details of how the state government would spend the N20.9 billion Paris Club refund on salary and pension arrears.

The state workers and pensioners had last week staged a peaceful protest for several hours at the entrance of the governor ’s office to kick against an alleged plot by the state government to divert the Paris Club refund released by President Muhammadu Buhari to settle accumulated arrears of salaries and pension. It was gathered that trouble started when Akeredolu kept the labour leaders waiting for about five hours. On arriving at the meeting, the governor was said to have expressed displeasure with the blockage of his

office entrance on Tuesday by the workers during the protest. The governor was said to be furious with the timing of the blockage when dignitaries in the country were attending the inauguration ceremony of Kayode Fayemi as governor of Ekiti State. The chairman of the Joint Negotiating Council, Abel Oloniyo, who confirmed the walkout, said the action showed Akeredolu had an “inordinate intention to divert the Paris Club refund for personal or political use.” A labour leader, who spoke to our correspondent

on condition of anonymity, said the workers might go on strike next week. He said, “It has been shown to us that the governor is not ready to listen to us and at the next meeting we are holding, probably Monday or Tuesday, the leaders of the union would announce the date for the commencement of the strike and the strike is going to be indefinite. We don’t have a workers - friendly governor.” However, the chief press secretary to the governor, Segun Ajiboye, said Akeredolu never walked out on the labour leaders.

EXPLAINER:

Speed, ease, convenience are reasons more Nigerians are turning to mobile money BUNMI BAILEY

igh investments in technology mobile space, convenience, alongside confidence from mobile consumers are reasons mobile inter-scheme transfers increased 57 percent in nine months, analysts say. An analysis of the mobile transfer data obtained from the Nigeria Interbank Settlement System (NIBSS) shows that the value of transactions (transfers) via mobile devices rose by 57 percent to N216.3 billion in the first nine months of 2018, as against N138 billion in the same period last year. Similarly, the volume of transactions of mobile transfers also increased by 47 per cent from 3.6 million in 2017 to 5.4 million as at September 2018. These data illustrate just how much Nigerians have become dependent on mobile money transfers. Ayo Akinwunmi, head of research, FSDH Merchant Bank, said the investment that had been going in the tech mobile banking space and people’s confidence in it has led to the growth. A lot of banks and fintech companies are investing in the tech mobile space. Seeing business opportunity mobile money presents, the banks have buffed up their security system and are making investments in cyber security to make transactions over the channel more secure. This is building confidence in the system as can be seen by the large volumes of transactions. In addition, the volume of transactions on NIBSS instant payment (NIP) platform rose by 102 percent to 501.1 million in the period under review in 2018 from 248.1 million in the same period of 2017 and its value from January to September increased by

40.2 percent from N40.5 trillion in 2017 to N56.8 trillion within the same period this year. As regards Point of Sales (POS) activities, transactions worth N1.6trillion were carried out all over the country from January to September 2018, recording a 65 per cent increase as against N974.7 billion in 2017. The volume of POS transactions also rose by 99.5 per cent from 98.73 million in the first nine months of last year to 196.83 million in the same period of this year. Bismark Rewane, managing director, Financial Derivatives Company, said mobile money systems were convenient and people were finding it more efficient. Also, there is more marketing and there are more intermediaries in the financial payments providers system making the growth seem natural. The increased penetration or use of mobile banking is already having an impact in the volume of bank cheques. In the first nine months of 2018, the volume of bank cheques transactions reduced by 16.5 percent to 6.8 million from 8.1 million last year. According to Rewane, mobile transfers are reducing the volume of transactions by cheques. First, there is a limit to the amount that can be withdrawn by cheques. For example, cheques have a limit of about N10 million and secondly people are finding it more convenient to do their financial transactions by phone because of the speed it offers. Ayodele Teriba, CEO, Economic Associates, said more people were catching up with mobile transfers than before. In the past, before you can do any transfer, you would have to go to the bank but now you can use a token at home to do your mobile transfer anywhere.

44 BUSINESS DAY NEWS PFAs invest N1.49trn in Treasury Bills

he Pension Fund Administrators (PFAs) in the country have invested N1.49 trillion in Treasury Bills. The monthly report released by the National Pension Commission (PenCom) on Sunday in Abuja by Peter Aghahowa, the commission’s spokesman, made the disclosure. The commission also disclosed that the PFAs invested N4.22 trillion in Federal Government’s bonds, Federal Mortgage Bank of Nigeria (FMBN) got N10.91 billion; Sukuk bonds, N53.15 billion, and green bonds, N6.96 billion. “State government securities gulped N154.43 billion, while corporate bonds was N400.45 billion with corporate infrastructure bonds amounting to N7.33 billion, even as banks gulped N849.09 billion. “Others include commercial papers, N116.76 billion and real estate properties, N226.64 billion and supranational bonds, N6.67 billion.

“Open and close end funds, N12.18 billion; mutual funds, N21.29 billion; private equity fund N38.57 billion; infrastructure fund, N16.07 billion; other assets N24.56 billion and Reits, N9.10 billion,” the commission said. According to the commission, the total sum invested in Federal Government’s securities by PFAs stood at N5.78trn out of N8.33 trillion pension assets as at August. “The investment represents 69.30 percent of N8.33 trillion pension assets,” the commission said. The commission, in the monthly report, also reclassified the pension assets according to the new structures, namely; 1, 11, 111 and 1V multi-fund structures. “Fund I has N4.55 billion; Fund II, N3.69 trillion; Fund III N1.96 trillion and Fund IV N619.59 billion. It noted that Closed Pension Fund Administrators Fund (CPFAs) is N1.08 trillion and Existing Schemes (ES) N957.50 billion,” it said.

C002D5556

Dana Air partners NESG on 24th Nigerian Economic Summit

ana Air has announced that it is partnering the Nigerian Economic Summit Group (NESG) towards the success of the 24th Nigerian Economic Summit holding at the Transcorp Hilton Hotel, Abuja from October 22 to 23, 2018. This year’s summit with the theme: Poverty to prosperity: Making Governance and Institutions Work, will provide a forum for policy makers and captains of industry from both private and public sectors of the Nigerian economy as well as academia, civil society organisations and development partners to interact and share thoughts on key issues and challenges facing the Nigerian economy. Commenting on the partnership, the Communications Manager of Dana Air, Kingsley Ezenwa, said, “We are proud to have become a key partaker and contributor to the success of a thinktank initiative such as the Nigerian Economic summit and it is coming up at a time when the issue

of good governance and economic inclusion has become an existential one for our nation.’’ As airline partner of the 24th Nigerian Economic Summit, Dana Air is providing a special discount to guests and delegates to facilitate their transportation to the summit in Abuja. NES#24 is structured around five key pillars of inputs and outcomes that will serve as the summit’s sub themes: Corruption and Rule of law, Effective Public Institutions, Sustainable Economic Opportunities, Human Development, Participation and Citizens’ Rights. Other sessions will include: Effective Public Institutions, Sustainable Economic Opportunities, mobilisation and Venture Networking. Having flown over 2.7 million passengers in the last 9 years of its operations, Dana Air is one of Nigeria’s leading airlines reputed for its world-class in-flight service, innovative online products and services and unrivaled on time departures.

Monday 22 October 2018

BBC News Pidgin reveals winner of essay competition

zeowayi Izaza Victor has won the first edition of the BBC News Pidgin essay competition titled, “Is Africa’s youth ready for political leadership.’’ Izeowayi is from Rivers State and currently studies Marketing at the University of Port Harcourt. The 21-yearold is a keen writer, poet and football fan who is passionate about youth participation in governance. The winning essay will be shown on BBC News Pidgin and Izeowayi will be awarded at a ceremony on October 22 in Ikeja, Lagos, where he will read out his essay to a specially invited audience. Chosen from amongst 18 other entries submitted by talented, young African writers, Izeowayi’s winning piece focused on the paradox of how Africa, which has 60 per cent of its population from a younger demographic, often produces political leaders with an average age of 70 years and above. His essay included key factors that led to this situation such as: Political apathy, Materialism among young people, Lack of unity among young people, and Absence of proper education. Izeowayi says he entered

the competition because he felt his voice should be heard as a young person in Africa. He went on to say, “When I first heard about the competition, I took it as a personal challenge. This is the first essay I have written in the language I love. As soon as I got the news, I was speechless and emotional. I am truly grateful to the BBC for this great honour.” In its first year, the essay competition was introduced to highlight the beauty of the written form of Pidgin language. Known as a largely spoken language, the essay writing series is aimed at contributing to the development of the written form of Pidgin language amongst young people across the region. Adejuwon Soyinka, head of the Pidgin Service, said: “I am excited about the opportunity that BBC Pidgin represents for young men and women across West and Central Africa and even in the Diaspora, for whom Pidgin is a lingua franca. Even more exciting is the fact that the BBC Pidgin Annual Essay Writing Competition is a concept that has not only come to stay, but is poised to further entrench the culture of writing in Pidgin.”

Monday 22 October 2018

C002D5556

BUSINESS DAY

46 BUSINESS DAY NEWS Rising population, dwindling jobs put... Continued from page 1

lowest since 2012 when they

employed 165,474 people. An analysis of the number of people employed by listed firms from 2009 to 2018 shows that in 2009, firms employed 180,588 people, but that number shrank 16 percent and 3.7 percent to 151,062 and 145,497 in 2010 and 2011, respectively. After that, there was a 13.7 percent increase to 165,474 in 2012, which would later be followed by a marginal decline to 163,739 in 2013. In 2014, firms employed the most people in the period under review after an 11 percent jump to 181,978. The momentum faded in 2015, with a 4 percent decline to 174,650. Job growth was flattish in 2016, which was the year Nigeria slipped into its first recession in a quarter of a century, after global oil prices and production in Africa’s largest oil producer tumbled to record-lows. That year, listed firms employed 175,975 people, a 0.75 percent growth over the previous year, as corporate boardrooms pulled the plug on staff to reduce costs and cushion the blow dealt on profits by the economic slowdown. In 2017, a fragile exit from recession failed to show up in job creation given that unemployment is a lagging indicator. That year, companies shed 7.54 percent of staff to 162,704. As at the end of September this year, those jobs had declined further, this time by 5 percent to 154,403, the lowest in seven years. From 2009 to 2018, publicly listed companies in Nigeria cut jobs by 14 percent even as the country’s population grew by 28.5 percent, a trend that reflects the health of the economy and scarcity of well-paying jobs in Nigeria, which recently outstriped India as the country with the highest number of extremely poor people, according to the World Poverty Clock. “This tells us Nigerian companies invest in employees when the oil price is high,” Charles Robertson, global chief economist at investment bank, Renaissance Capital, said. “It also tells us that well-paid jobs have been harder to find for young Nigerians,” Robertson said in an emailed response to BusinessDay. Latest available data from the National Bureau of Statistics (NBS) put Nigeria’s unemployment rate

at a six-year high of 18.8 percent as at the third quarter of 2017, while underemployment rate reached the highest on record at 21.2 percent. With unemployment and underemployment on the rise, Nigeria faces tremendous challenges in terms of sustainable job creation and productivity. Nigeria’s population is projected to rise to 410 million by 2050, according to the World Bank. With this population, the country will rank as the third largest populated nation globally.

2019: Uncertainty in CUPP over Obi’s... Continued from page 1

as its consensus presidential can-

didate, they are insisting that they will not concede the position of running mate to PDP. Already, the Coalition has commenced the process of adopting a consensus presidential and vice presidential candidate. However, not all the Coalition members are at ease with the Atiku/ Obi ticket, which seemed to be gaining positive public acceptance. In an interview with BusinessDay, the national chairman of Progressive People’s Alliance (PPA), Peter Ameh, says if the PDP standard bearer, Atiku, is adopted as the consensus presidential candidate for the Coalition, his running mate should come from any of the other parties that make up the Coalition. This, he explains, will give the other parties a semblance of equality. Ameh, who is also the presidential candidate of PPA and chairman, Inter Party Advisory Council (IPAC), says discussions are ongoing with a view to reaching a consensus. He said: “What if I am chosen as

the consensus candidate because I am young, experienced and educated? The consensus is not just for one party. It is for all parties. We are operating on an equal arrangement. It is equality before the law that we are using.” Also speaking, a top official of the Social Democratic Party (SDP), cautions that PDP must shun any form of domineeringattitudetowardstheother parties that make up the Coalition. He warns of ‘dire consequences’ if the presidential candidate and his running mate emerge from the PDP. “If the sole presidential candidate and his running mate come from PDP, I can tell you that this Coalition may die even before next year’s general election. That is tantamount to toeing the path of APC, which marginalised other merger parties, save for the defunct CPC, CAN members,” the source who spoke on condition of anonymity, says. CUPP comprises of 40 opposition political parties that agreed to field a single presidential candidate for the 2019 presidential election billed for February 16. In July this year, the political parties signed a memorandum of un-

C002D5556

Monday 22 October 2018

Nigeria’s labour force grows at an average of 2.6 million yearly according to the third quarter 2016 job creation report by the National Bureau of Statistics (NBS). This means the economy must generate same amount to keep unemployment rate at 2016 levels. The agency is yet to release a new jobs creation report since 2016, however, the unemployment report released a year later shows the unemployment rate has been rising, an indication that the economy has not been able to create enough jobs over the period. A grim reminder of thinning jobs

in the country was when in 2014 a nationwide recruitment exercise for the Nigerian Immigration Service claimed the lives of a dozen job seekers during a stampede that happened as job applicants turned up en masse for the exercise. Some 520,000 people had registered even though vacancies existed for only 4,556, according to the Immigration service data. That implies that for each available job, 114 people submitted applications. Analysts say the shortfall is a signal that government jobs are short of what the country requires and the private sector has a big role to play in creating sufficient jobs. “It is the private sector that should be creating jobs, but the question that should be asked is if enough is being done to allow for a business climate where the private sector can contribute more to growth and employment,” Razia Khan, the chief economist at Standard Chartered Bank, said. “One of the key features of economies susceptible to the resource curse is a bloated, inefficient public sector and that’s why right sizing is positive,” Khan said in a tweet response to BusinessDay. Reducing an over-bloated civil service is hardly a new counsel in Nigeria. However, the government has been reluctant to do that, as it is politically unpopular, according to people familiar with the matter. It is not the only instance of where the fear of a implementing an unpopular policy has brought damage to public good. There is the petrol subsidy that gulps about $3 billion yearly, almost a trillion naira and a third of the N2.7 trillion the Federal Government earned in whole of 2017, according to official data. The country’s oil resources are not enough to warrant a subsidy this size, but the country has managed to kick on with the practice, claiming it is for the benefit of the poor, the same people who can not afford basic necessities let alone a car of their own, neither can they afford to generate their energy needs through fuel-powered generators. In an ambitious economic plan unveiled in 2017, the Federal Government said it would create 15 million jobs in four years, an average of 3.75 million yearly. The plan targets unemployment rate of 14.5 percent in 2018, 12.9 percent in 2019 and 11.23 percent by 2020. Creating 3.75 million jobs annu-

ally would mean a 134 percent rise over the 1.6 million jobs created in the whole of 2015, according to latest full-year jobs creation data from the NBS. “When the job creation reports for full-year 2016 and 2017 are published, it would show that less jobs were created in those years, a reflection of the economic realities which have been well captured by the trend with jobs in publicly-listed firms,” Nonso Obikili, an economist, said. “That then leaves the government with an even higher mountain to climb in terms of reducing the rising unemployment rate in the country,” Obikili said. Data from the NBS show that the private sector is key to creating jobs in the country. Between 2013 and 2016, the government created a total of 277,194 jobs, compared to the about 5 million jobs created by the private sector in the same period. Worse still, public sector job creation has been contracting since the fourth quarter of 2015, having gone from 4,818 in the third quarter of 2015 to -7,012 in the third quarter of 2016. Global consulting firm, Price Waterhouse Coopers (PWC) says Nigeria can reduce unemployment through services-led growth, according to a May 2018 report by the firm titled “Structural transformation and jobless growth in Nigeria.” The services sector accounted for over 57 percent of the country’s GDP in 2017 and accounts for the highest number of jobs. The services sector has been instrumental in helping highly populated countries, specifically India, in creating jobs for their teeming population. “Overall, there is a need for structural reforms to lay the foundation for long-term sustainable growth in the broader economy and the services sector,” Andrew Nevin, the chief economist at PWC, said. “Such reforms include business environment reforms, which are necessary to improve the ease of doing business, sustain macroeconomic stability, and attract investments.” “In specific terms, improving human capital development, providing enabling infrastructure and intellectual property rights are necessary to drive growth and productivity in the services sector,” Nevin said.

derstanding (MoU) to field a single presidential candidate. The political parties that signed the documentincluded:theActionAlliance (AA), Alliance for Democracy (AD), Africa Democratic Party (ADC), Action Democratic Party (ADP), All Grand Alliance Party (AGAP), Action Peoples Party (APP), Advanced Congress of Democrats (ACD), Better Nigeria Progressive Party, Democratic Alternative (DA),DemocraticPeoplesParty(DPC), Grand Democratic Party of Nigeria (GDPN), Green Party of Nigeria (GPN), KOWA Party, Labour Party (LP), Mass Action Joint Alliance (MAJA), Masses Movement of Nigeria (MMN). Others included the National Conscience Party (NCP), New Generation Party (NGP), National Unity Party (NUP), Nigeria Intervention Movement (NIM), Peoples Alliance for National Development and Liberty (PANDEL), Progressive People’s Alliance (PPA), People for Democratic Change (PDC), Peoples Democratic Party (PDP), Providence People’s Congress (PPC), Reformed All Progressives Congress (R-APC), Restoration Party of Nigeria (RPN), Social Democratic Party (SDP), Unity Party of Nigeria (UPN), All Grassroots Alliance (AGA), National InterestParty(NIP),NigeriaDemocratic

Congress Party (NDCP), Progressive Peoples Alliance (PPA), and Young DemocraticParty(YDP),amongothers. Some of the Coalition members that have submitted their list of presidential candidates and running mates to the Independent National Electoral Commission (INEC) are the PDP, SDP, PPA, ADC, KOWA Party, ADP, among others. Already, the Coalition has commenced the process of fielding a consensuscandidatewiththeaimofforging a common front against APC presidential candidate, Muhammadu Buhari. To this end, its Blueprint and Manifesto Committee is already drawing up a draft on how a consensus candidate will emerge. A former minister of foreign affairs, Tom Ikimi, chairs the committee. Speaking on the development, the Spokesperson of CUPP, Ikenga Imo Ugochinyere, pointed out that the Ikimi-led committee would submit its report by next week. The party chieftain who doubles as National Chairman of Action Peoples Party (APP), assured that the Coalition would be fair to all the parties. He pointed out that once a consensus candidate emerges, other political parties in the Coalition that

sent their nominations to INEC are expected to withdraw them. According to the guideline and schedule of activities released by the electoral body, November 17 is the last day for withdrawal by candidate(s)/replacement of withdrawn candidate (s). His words: “We held our last meeting on Tuesday. We will have the General Assembly (next week). The committee brought in their report and it was chaired by Olagunsoye Oyinlola and we will look at modality for selecting the candidates. We have decided to go by the suggestion of Olu Falae of SDP that we shift it to the Blueprint Committee, which is chaired by Tom Ikimi and bring it to the General Assembly to adopt in the next few days. “If we had not allowed parties to have their individual primaries, it means you are telling them that you have narrowed down on a particular candidate. Now that they have fielded candidates (to INEC), you know that that is not the end. There is still window from now till next month to do withdrawal. So once we agree on the presidential candidate and the Vice Presidential candidate, every other party will just withdraw their nominations”.

Monday 22 October 2018

C002D5556

National Industrial Council to add 4.2 Gigawatts of power to national grid … 8 projects selected for intervention HARRISON EDEH, Abuja

n a move to ensure optimal use of resources, the Federal Government has commenced moves to deploy underutilised power assets to deliver incremental power to industrial centres and needy communities in the country. Through the coordination of the Nigeria Industrial Policy and Competiveness Advisory Council, the government seeks to generate additional 4.2 Gigawatts of power to the national grid in the next 12-18 months. To this end, a total of eight power projects have been selected for the critical intervention. They are the Aba Integrated Power Project; Kainji Rehabilitation and Expansion; power transmission; captive power projects for industry; Afam IV rehabilitation; Afam V rehabilitation; a Seplat gas

facility, and Alaoji Power Plant. The Council believes the Niger Delta Power Holding Company (NDPHC) brownfields are the fastest and the most cost effective path to increased power delivery to industrial hubs and communities. According to the Council’s executive secretary, Edirin Akemu, the objective of the intervention is being achieved through enhanced distribution infrastructure and elimination of technical power rejection; transmission upgrades on critical path to industrial and commercial load centres; and generation optimization and maximization of NDPHC output. Speaking with journalists at the end of the Council’s meeting during the week, Okechukwu Enelemah, vice chairman of the Council, who is also the minister of industry, trade and invest-

ment, said work was ongoing on the Alaoji Power Plant to supply about 360mw of unutilised power to industrial centres and people in the South-East axis of Onitsha, Aba, Nnewi and Ihiala. He explained that only 120mw out of the 480mw of power generated by the plant was regularly utilised, so 360mw of power was available for centres willing and ready. He said, “The end-toend power delivery project, which is being undertaken through Public-Private Partnership ensures that generation, transmission and distribution are all aligned and simultaneously executed. “The beauty of this project, which is a pilot, is the optimization of resources and also that the learning from it is intended to be used to unlock up to 2GW from underutilised NDPHC power plants.”

47 NEWS

BUSINESS DAY

Edo vows to sustain poverty eradication policies, as USAID project lifts 11,904 households

do State governor, Godwin Obaseki, says the state government, through her people-oriented policies, has ensured that the people lead better lives and are exposed to more opportunities to develop themselves and grow the economy, noting that such poverty reduction policies will continue to receive priority attention in the state. Obaseki disclosed this at the end of the Sustainable Mechanism for Improving Livelihood and Household Empowerment (SMILE) project dissemination meeting, held at Government House, Benin City, Edo State. The governor, who was represented by the deputy governor, Philip Shaibu, said his administration had resolved “to make poverty history in the state,” adding that “The journey to make poverty history actually started in 2008 and this administration has consolidated on the promise. All we are going to

do for our people is to create the enabling environment for them to create wealth. “That exactly is what we are doing with the SMILE project. We will continue to do that. That is the way forward. The only way our promise can be tangible is when we have that collaboration and understanding, and I want to thank SMILE for that collaboration.” He commended USAID, Catholic Relief Services and other partners for their commitment in ensuring that the project achieved its goal, adding that the state government is open to partnership as part of the resolve to eradicate poverty in the state. SMILE, a five-year project implemented in five states, including Edo, Benue, Kogi, Nasarawa and the Federal Capital Territory (FCT), Abuja, is jointly funded by the United States Agency for International Development (USAID), Action Aid Nigeria and Catholic Relief Services.

The Chief of Party for the SMILE project, Emeka Anoje, said over 11, 904 households in Edo State benefitted from the project, which was implemented in collaboration with the state government. Anoje noted that the SMILE project was meant to build capacity of local government welfare department and civil society groups, with a view to empowering the most vulnerable in the benefiting communities. He added that the programme was carried out in eight local government areas of the state, noting, “SMILE successfully provided support to 46,173 vulnerable children who were drawn from about 11, 904 households.” According to Anoje, SMILE also supported agricultural value chain, vocational skills training, child protection services as well as nutrition and food security services, among others in the communities.

Ayade calls for unity among Africans as Carnival Calabardry run commences OBINNA EMELIKE

overnor Ben Ayade of Cross River State has called on Africans to be united in order to help the continent win back her rightful position in the world. Speaking during the flag off the first dry run of the 2018 Carnival Calabar on Sunday, Ayade, who was represented by Ivara Esu, his deputy, said this year’s celebration marked the 14th anniversary of the carnival. The governor, who disclosed that the theme of the 2018 Carnival was ‘Africanism,’ described the carnival as `the largest street party in Africa.’ He said the time has come for Africans to show unity among themselves and the commitment to be respected by other nations of the world. The carnival, according to him, has over the years promoted talent and creativity, while at the same time uniting the people of Cross River and Nigeria in general. “Today, we are flagging off the 14th annual Carnival Calabar, the largest street party in Africa. So, much has been done to showcase what the theme is all about. The time has come for Africa to be of age where the black man is seen as a symbol of integrity. ``If Africans can get themselves together and shun fraud, drug peddling and other forms of heinous crimes and vices, we will win back our position and compete favourably with

other colours in the world. ``All we need to do is to change our attitude and believe in ourselves. We hope that the bands will take time to espouse the theme and tell the story of Africa and the need to respect our continent,’’ he said. The governor disclosed that his administration has done a lot in bringing understanding to the carnival through the interpretation of the Carnival themes. Gabe Onah, chairman, Calabar Carnival Commission, said the state had sustained the hosting of the largest street party in Africa for a record 14 years. Onah lauded the efforts of the people of Cross River and the participants for coming out en mass for the dry run “We are here to make a difference in this year’s carnival with the theme `Africanism’. The dry run signifies the commencement of the carnival. It tracks the system on the 12 kilometres routes and engages the community positively,’’ he said. The five carnival bands, which include Seagull, Master Blaster, Passion 4, Freedom and Bayside will be participating in this year’s carnival. The participants were beautifully dressed in different attires, while security was mounted along the carnival routes. Dignitaries at the ceremony included, John GaulLebo, speaker of the state House of Assembly, Florence Ita-Giwa, members of the state executive council, among others.

L-R: Head of Service, Lagos State government, Folashade Adesoye; secretary to the Lagos State government/representative of Lagos State governor, Tunji Bello; state commissioner for agriculture, Oluwatoyin Suarau, and general manager, refinery, Dangote Sugar Refinery plc, Braimoh Ogunwale, at the closing ceremony of the Dangote Sugar Refinery plc sponsored 2018 Lagos State World Food Day celebration, held in Lagos.

‘I never said former Governor Elechi was behind Ebonyi APC killings’ JACOB OGODO, Abakaliki

enator Julius Ucha, Ebonyi Central Senatorial candidate of the All Progressives Congress (APC), weekend, denied media report credited to him that former Governor Martin Elechi was behind the killings recorded during the failed APC senatorial primaries held at Onueke in Ezza South Local Government Area. Ucha made this known to newsmen in Abakaliki while reacting to media reports on the killings that characterised Ebonyi Central zone primary. He described the report as a misrepresentation of fact, noting that he overheard the

acting chiarman of the primary committee saying that one old man said if direct primary was not held there would be war. “I think the report is a misrepresentation of fact. I never made a statement alluding to such publication to anybody, let alone the former governor to be behind the killings because I did not know who is behind the killings. That matter is for the security personnel to unveil. “What I know is this, as we were going to Onueke I was called by Comrade Chinedu Ogah to come to the party office along Abakaliki- Afikpo Road. So, I went there and listened to arguments of the

primary election committee and some leaders were there. “The impression was that they were going for direct primaries. But I said direct primaries cannot hold in Ebonyi because the party has passed a resolution and communicated INEC that Ebonyi State was for indirect primary. “And I questioned the validity of the direct primaries and why election committee were at the party secretariat. Because the business of primary election was for the committee to pay courtesy call to the party and they go away to do their job. “They were not to be dictated for by anybody. I was surprised that the primary

election committee was at the party secretariat and was arguing weather to do direct or indirect primaries when they have a mandate from the national secretariat. “I said the primary election committee has no power to change the goal post at the middle of the game. For them to talk about direct primaries they must go back to Abuja, convoke a meeting of the national working committee and make a resolution and communicate back to INEC that Ebonyi central senatorial zone was to use direct primaries; otherwise nobody would change the position of the party, not even through a telephone conversation.

Monday 22 October 2018

C002D5556

CBN cannot regulate us, MTN tells Lagos court

awyers for the Central Bank of Nigeria, CBN and the leading telecommunications firm MTN have launched their initial legal fireworks at a Lagos High court where MTN is seeking to nullify a request on it to repatriate over eight billion dollars in dividend it is alleged to have illegally exported from the country. The court has fixed hearing of the suit for October 30 while a separate hearing between MTN and the attorney general over an alleged $2 billion unpaid tax bill will be heard from November. 8 at the same court. In a reply to claims by the CBN represented by the law firm of Ukiri & Lijadu, MTN’s team of lawyers led by Wole Olanipekun, SAN and including four other senior advocates -Babatunde Fagbohunlu, D. D. Dodo, Olabode Olanipekun and Fabian Ajogwu a law professor, said “there

is no law or statutory provision in Nigeria which gives the defendant(CBN) the power to regulate the plaintiff(MTN).” In the nine-page document filed with the court and seen by Businessday, the lawyers said their client was “accused of any wrongdoing or invited to be part of any investigation commissioned against it.” The lawyers averred that the defendant(CBN) used an investigation commissioned against the defendant’s authorised dealers and agents, to wit the banks, to reach a punitive decision against the plaintiff and that MTN’s right to fair hearing was breached given a decision was reached against it as a result of a fallout of investigations against the banks. “Further to (b) above, the defendant was not furnished with details of the allegations against the banks or charges against them”, the lawyers declared.

“The plaintiff is not vicariously liable for the actions of the banks who are authorised dealers of the defendant. “It(MTN) did not concede to any wrongdoing as wrongly pleaded in paragraph 20 of the statement of defence. The letter of Standard Chartered Bank dated December 10, 2009 did not allege any wrongdoing on the part of the plaintiff. The letter of Standard Chartered Bank dated December 10, 2009 confirmed to the defendant that all the requirements pursuant to the satisfaction of the conditions for granting a final approval for the conversion of CCIs were met in February 2008.” The lawyers further stated that MTN “has not breached any law with respect to repatriation of funds from Nigeria and the defendant’s allegations, are mainly generalised without reference to specific statutory provi-

sions which breach is alleged.” The lawyers said having admitted MTN’s right to alter its share capital, the CBN cannot take the contrary position that its(CBN) approval is necessary for the alteration. According to the filing, MTN “is guaranteed unconditional transferability of monies imported into Nigeria.” MTN said having admitted that it received Naira value for the $8,134,312,397.63 purchased by MTN, the CBN cannot claim the transaction by MTN has negatively impaired the welfare and benefits of all Nigerians. In another section of the deposition, the lawyers said MTN “is not a threat to Nigeria’s economy but adds considerable value to the economy through provision of direct and indirect employment as the largest mobile telecommunication provider in Nigeria.”

A1 NEWS

BUSINESS DAY

ICAN canvasses improve incentives to SMEs for economic development KELECHI EWUZIE

nstitute of Chartered Accountants of Nigeria (ICAN) has called on government to urgently intervene by increasing allocations for SMEs development, adding they have the capacity to address unemployment, grow the economy, contribute to GDP, build blocks for large businesses, introduce innovation and stabilise the society. Razak Jaiyeola, 54th president of ICAN, observes that some of the main challenges confronting SMEs include poor infrastructure, policy inconsistency, access to finance, access to markets and business support, high level of unskilled labour, under-performing value chain, difficult regulatory environment and multiple taxation. Jaiyeola stated this in Lagos while addressing journalists on the outcome of 48th Annual Accountants’ Conference Communiqué. According to Jaiyeola, agribusiness, SMEs remain one of Nigeria’s greatest hopes for economic growth and development due to its potential for high growth rate in real terms, spanning across various segments of agricultural value chains and accounting for about 97 percent of the agricultural

GDP. He called on the government to empower agribusiness SMEs to take advantage of the agricultural value chain. While identifying the drivers of a greater Nigeria to include security of life and property, sound macro-economic environment, good infrastructure base, strong financial system, contract enforcement mechanism and fight against corruption, the ICAN president urged accountancy profession to drive the next generation by leveraging innovative opportunities like machine learning, specialisation and digital marketing. He further recommended that tax administrators should collaborate and engage more with the taxpayers to bridge the information gap in order to promote voluntary compliance, stressing that the issue of multiplicity of taxes should be addressed expeditiously in the long term interest of businesses. “Tax administrators and tax consultants should collaborate to achieve the goal of driving development through tax revenue, the participants noted that there cannot be tax justice when those with governance responsibilities do not pay and remit their taxes as and when due to the FIRS,” he said.

FG loses $2.5bn to gas flaring – expert

C L-R: Abderahim Bireme, executive secretary, Niger Basin Authority (NBA); Suleiman Adamu, Nigeria’s minister of water resources; Musa Ibrahim, permanent secretary in the ministry, and Gerald Osuagwu, coordinator, National Focal Structure in Nigeria, during the opening ceremony of the 37th ordinary session of NBA council of ministers in Abuja at the weekend. NAN.

CBN, NCC, telcos to clampdown on SIM identity theft fraudsters HOPE MOSES-ASHIKE

entral Bank of Nigeria (CBN), the Nigerian Communication Commission (NCC) and the telecoms firms are collaborating to clampdown on SIM identity theft fraudsters in Nigeria through the education of consumers. To achieve this, they intend to educate the public through the use of social media. Dipo Fatokun, director, banking and payments system department, CBN, disclosed this at the weekend at the Nigeria electronic Fraud Forum (NeFF) organised in conjunction with Citibank, Zenith Bank, SunTrust Bank and Providus Bank in Lagos.

Fatokun said globally, the level of electronic fraud had been increasing but in Nigeria, it had been decreasing. “Another measure that we are taking is that we are working with the NCC and the telcos so that when fraudsters steal other people’s identity, by taking the SIM either swapping or churning the SIM as it is called, they will not have access to the bank accounts of such customers,” he said. Responding to questions from the journalists, Fatokun said, “The major trust that we intend to employ is the use of the social media. You will agree with me that it has become most popular and of course it is also cheap and

have a wider audience. “So, the steering committee of NeFF has decided to launch a social media campaign that will be used to sensitise the people, to educate people and it will come in attractive form so that both the young and the old could be reached. We believe that with the social media we will reach a larger number of people and the message will be conveyed in a better way.” In his goodwill message, Peter Amangbo, group managing director, Zenith Bank plc, commended participating stakeholders at the forum over their efforts and contribution in combating electronic fraud. Represented by Temi-

tope Fasoranti, executive director, Zenith Bank, he noted that NeFF had achieved a milestone as reflected in its annual reports and development in the industry, as well as sustained periods of retreat and workshops. He assured the participants of the bank’s continued collaboration with other stakeholders in information sharing, innovation, among others. Talking about the payment service bank, Fatokun said the whole essence of coming up with that guideline was to create banks that could serve the needs of the people at the bottom of the pyramid, especially people in rural areas.

EO of AfriPERA, an energy and infrastructure policy research organisation, Chinedu Onyeizu, says Nigeria loses about $2.5 billion annually from gas flaring. Onyeizu disclosed this in an interview with the News Agency of Nigeria on Sunday, in Abuja, saying, “Since the 1950’s, Nigeria has been burning off its natural gas at flare points and despite efforts by successive administrations to curtail the wastage, the country loses an estimated $2.5 billion each year to gas flaring as well as unattended impact of negative externalities associated to gas flaring.’’ He said the country’s natural reserves was the seventh largest in the world and the largest in Africa, adding that it was estimated that Nigeria had over 187 trillion cubic feet (tcf) of proven natural gas in reserves. According to Onyeizu, the country has an additional 600tcf of unproven volume, 40 percent of the proven volume is associated with gas. “In other words, they are produced alongside oil and largely flared at location where we don’t have facilities to harness them,’’ he

said. He said the AjaokutaKaduna –Kano gas pipeline (AKK) project if well conceived would accrue to the country, as the project could be transformational. He said apart from the fact that it would address the challenges of environmental pollution that come with open air green gas emission and flaring as practiced in many communities in Nigeria. According to him, it also had the capacity to trigger an industrial revolution across the country. “Don’t forget, every country passes through an economic ladder that starts from Agricultural and food revolution, followed by industrial revolution before technological, computing and Artificial Intelligence revolution. “Most first world countries experienced these phases in their developmental stages. Therefore, visionary projects like the AKK or the Trans-Nigeria Gas pipeline projects can act as the required enabler to industrial revolution in Nigeria,’’ he said. He advised the Federal Government to further segment the scope of the project and allow for simultaneous operations.

A2 BUSINESS DAY NEWS

C002D5556

Monday 22 October 2018

Group calls for proper research funding in tertiary institutions SEYI JOHN SALAU

he Nanotechnology Research Group (NANO+) of the Ladoke Akintola University of Technology (LAUTECH), Ogbomoso, in setting agenda for nanotechnology research in tertiary institutions across the country has called for proper funding of research institutes and tertiary institutions in Nigeria as catalyst for growth of tertiary education in Nigerian. The NANO+ stated this in preparedness for its forthcoming second annual workshop/conference on nanotechnology tagged ‘LAUTECH NANO 2018’slated for October 23-25 in Ogbomosho. The theme of the conference, ‘Nanotechnology for sustainable development: prospects for Africa’ is expected to draw scholars, policy makers and participants from within and outside Nigeria in agriculture, life sciences, physical sciences, environmental sciences, engineering and medical fields to discuss research activities that can engender development in Africa through the multidisciplinary field of nanotechnology. The research group which

is headed by Agbaje Lateef, a professor of Microbiology in the Department of Pure and Applied Biology, LAUTECH, comprised of dedicated scholars from the fields of Physics, Engineering, Biochemistry, Botany, Microbiology and Zoology. The group earlier successfully organised the maiden National Workshop on Synthesis, Characterisation and Applications of Nanoparticles on August 21-24, 2017, in which Africa was called upon to invest in nanotechnology to aid development. According to Lateef, activities of the research group have led to enormous contribution to knowledge in the field of nanotechnology through publications in journals and training of manpower in the field of nanotechnology. The group has been described as a focussed and productive research cluster in Nigeria in the field of biomimetic nanotechnology by the first Professor of nanotechnology in Nigeria, Enock O. Dare, of the Department of Chemistry, Federal University of Agriculture, Abeokuta, who delivered the keynote address at the opening ceremony of the maiden workshop held in August 2017.

Ogun assures every successful applicant will collect C of O TELIAT SULE

gun State governor, Ibikunle Amosun, has assured Homeowners’ Charter Programme applicants that they will collect their Certificates of Occupancy (C of O) before the end of his administration. Governor Amosun stated this at the 35th edition of the distribution of C of O and Building Plan Approval to another set of beneficiaries at the Arcade Ground, OkeMosan, Abeokuta. Amosun, represented by the commissioner for works and infrastructure, Olamilekan Adegbite, said the process was being fast tracked by issuing the land title documents to 2,000 beneficiaries monthly. “One of the missions to rebuild Ogun State came with the message of validating the residency of every person that has property in Ogun and we are consistently doing that, by putting smiles on the faces of thousands of people on monthly basis and we will continue to do that until every applicant that met the requirements collect his or her C of O,,’ Adegbite said. The commissioner, who was equally represented by the director, administration and supplies in the ministry, Nofiu Adebiyi, enjoined those that

were yet to pay for assessment to do so. In his opening remarks, the director, planning, research and statistics, the ministry of urban and physical planning (MUPP), Bola Ajayi, congratulated beneficiaries and asked them to continue supporting the present administration to spread the dividends of democracy to the nooks and crannies of the State.

L-R: Folaseto Akin-Olugbade, associate, Actis; Debola Badejo, principal, Themis; Zeina Beydoun, CEO, Z Kitchen; Naresh Asnani, CEO, EMEL Group of Companies, and Temitope Odukoya, partner, West Africa, financial advisory leader, Deloitte, all of Alumni of London Business school (LBS), at the word wide celebration of London Business School in Lagos, at the weekend. Pic by Olawale Amoo

Labour vows to vote Buhari out in 2019, sets November 6 for nationwide strike JOSHUA BASSEY & KEHINDE AKINTOLA

rganised labour has threatened to vote out President Muhammadu Buhari in 2019 general elections over the lackadaisical attitude towards the implementation of the new national minimum wage. The leaders of the three labour centres: Nigeria Labour Congress (NLC), Trade Union Congress (TUC) and United Labour Congress (ULC) in a joint statement obtained by BusinessDay, also vowed to ensure that all the governors who claimed to lack the capacity to pay the new national minimum wage do not return to office. To this end, the coalition unanimously resolved to hold a day national outrage and mourning protest on October 30, 2018, and nationwide strike as from

November 6, 2018. “Nigerians are no longer surprised why governance in the nation seems to have become a huge joke, if this is how they tackle other serious national issues. Imagine Governors’ Forum that has six representatives in the tripartite committee jumping in to make excuses after its representatives had made their submissions in the committee! We shall consider any governor saying that he is unable to pay as unpatriotic and, an enemy of Nigerian workers and masses. We shall vote them out in 2019. “We the organised labour in Nigeria having not seen any sign that this government is willing to demonstrate honour and integrity in relating with Nigerian workers and masses have resolved to as follows: Organise a day of national outrage and mourning which will be used to sensitize Nigerians

on our plight and on the issues at stake. This shall take place in all states of the federation including Abuja on Tuesday, the 30th day of October, 2018. “A meeting of various organs of the Unions will hold as appropriate: on Friday, the 2nd day of November, 2018, a Joint Central Working Committee (CWC) meeting of all the Labour Centres in Nigeria shall hold to receive reports and make final preparations for our ultimate engagement with the Federal Government on this matter. “This is the first time in the history of this nation in recent times that such meeting will take place and this goes a long way to show the seriousness with which Nigerian workers and its leadership hold this matter. “If nothing is responsibly done by the Federal Government to meet our demands, on Monday, the 6th day of November, we

shall embark on a nationwide strike to compel this government to show more sensitivity to the plight of Nigerians and the suffering that is decimating our people on daily basis,” the joint statement read. Contrary to Federal Government’s position that the Tripartite Committee on National Minimum Wage did not agree in any figure, Ayuba Wabba, NLC president; Bioboi Kaigama, TUC president, and Joe Ajaero, ULC president in the statement argued that the N30,000 was unanimously agreed procedurally within the Committee. “All these are clearly not pointers to a party whose negotiation motives are in good faith but expressly demonstrate to all Nigerians that this party was unfortunately willing from beginning to play games on a life and death issue like a new national minimum wage for Nigerian workers.

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

C002D5556

NEWS Economists forecast oil price decline next year, foresee another naira devaluation EMEKA UCHEAGA

rude oil price has been hitting multi-year highs almost every month in 2018, but economists now think the oil price rally may not continue for too long. In a report by Renaissance Capital last week, the investment house told its clients that it expects crude oil price to decline significantly next year, sending Nigeria’s external reserve lower and putting naira under tremendous pressure. Senior oil analyst at RenCap, Alex Burgansky, expects the oil price to decrease to $65 per barrel in 2019, from its current price of $79 per barrel, which implies that Nigeria’s export earnings could contract in 2019 after rallying in the past two years. A decline in oil export earnings could be very costly for the Nigeria economy, which has enjoyed foreign exchange stability in the last two years largely due to the rally in crude oil price. Nigeria’s external reserves have already dropped almost $2 billion from $47.6 billion in June to $45.9 billion in August, as large foreign capital

outflows have negatively impacted the foreign reserves. Economists opine that the decline in external reserves could simply be the result of the Central Bank of Nigeria choosing to defend the naira rather than devalue right away and use the reserves to build a buffer for the potential oil price decline next year. “External reserves dropped by $1 billion in 13 days. CBN has chosen foreign exchange stability over reserves, so I am not surprised considering the huge Treasury bill maturities in October alone. CBN may not be able to keep up as N7.5 billion of Treasury bill maturities come up in December and another N11-12 billion of Treasury bills will mature before February. “It is either CBN takes treasury yields to levels they were last year or just devalue the currency or do both,” said Yvonne Mhango, economist at RenCap, said when asked about the external reserves decline in Nigeria. External reserves are expected to recover slightly in the fourth quarter this year after the Nigerian Senate approved the $2.8 billion Eurobond to fund the budget

deficit. The Eurobond sale is expected to be completed in Q4 and could lift Nigeria’s foreign external reserves position to almost $50 billion, its highest level since 2009. Despite legitimate fears by some economists that another crude oil price crash could lead to an exchange rate crisis, not all economists are convinced that the Nigerian government will be helpless if another oil price crash occurs next year. Ayo Teriba, CEO, Economic Associates, said, “it is a naive prediction to say, if the oil price falls, the foreign exchange situation will be disrupted and the Naira will fall. It is assuming the Nigerian government will not do not anything in the event of a fall in oil price, but there are number of things the Nigerian government can do. “In this year’s budget, the benchmark price was set at $51 and the price is currently above it, what then happens to the savings? Using the proceeds of the savings is not the only option, the Nigerian government sits on a lot of assets that they can privatize, including dollar-based assets, to avoid this kind of doombased scenario.”

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES World leaders condemn Saudis over Khashoggi account

A10

Lloyds prepares for £2bn share buyback

Page A11

Page A12

World Business Newspaper

Iran’s Rouhani rejigs economic team as fresh US sanctions loom Government under mounting pressure on economy after sharp fall in rial MONAVAR KHALAJ

ran’s president Hassan Rouhani has reshuffled his top economic team as the country prepares for a new round of US sanctions early next month. The appointments come as Mr Rouhani’s government faces mounting economic pressure brought on by President Donald Trump decision in May to withdraw the US from the 2015 nuclear deal Iran signed with world powers and reimpose sanctions on Iran. A new tranche of curbs on Iran’s oil exports — the economic lifeline and prime source of foreign currency revenue — and on transactions with Tehran’s central bank will come into force on November 4. The looming sanctions have deepened the sense of economic crisis, with Iran’s currency, the rial, falling sharply in recent months. This has pushed up prices of basic goods and made panicked Iranians rush to buy gold coins, cars and even apartments to preserve their savings. Mr Rouhani on Sunday named Farhad Dejpasand as the new economy and finance minister. The economic professor is head of the state Plan and Budget Organization’s development research centre. Mohammad Shariatmadari, Reza Rahmani

and Mohammad Eslami have been brought into the cabinet as, respectively, minister for labour, industries and roads. “A look at the new names shows that the cabinet will become younger and more technocrat,” said a reform-minded political analyst. “This does not mean that the government is getting ready

Russia hits back at US over withdrawal from nuclear treaty Moscow attacks ‘dangerous’ decision by Donald Trump ahead of visit by John Bolton

MAX SEDDON, HENRY FOY, KATRINA MANSON AND DAVID BOND

ussia has called US president Donald Trump’s intent to withdraw from a key nuclear arms control agreement “crude” and “dangerous”, threatening responses that could stretch to military means. Sergei Ryabkov, deputy foreign minister, told reporters on Sunday that Mr Trump’s plans to withdraw from the Intermediate Nuclear Forces Treaty, a 1987 agreement that helped to end the cold war, were like “blackmail” ahead of US national security adviser John Bolton’s visit to Moscow this week. “Unlike our American colleagues, we understand all the seriousness of the issue and its significance for security and strategic stability,” Mr Ryabkov said. “If the Americans continue to act as crudely and bluntly . . . and unilaterally withdraw from all sorts of agreement and mechanisms from the Iran deal to the Inter-

national Postal treaty, then we’ll be reduced to taking action in response, including of a military nature. But we don’t want to go that far.” Mr Trump explained his decision on Saturday by claiming Russia had been violating the treaty for years, a charge Moscow denies. “We’re going to terminate the agreement and we’re going to pull out,” Mr Trump said, giving no timeline for withdrawal. “We’re not going to let them violate a nuclear agreement and go out and do weapons and we’re not allowed to,” he said in reference to the treaty that was signed 30 years ago by former US president Ronald Reagan and ex-Soviet leader Mikhail Gorbachev. Mr Ryabkov said the US had “no grounds to accuse Russia of supposedly violating the treaty.” Mr Bolton, a hawk on Russia, is due to meet senior Russian officials on Monday to discuss the treaty and other subjects Continues on page A11

for new sanctions but is moving towards more consistency and expedition in the executive affairs because they would probably listen to the president more.” While the reshuffle was prompted by the resignation on Saturday of Iran’s industry and road ministers, there has been speculations about a cabinet shake-up for months,

particularly after Mr Rouhani sacked the country’s central bank governor in July. Parliament also impeached the former economy and labour ministers in August due to what it said was a failures to deal with the impact of the sanctions as well as mismanagement. Mr Shariatmadari switches

from the industry ministry. Mr Eslami studied road and civil engineering in the US and has an MBA from Tehran University while Mr Rahmani was previously Iran’s deputy industry minister for production affairs. The new ministers require a vote of confidence from the legislative body.

International investors back away from Saudi Arabia Fund managers pull $650m from country’s equity market after Jamal Khashoggi’s death OWEN WALKER

nternational investors have begun withdrawing funds from Saudi Arabia in response to the geopolitical crisis surrounding its involvement in the death of a journalist and critic of the country’s leadership. The Gulf nation has courted foreign investors in recent years and is expecting a windfall from its inclusion in the widely tracked MSCI emerging markets index next June. But last week global fund managers withdrew $650m from the country’s equity market, damping Saudi ambitions to move away from its heavy reliance on domestic investors. “It’s a market I would rather not invest in unless I have to,” said Daniel Vaughan, an investment consultant and fund selector at Morningstar, the data provider and investment manager. “But it’s such a big economy in the region we have to have some investment in Saudi.” Only about 5 per cent of stocks in the country’s main exchange, the Tadawul, are owned by foreign investors, with more than two-thirds held by domestic institutional investors and a quarter by local retail investors. This heavy domestic ownership has ensured the stock exchange has so far avoided a big sell-off. Between Oc-

tober 10 and October 14 the Tadawul all share index fell 7 per cent, but has since risen more than 5 per cent. The Tadawul, which has a market capitalisation of $507bn, has attracted $3bn of foreign investment this year, with $1bn flowing in between the beginning of September and October 11. But since then, global investors have withdrawn $650m, according to Arqaam Capital, a Middle East investment bank. Saudi leaders had hoped its inclusion in the MSCI emerging markets index next year would lead to $20bn of foreign investment from passive funds that track the benchmark and a further $20bn from active managers. But Nick Wilson, chairman of the $120m Gulf Investment Fund, a London-listed investment trust, said the revelations surrounding the death of journalist Jamal Khashoggi had knocked international investors’ views of the country. “We have been pretty cautious on Saudi this year and . . . I would expect a lot of active managers to hold back [despite the forthcoming] MSCI listing,” he said. Some international fund management executives have shown their apprehension about being linked to the country by pulling out of “Davos in the Desert”, the high-profile investment conference in Riyadh that starts on October 23. Larry Fink, chief executive of

BlackRock, the world’s biggest money manager, and David Hunt, chief executive of PGIM, the US manager with $1tn of assets, both decided not to attend. Amundi, Ashmore and Franklin Templeton are global fund managers with the heaviest exposure to Saudi’s equity market. Amundi, Europe’s largest asset manager, has several funds with large commitments to the Tadawul. Its $82m Middle East and North African focused equity fund has 56.5 per cent of its assets devoted to the country, according to Morningstar. Its biggest holdings include Al Rajhi Bank, the world’s largest Islamic lender, which accounts for just under 10 per cent of its assets, and Saudi Basic Industries, a Riyadh-based manufacturer, which accounts for 9 per cent. Amundi has two other vehicles — the Middle East equity and Arab equity funds — with more than a third of their portfolios exposed to Saudi Arabia. Emerging markets specialist Ashmore has a $234m Middle East equity fund that has 47 per cent of its portfolio dedicated to Saudi stocks. The UK-listed manager’s frontier equity fund, which holds $210m across its Luxembourg and US versions, is more than 5 per cent exposed to the Gulf nation.

A11 BUSINESS DAY

Monday 22 October 2018

C002D5556

NATIONAL NEWS

Russia hits back at US over withdrawal from nuclear...

Landlords grapple with Sears bankruptcy

Continued from page A10

Decline to worsen for some malls but others poised to benefit from higher rents

of contention between the two countries. A senior administration official told a small group of reporters on Thursday that the Trump administration was also looking at renegotiating another nuclear treaty between the US and Russia, the 2010 New Start treaty, which caps the number of nuclear warheads each country can have and is due for renewal in 2021. “We don’t have a definitive US position yet, but there are several considerations including renegotiation,” said the official, who added another option would be to agree an extension, but that would be “unlikely”. Mr Trump on Saturday said the US would consider capping its nuclear weapons development if it could make a new arrangement with both Russia and China, which is not a signatory to the deal. “But if Russia is doing it and if China is doing it, and we’re adhering to the agreement, that’s unacceptable,” he said. Alexei Pushkov, a Russian senator, said Mr Trump’s statement was “returning the world to the cold war”. “Such an exit would be the second most powerful blow inflicted on the world’s entire system of strategic stability,” he said. “The first blow was America’s withdrawal from the anti-ballistic missile treaty in 2001. Once again the initiator of the treaty withdrawal is the US.” Heiko Maas, Germany’s foreign minister, said that while Europe had “frequently called on Russia in the past to address the serious charges that it is violating the INF treaty”, the US decision to withdraw was “regrettable”. “The INF treaty . . . has been an important pillar of our European security architecture for 30 years. For us in Europe it is therefore of tremendous importance. “An end to the treaty would also have negative consequences for the New Start treaty which we urgently need in order to codify the successes of nuclear disarmament including beyond 2021.” Gavin Williamson, UK defence secretary, blamed Russia for the breakdown, insisting that Britain stood “resolute” behind the US. “Our close and long-term ally of course is the US and we will be absolutely resolute with the US in hammering home a clear message that Russia needs to respect the treaty obligation that it signed,” said Mr Williamson, who added that the Kremlin was making a “mockery” of the agreement. “We, of course, want to see this treaty continue to stand but it does require two parties to be committed to it and at the moment you have one party that is ignoring it. It is Russia that is in breach and it is Russia that needs to get its house in order.”

ALISTAIR GRAY

L The death of Jamal Kashoggi has led to an international reappraisal of Saudi Arabia’s crown prince Mohammad bin Salman, who had previously been considered a reformer and moderniser. © PA

World leaders condemn Saudis over Khashoggi account Donald Trump says he is ‘not satisfied’ with claim that journalist died in fist fight in consulate KATRINA MANSON

nternational condemnation of Saudi Arabia over the death of Jamal Khashoggi increased on Saturday after Riyadh’s claim that the veteran journalist died in a fistfight was greeted with near-universal scepticism. US president Donald Trump said he was “not satisfied” with Saudi Arabia’s latest explanation for the death of the columnist and dissident. “I’m not satisfied until we find the answer,” he told reporters on Saturday, adding he was considering imposing sanctions on Riyadh, a key foreign policy ally of his administration and a major buyer of US weaponry. Mr Trump said he did not know the whereabouts of Mr Khashoggi’s body, but that no one in his administration had heard or seen alleged recordings of the incident — or a transcript of them — which Turkish officials say they possess. Mr Trump said he expected to speak again to crown prince Mohammed bin Salman and have an answer by Tuesday, adding that it was “possible” Saudi Arabia’s de facto leader did not know about the events. He had initially described the Saudi statement as “a great first step”.

Riyadh said on Saturday that it had arrested 18 unidentified Saudis and sacked two senior offi cials close to Prince Mohammed — Ahmed Assiri, the deputy intelligence chief, and Saud al-Qahtani, a royal court adviser — as the kingdom sought to defuse an international crisis over the journalist’s death. Mr Trump said on Saturday the sackings were “a big first step”.He also said he would work with Congress, where many have called for sanctions, but that he wanted to preserve a ten-year arms deal which the administration said was worth $110 billion that he struck with Riyadh on his visit there last year. “But there are other things that can be done, including sanctions,” he said. The confirmation of Mr Khashoggi’s death followed more than two weeks of strong denials by Saudi Arabia that it had been involved in his disappearance after he entered the consulate on October 2. But the Saudi explanation contradicted Turkish officials who have said they believed a 15-man hit squad flew into Istanbul, killed Mr Khashoggi and dismembered him. Diplomats and analysts have said that any operation against Mr Khashoggi was unlikely to have been

authorised without the knowledge of Prince Mohammed. Saudi King Salman instructed his son Prince Mohammed to head a committee to restructure the intelligence services within 30 days, suggesting that the crown prince had been absolved of blame. Turkey warned on Saturday that it would not accept a cover-up. “Turkey will reveal what happened. No one should have any doubt about that. We are conducting an independent investigation,” Omer Celik, a spokesman for Turkey’s ruling Justice and Development Party told Anadolu, the state news agency, said on Saturday. “We are not prematurely accusing anyone, but it is not acceptable to us for anything to remain covered up.” Justice and Development deputy chairman Numan Kurtulmus said he believed “it’s not possible for the Saudi administration to wiggle itself out of this crime if it’s confirmed.” Turkish president Recep Tayyip Erdogan spoke with King Salman, who has become increasingly assertive in trying to manage the crisis, shortly before the kingdom gave its account of Mr Khashoggi’s death. There were no details of their conversation.

Thousands of migrants cross into Mexico on way to US Donald Trump has promised a hard line on the human caravan from Honduras that is heading north JUDE WEBBER

housand of Honduran migrants trooped out of the southern Mexican town of Ciudad Hidalgo on Sunday en route to the US after surging across a river on the Guatemalan border where they had been stuck on a bridge for two days. The caravan of migrants fleeing poverty, violence and political repression has blown up into a serious humanitarian and political crisis for Mexico, which has sent hundreds of federal police and marines to the crossing between Ciudad Hidalgo and Tecún Umán in Guatemala. Ana Martínez, 33, left her four children aged from eight to two in San Pedro Sula in Honduras and does not want to go back after gangs killed her parents and brother-inlaw. “If I go back, my life is at risk,” she said. She said her shoes had broken but she had been given flip-flops: “I’m going to the US, even if I have to go barefoot.” On the main road out of town, immigration officials urged the migrants to apply for refugee status,

but few trusted them. “You can go to a shelter. The Mexican state will receive you,” said Francisco Echeverría, federal delegate for the National Migration Institute in the state of Chiapas. “But you can’t continue in an irregular situation transiting through the whole country.” Paola Ramírez, 21, travelling with her husband and four-yearold daughter, said she had no faith in them. “We don’t believe in this shelter,” she said. “We prefer to run the risk.” One migrant shouted: “Tell Donald Trump we’re on our way!” For years the biggest source of migrants to the US, Mexico is now under intense US pressure to be Washington’s border cop. Most migrants were aiming to reach the US despite President Trump’s threat to close the US border with Mexico and send the military to keep them out. From the southern Mexican border, they still have about another 3,000km to go. Mexican police fired tear gas into the crowd crammed on to the bridge Friday when a violent group burst through a border gate. But officials on Saturday began letting migrants

though, once federal police had erected tall crash barriers. As Mr Echeverría took a small group in his vehicle, saying he would prove the shelter offer was true, hundreds of riot police with shields were preparing for the caravan further up the road. A police helicopter buzzed ahead. It was not immediately clear whether the police would detain the migrants for crossing illegally and hand them over to the authorities to be deported. By some estimates, their number has swollen to more than 7,000. “We’re going to invite them to go to shelters but I don’t think they’ll want to go,” said one police officer who declined to be named. On Saturday, makeshift rafts were plying a busy trade across the river from Guatemala and some migrants swam or waded across with the help of ropes. “There are thousands of us, they can’t arrest us all,” said Hugo Lara, 28, from Cucuyagua in northern Honduras. “They’ve tried to stop this caravan; it wasn’t supposed to get into Mexico, but here we are.”

andlords to Sears, the bankrupt US retailer, are in line to more than triple rents if they can find occupants for the sites — but face a years-long search for tenants and refurbishment costs running into tens of millions of dollars. The department store chain’s Chapter 11 filing last week is set to have a far-reaching impact on US shopping centres, which are already grappling with a raft of closures by other formerly reliable stalwarts such as Macy’s and JCPenney. Property brokers said the restructuring of Sears, an anchor tenant occupying more than 500 sites across the country, was likely to further widen the gulf between different grades of mall. While the retailer’s departure threatens to accelerate a downward spiral in already struggling areas, landlords in prime locations would be glad to be rid of it. “A lot of landlords will be able to triple rents — or do substantially better than that,” said Mark Hunter, managing director at CBRE who oversees the commercial real estate company’s mall-leasing business. Sears negotiated many of its leases years, in some cases more than two decades, ago, when it was “the place people wanted to shop”, said Ana Lai, senior director at Standard & Poor’s. Back then, a Sears store would draw customers, making it a valuable source of footfall for the mall. As a result of its bargaining power, the company was able to lock landlords in to long leases with below-market rents, often at low- to mid-single digit dollars per square foot. Real estate companies exposed to Sears include Simon Property Group, Washington Prime and Kimco, yet in each case the chain’s rents account for less than 1 per cent of group revenue, according to S&P. Sears’ allure has long since faded, and its departure provides owners of otherwise thriving malls an opportunity to find better prospects. James Taylor, chief executive of Brixmor Property, a landlord to about 11 Sears stores, said: “We are confident that space recaptured through the bankruptcy process will enable Brixmor to create meaningful value as the company remerchandises these assets.” Sears, which also operates Kmart, is to close 142 stores by the end of the year as part of an agreement with creditors. Under bankruptcy protection, the group is also planning to exit leases on about 200 other stores that it had disbanded but was still paying rent on. Additional properties may be up for grabs. Eddie Lampert, chairman, has said he is fighting to avoid an outright liquidation but lawyers warn Sears may struggle to avoid such a fate, putting the rest of the portfolio at risk. Whereas Kmart stores are located mostly near main roads or stand alone, almost 90 per cent of the Sears outlets are in regional shopping malls, according to CBRE. Of these, less than 30 per cent are estimated to be in class A malls — the kind that may feature an Apple store or a Whole Foods, where a dowdy Sears would be regarded as a blot. Just over half are in mid-tier class B locations and about a fifth in out-of-favour class C.

Monday 22 October 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES

A12

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Lloyds prepares for £2bn share buyback Plan for capital return reflects increasing confidence at Britain’s third-largest bank DAVID CROW, NICHOLAS MEGAW AND PATRICK JENKINS

loyds Banking Group is drawing up plans to buy back almost £2bn of its own shares in 2019, double this year’s tally, in a sign of the lender’s confidence in its business despite the uncertain economic outlook. People familiar with the plan said the UK bank hoped to be able to return roughly £4.5bn of capital to shareholders next year via a higher dividend and a share buyback of almost £2bn. Lloyds declined to comment. The move comes after Lloyds completed a £1bn buyback earlier this year and reflects the improving fortunes of the lender, which had to be bailed out by the government during the financial crisis. One person familiar with the plan said it was still at an early stage and would not be finalised until a board meeting in February. They cautioned that any buyback was contingent on the regulator approving Lloyds’ capital plan and said it could be derailed by a hard Brexit that sent the UK economy into a downward spiral. The plans could also change if Lloyds were to decide to use the capital for acquisitions. However, Lloyds’ decision to prepare for a buyback at a time when the Brexit talks are entering a tense final stage suggests it is hopeful that Theresa May, UK prime minister, can secure a deal with the European Union.

Earlier this year, António Horta-Osório, the bank’s chief executive, said he was “strongly convinced that there is a strong possibility of a deal being reached by November”. It is also indicative of Lloyds’ relatively bullish stance on the outlook for the UK if a Brexit deal is reached, with one person close to the bank saying it had yet to see any signs of economic strain. The capital return plan underscores improving profitability at Britain’s third-largest bank by assets. In August, it reported a more than 20 per cent increase in first-half profits, even as it continued to be hit by compensation payouts to borrowers who were mis-sold payment protection insurance. The bank’s return on tangible equity in the first half was 12.1 per cent, putting it within touching distance of US investment banks such as Goldman Sachs and Morgan Stanley, which are in much ruder health than UK lenders. Lloyds also sold its Irish mortgage business to Barclays for about £4bn earlier this year, in a move that freed up capital that could be returned to shareholders. The bank is due to report thirdquarter earnings on Thursday. In a note ahead of the update, analysts at UBSdescribedLloydsas“undervalued”. “Lloyds is in our view . . . a strongly capital generative bank, operating with a cost advantage in a competitive market and with decent medium term growth opportunities.”

German former trader charged in Euribor rigging case Ex-Deutsche Bank trader was arrested in Italy in August BARNEY THOMPSON

ritain’s Serious Fraud Office said it had charged a former trader with conspiracy to defraud in connection with the Euribor rate-rigging scandal after he triggered an arrest warrant and was extradited to the UK. Andreas Hauschild appeared before Westminster Magistrates’ Court this weekend, according to an SFO statement released on Sunday. No plea was entered. He was first arrested in Italy in August after leaving his home country of Germany, thus activating a European Arrest Warrant. Mr Hauschild, a former trader at Deutsche Bank, was one of 11 individuals charged in 2015 on allegations they had conspired to manipulate the Euribor benchmark interest rate, the Brussels equivalent of Libor. Euribor underpins trillions of euros of products, such as loans and mortgages, and has been described as “one of the most globally significant numbers in finance”. The SFO has alleged that a pan-European conspiracy took place between 2005 and 2009 in which traders and rate submitters conspired to artificially nudge Euribor up or down to suit the positions of certain traders. This year, Christian Bittar, a former Deutsche derivatives trader

described by a judge as “perhaps the best in the world” in his field, pleaded guilty to conspiracy to defraud shortly before he was due to face trial in London. He was jailed for five years and four months, and fined £2.5m in penalties and almost £800,000 in costs. Philippe Moryoussef, a former Barclays trader who did not appear in court to defend himself, was tried in absentia and convicted, receiving a prison term of eight years. He is thought to be still in France. At the end of the 11-week Euribor trial at Southwark Crown Court, which finished in July, one trader was found not guilty and the jury failed to reach a verdict on three former Barclays employees. They face a retrial in January. When he passed sentence on Mr Bittar and Mr Moryoussef, Judge Michael Gledhill QC was also strongly critical of senior managers working at Deutsche Bank and Barclays at the time of the conspiracy, saying they “should have known what was going on and should have stopped it”. The interbank lending rate scandal has led to some of the biggest banks and inter-dealer brokers in the world paying about $9bn in penalties. Deutsche Bank itself paid $2.5bn in fines to authorities in the US and UK in 2015 to settle allegations that it had manipulated the Libor rate.

Geopolitical risk remains in spotlight for investors Fears are growing of a contagion in Europe and worries continue over Asian stocks

DAVID KEOHANE

hile the European Central Bank meeting will be watched, tensions over Italy look set to dominate the start of the week. Will the financial stress in Italy stay a domestic affair? One striking feature of the pressure on Italy’s borrowing costs is that it has largely remained a domestic story. But as the coalition government’s standoff with Brussels over its budget deepens, a critical question for investors is whether other parts of the eurozone’s periphery can remain insulated. While the bond yields of other eurozone periphery countries such as Spain and Portugal have remained fairly subdued since Italy’s market first came under pressure at the end of May, this month has signalled that could

change. Spain’s 10-year bond yield has risen 26 basis points this month to 1.55 per cent. Meanwhile, Portugal’s 10-year yield has risen 32bp this month to 2.26 per cent. Over the same period, the Italian 10-year yield has surged 76bp to 3.72 per cent. It has the potential to be another volatile week for Italian bonds and the country’s bank shares. Rome has to respond by Monday to the EU’s concern over the proposed budget, which authorities in Brussels described as an “unprecedented” challenge to its fiscal rules. Investors will also be digesting the decision late on Friday by rating agency Moody’s to downgrade Italy’s rating a notch to Baa3, just above junk territory. However, the agency moved outlook on Italy from negative to stable.

“ I f ma rke t st re ss pu s h e s spreads higher the government strategy to use stimulus to boost growth comes under pressure,” analysts at JPMorgan noted. “Italian banks are vulnerable and yields already are high enough to tighten credit standards.” Rival agency S&P Global is expected to publish its latest assessment of Italy at the end of the week. The spike in Italian yields has also driven the gap over yields on German government debt, the benchmark for the eurozone, to the highest since 2013. “With BTP [Italian bond] investors still lacking reassurance from the Italian government, spreads continue to widen, increasing the probability of the adverse risk case, namely that the 10-year Bund and BTP yields will more in opposite directions,” said Laurence Mutkin, global head of G10 rates strategy at BNP Paribas.

Doubts grow over US equity outlook

Fund managers’ appetite for stocks dims as Fed begins liquidity drawdown CHRIS FLOOD

he wave of selling that hit Wall Street in mid-October has sharpened fears that the nineyear bull run, which has propelled the US stock market to an all-time high, is nearing exhaustion. The S&P 500, the main US equity benchmark, has risen 309 per cent since its low point in March 2009 following the global financial crisis. But rising US interest rates and promises by US President Donald Trump to escalate the trade war with China threaten to end the rally. After reaching a record close on September 20, the S&P 500 has retreated 5.5 per cent, trading close to important long-term technical support levels. Investors are grappling with multiple concerns, including doubts about the duration of the US economic cycle, equity valuations, the effect of higher interest rates on company business models, international trade and the evolving relationship between the US and China. The Federal Reserve has also started the process of quantitative tightening, reversing the massive bond-buying programme introduced in response

to the 2008 financial crisis. “Investors question what impact all of these issues might have on corporate earnings,” said Kate Moore, chief equity strategist at BlackRock. “But US economic data remains exceptionally strong, suggesting the expansion is still on track. Our advice to clients is to stay calm as there has not been any meaningful fundamental shift in the outlook for the US economy or corporate earnings.” The S&P 500 is trading on a current price to 12-month forward earnings ratio of about 16.6 times. High company valuations remain a worry for some strategists. Tommy Garvey, a member of the asset allocation team at GMO, the $71bn Boston investment manager, said US equities are 50 to 60 per cent overvalued but it may be a long time before a meaningful correction occurs. “It is easy to build a ‘good news’ story around US equities but all of that is already priced in. Corporate profits are strong and the valuation multiples that investors have attached to those earnings are too high. At some point, both profits and valuations are likely to revert closer to historical norms,” said

Mr Garvey. US companies are expected to deliver earnings growth of 23.4 per cent this year, dropping to 10.9 per cent in 2019, according to consensus forecasts. “A significant portion of earnings growth has come from US tax cuts but top-line (revenue) growth has been very encouraging so far this year,” said Ms Moore. She added that there is “little reason” to de-rate the US stock market further from here but if any cracks appear in revenue growth forecasts from companies during the third-quarter earnings season, investors might question the sustainability of US economic expansion. Fiona Harris, an investment specialist in JPMorgan Asset Management’s US equity group, also believes that strong US economic fundamentals will continue to support the stock market. “Employment is very strong and wage growth is starting to strengthen. Business and consumer sentiment indicators are also very robust but we will be looking out for any changes in tone in comments from companies as the current earnings season continues,” she said.

BUSINESS DAY

C002D5556

NEWS YOU CAN TRUST I MONDAY 22 OCTOBER 2018

fivethings

Insight Nigeria wallows in poverty amidst rising global prosperity GLOBAL PERSPECTIVES

OLU FASAN 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

he 24th Nigerian Economic Summit starts this week with the theme “Poverty to prosperity: making governance and institutions work”. This is an appropriate topic, especially given the dire Nigerian situation. Good governance and effective institutions are key drivers of economic and social performance, and thus of prosperity and poverty-reduction. But Nigeria is stuck in the poor governance and weak institutions trap and, inevitably, in the poverty trap. Even worse, Nigeria is a perverse outlier. While prosperity is rising globally, poverty is deepening in Nigeria. As everyone now knows, Nigeria has acquired the sobriquet “poverty capital of the world”. According to Brookings Institutions, it has overtaken India as the country with the largest number of people living in extreme poverty, having 87m people in extreme poverty compared with India’s 73m. For Nigeria, with a population of 190m, to have 87m people, nearly half its population, in extreme poverty, while India, with a whopping population of 1.3bn, has a miniscule proportion, 73m, in extreme poverty is beyond belief. What’s more, the report says that “extreme poverty in Nigeria is growing by six people every minute”. Put simply, the poverty situation will get even worse. This is not a new phenomenon, of course. Even when global poverty fell dramatically from over 1.3bn in 2005 to under 800m in 2011, in line with the Millennium Development Goal poverty-reduction target, Nigeria was a laggard. In its 2014 “Nigeria Economic Report”, the World Bank said there was “little evidence of recent progress in poverty reduction”, adding that this “is at odds with the general international trend of poverty reduction”. Although the economy was growing at an annual rate of 6 or 7%, it was a jobless growth, contributing virtually nothing to poverty reduction. The World Bank described this as “the poverty/growth puzzle” and posed the inevitable question: “How could the economy the size and wealth of Nigeria have such high poverty rates?”. But while Nigeria is still stuck in the poverty trap and struggling with the rudimentary and primitive challenge of dealing with extreme poverty, the trend all over the world is about people not merely escaping poverty, but actually enjoying real prosperity. Globally, countries are creating and expanding the middle classes, the aspirant people, who provide the stable consumer base that drives productive investment and, thus, economic growth. In a recent report, the World Data Lab, a think-tank, shows that more than half the world’s population is now middle class. Specifically, 3.6bn people now qualify as middle class, i.e. those living on

up to $110 a day. According to the analysis, people are classified as middle class if they have discretionary income to spend on large consumers items, such as refrigerators, washing machines or motorcycles, if they can pay to go to the cinema or for other forms of entertainment and if they can afford to go on family holidays. Such people would have accrued enough resources to be reasonably confident that they can withstand an economic shock, such as illness or a period of unemployment, without slipping into financial insecurity. Interestingly, the ranks of the middle classes are being swelled by rising incomes in Asia, with 9 in ten of the new entrants into middle classes coming from China, India and south and east Asia. Even more striking, while one person escapes extreme poverty every second, according to the analysis, five people are entering the middle classes every second, with a projection that, by 2030, the middle classes will have expanded by 1.7bn to 5.3bn people. But where is the middle class in Nigeria? How many Nigerians fall into this category? Well, according to a recent World Bank data, 92.1% of Nigerians live at below $5.5 a day. If the middle are people who live on up to $110 a day, then probably just about 6% of Nigerians are middle class, with the remaining 1 or 2% qualifying as rich, including the millionaires and billionaires! But this has huge implications for economic growth and prosperity.The Nigeria Industrial Revolution Plan, published in 2014, identifies weak purchasing power as an obstacle to industrialisation in Nigeria. Indeed, industrialisation is sustained by a consumer society. But Nigeria doesn’t have a sufficient pool of the middle class, with the discretionary income to spend on goods made by Nigerian manufacturers. Yet, not only is Nigeria bereft of a robust middle class, it has an acute human development challenge of tackling extreme poverty, with

six Nigerians falling into extreme poverty every minute, a situation that would be made worse by a rising population, which has grown by 72% over the past 20 years, and a stagnant economy, currently growing at just 1.5%. But why is Nigeria failing to tackle poverty? Well, the obvious answer is the failure of ideas, policies and institutions. Ideas matter, policies matter, and institutions matter. Put simply, governance matters. The fact that China and India, which once had extreme levels of poverty, have escaped the poverty trap shows that poverty can respond to the right solution. China reduced the proportion of its people living in extreme poverty from 60% in 1990 to 12% in 2010. In 2012, the

World Bank launched a knowledge hub to spread knowledge of China’s successes in reducing poverty. Everything starts with the right ideas and knowledge. It’s not surprising that one of this year’s winners of the Nobel Prize in Economics, Paul Romer, a professor at the University of Chicago, won the prestigious prize for his endogenous growth theory, which emphasises the role of ideas and knowledge in decision-making and as drivers of economic growth. Policies and their

‘

...according to a recent World Bank data, 92.1% of Nigerians live at below $5.5 a day. If the middle are people who live on up to $110 a day, then probably just about 6% of Nigerians are middle class, with the remaining 1 or 2% qualifying as rich, including the millionaires and billionaires!

successful implementation are the real drivers of change, but policies can only yield the right outcomes if they are based on the right ideas. And the overarching idea that everyone must understand is that economic growth is the key antidote to poverty. Growth is the rising tide that lifts all boats. Economic expansion creates jobs and, when

matched with higher productivity, increases people’s incomes and living standards. Unfortunately, Nigeria’s economy has stopped growing and, as a recent data shows, the average productivity of a Nigerian worker is $3.24/hr, compared with $19.68/hr in South Africa. Surely, with an abysmal growth rate of 1.5% and such a ridiculously low productivity level, Nigeria can never escape the poverty trap. But another anti-poverty idea, sadly ignored in Nigeria, is that growth and productivity are functions of economic openness. It is not a mere coincidence that poverty began to fall significantly in China and India when they started opening up and liberalising their economies by lowering barriers to

foreign investment and trade. In a joint report by the World Bank and the WTO, titled “The role of trade in ending poverty”, they argued that “trade can drive poverty reduction by boosting growth” and through higher incomes that result from greater choice and value for goods. Of course, government must ensure that growth really trickles down and must support it complementary policies. For instance, China introduced universal social development programmes, such as free medical system and a minimum living allowance, that increased the disposable income of the poor, as well as targeted programmes that assist poor households and increase their ability to generate more income themselves. China spent $70bn on such programmes between 1980 and 2016, and now has the target of ending extreme poverty by 2020. Remarkably, something that’s very rare in Nigeria, Chinese billionaires and conglomerates are piling into the anti-poverty push, with the tech giant, Alibaba, pledging to spend Rmb 10bn in rural areas towards the anti-poverty programme. Sadly, in Nigeria, the government’s anti-poverty policies are merely cosmetic and palliative, without increasing disposable income or improving productive capacities. Nigeria’s anti-poverty initiatives are government-driven, with hardly any private sector or philanthropical involvements. Yet, the government lacks the coherent strategy, the ideas, even the resources to tackle poverty the way China and India have done. But Nigeria does not only have governance challenges, in terms of ideas and policies, it has huge institutional challenges as well. The absence of the rule of law and the poor quality of state institutions, coupled with the pervasiveness of corruption, are all obstacles to effective anti-poverty policies. A country with less corruption and more effective institutions will tackle poverty more successfully than one ridden with corruption and inefficient public institutions. The 2017 World Development Report on Governance and the Law highlights three institutional functions that are essential for policy effectiveness, namely, making credible commitments, inducing cooperation and coordinating actions. The truth is that huge commitment, cooperation and coordination problems undermine policy effectiveness in Nigeria, as we have with the incoherent, uncoordinated and sometimes gimmickry nature of the Buhari government’s social intervention programmes. Finally, you cannot tackle poverty through overcentralised governance. In her book, How China escaped the poverty trap, Yuen Yeun Ang, emphasised the role of decentralised governance, with decision-making devolved to subnational governments, which have significant degree of autonomy to choose their strategies. But Nigeria is over-centralised, and the government’s anti-poverty programme is too driven from Abuja. Surely, Nigeria must be restructured, with power and resources devolved to sub-national governments. Of course, governance and institutions are critical to a successful transition from poverty to prosperity. But Nigeria lacks effective governance and institutions, which is why poverty is deepening in the country while prosperity is spreading globally.

for your new week

Fascinating business facts

$100m

ogolese lender Oragroup SA is planning to raise about $100 million in the biggest initial public offering for West Africa’s regional exchange. Oragroup will list 20 percent of its equity on the Bourse Regionale Des Valeurs Mobilieres in Ivory Coast’s capital, Abidjan, as it wants to raise funds to grow operations across 12 countries, the group said in an emailed statement. The bank will issue 6.1 million new shares and sell 7.8 million existing shares at 4,100 francs per share, Oragroup said.

$40bn

ver the past year, the fortunes of the two brothers at the helm of India’s wealthiest dynasty have grown apart -- to about $40 billion apart. Elder sibling Mukesh Ambani, 61, toppled China’s Jack Ma as Asia’s richest man, after driving a telecommunications revolution in India that propelled his petrochemicals conglomerate Reliance Industries Ltd. into the $100 billion club. His personal fortune had swollen to more than $40 billion as of Friday, according to the Bloomberg Billionaires Index, billions ahead of Ma and at similar levels to Microsoft Corp.’s former chief, Steve Ballmer.

6.5%

hina’s economic growth slowed more than expected in the third quarter, as weak industrial output data and what the government called the “severe international situation” challenged efforts to stabilize the economy and reach its growth targets. Gross domestic product increased 6.5 percent in the three months through September from a year earlier, compared to 6.6 percent in a Bloomberg survey and down from the 6.7 percent pace in the previous quarter. That’s the slowest since the aftermath of the global financial crisis in 2009.

2.7%

he pattern of economic growth in Africa’s biggest economies is showing wide divergence as the countries struggle into higher gear despite a healthier global economy a Reuters found. While Nigeria is now projected to grow at 2.7% next year, 0.3 percentage lower than forecast in July, Kenya will grow at a much healthier pace of 5.8% next year while South Africa the second largest economy is expected to grow at 1.4%

2.4%

nd in Europe the contrasts between Portugal and Italy could hardly be sharper. Portugal last week unveiled a draft budget that proposes cutting the deficit to 0.2 per cent of gross domestic product next year, the lowest in more than four decades of democracy. Italy’s draft budget proposes a 2019 deficit of 2.4 per cent of GDP, far higher than the EU-mandated target of 0.8 per cent. The European Commission has written to Rome to express concern over an “unprecedented” deviation from previous plans.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Ghana Office: Business Day Ghana Ltd; ABC Junction, near Guinness Ghana Limited, Achimota – Accra, Ghana. Tel: +233243226596: email: mail@businessdayonline.com Advert Hotline: 08034743892. Subscriptions 01-2950687, 07045792677. Newsroom: 08169609331 Editor: Anthony Osae-Brown. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.

Private sector resource allocation should prioritise poverty reduction – Suleiman Page 6

Governance goes on holiday in Nigeria as politics takes centre stage

Predicting stock market performance in October, November

Page 20

Page 16

BUSINESS DAY

Monday 22 October 2018

C002D5556

BUSINESS DAY

What Nigeria needs to achieve economic prosperity ODINAKA ANUDU

igeria is widely adjudged as the poverty capital of the world today. With 87 million poor people, the country is officially world’s worst poor country. According to Oxford University Poverty and Human Development Initiative (OPHI) released in April this year, poverty situation in Nigeria’s north is pervasive and alarming, with the region posting an average of 85.36 percent in poverty rate in 2017. The worst-hit states are: Zamfara ( 92 percent poverty rate); Jigawa, 88 percent; Bauchi, 87 percent; Kebbi, 86 percent, Katsina, 82.2 percent, and Gombe 77 percent. It is interesting to note that Katsina has produced two Nigerian presidents—late Umaru Musa Yar’Adua and current President Muhammadu Buhari, yet the state is among the worst hit in terms of poverty. With this high rate of poverty, it is clear that Nigeria needs to take certain steps to begin its journey to prosperity. First, analysts want government to create the right environment for the private sector, which will provide jobs for almost 20 percent of the jobless population. High poverty rate works in pari passu with unemployment. Nigeria’s unemployment rate has risen 12 times since 2014. The unemployment situation was made worse in 2016 and half year of 2017 when firms did not employ but sacked hundreds of workers owing to dollar shortages Source: Doing Business database.

Continues on page 4

Kaduna in strong lead in Nigeria’s doing business ranking, Lagos lags

aduna State has assumed a strong lead in Nigeria’s sub-national ease of doing business ranking, which measures competitiveness among the country’s 36 states, according to a new report by the World Bank. According to the report, “Kaduna stood out by implementing reforms in starting a business, dealing with construction permits and registering property. As a result, the state improved its average distance to frontier score by 11.21 percentage points to 65.97 percent

in 2018 from 54.76 percent in 2014, and is now the top-ranked state in registering property and enforcing contracts.” Four states including Gombe, Nasarawa, Zamfara and Cross River fell in ranking compared to their previous positions with Cross River suffering the biggest slump from an average score of 52.67 to 49.2 in this new ranking, and is also the least ranked being the only state with an average ranking below 50. Qu i t e a nu mb e r o f s t at e s were ranked above 60 to rival the top state of Kaduna and they include Jigawa, Kano, Borno,

Bauchi and Katsina, while the commercial centre of Lagos is held down at 54.90. The report found that it is “easier to start a business in FCT Abuja and Lagos, deal with construction permits in Niger and Kano, register a property in Kaduna and Zamfara, and enforce a contract in Kaduna and Bauchi.” A more detailed look at the indicator rankings reveals several observations. “Although the average distance to frontier score worsened in a handful of cases, it improved by an average of 3 percentage points across most states since 2014,” the

report said. “This indicates that many states are adopting good practices, which translates into a less burdensome business climate for local entrepreneurs. “No single state dominates in all areas benchmarked. In fact, all but three states rank in the top half in at least one indicator. Similarly, all but five states rank in the bottom half in at least one indicator. A few states stand out, though. “Kaduna and Jigawa are the only two states that rank among the top five in three of the four indicators. On the other end

of the spectrum, Cross River, Ebonyi and Imo rank below the 30th spot in three of the four indicators. From a public policy viewpoint, these results show that most states, if not all, have something to learn and something to showcase.” The report noted that “there c o nt i nu e s t o b e s u b s t a nt i a l variation in business regulations and their implementation across Nigerian states, with significant gaps between the best and worst performing states across all four indicators.” And whereas “Niger, Kano and Continues on page 4

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24

Why FG must design indigenous policies to make Nigeria aviation hub Unless government designs policies that promote strong indigenous carriers,the ambition to develop Nigeria’s airports into a hub would remain a dream,IFEOMA OKEKE writes.

ub airports are used by one or more airlines to concentrate passenger traffic and flight operations. They serve as transfer (or stop-over) points to get passengers to their final destinations. They are part of the hub-and-spoke system. Hubs work by pooling regional demand from leisure passengers, international transfer passengers, business passengers and freight to make more routes and regular flights viable. While some airports in Africa have metamorphosed to become strong hubs, serving airlines across the globe and enhancing connectivity, Nigeria, the most populated country in Africa with a market strategically located at the centre of Africa, has failed to leverage its potential to build an aviation hub for the region. Nigeria’s potential to become an aviation hub for Africa, using its natural advantages such as central location on the continent, huge population and a growing middle class, is being stymied by poor aviation infrastructure and lethargy from a government whose agencies show reluctance in diversifying its economy away from oil. Experts say establishing Nigeria as a regional aviation hub would move it one step away from dependence on oil, resulting in the creation of economic activity that would spin-off jobs and attract revenue, even beyond the aviation sector. African airports with strong hubs There are strong hub airports in East Africa, South Africa and North Africa, which Continued from page 1

Jigawa—having a distance to frontier score of almost 80 percentage points on dealing with construction permits—would rank in the top 25 of the 190 economies measured globally by Doing Business, Lagos on the other hand would rank in the bottom quartile of economies.” Since the Doing Business in Nigeria 2010 study, 32 states have implemented 77 reforms across the four regulatory areas benchmarked. Ekiti while Enugu and Ogun have been the most consistently active states since 2010, imple-

account for most of the scheduled capacity in Africa. Oliver Tambo International Airport, Johannesburg (South Africa), is the busiest and largest airport in South Africa and on the continent. In 2016, the airport handled a total of over 20 million passengers and it is expected to reach between 24 and 28 million passengers in the coming years. Cairo International Airport is located near the capital city, Cairo, 22 km northeast of the city centre in the district of Heliopolis. It is one of the busiest airports in the Arab world and Africa. The second largest airport in Africa after ORTIA, it serves as the primary hub of various Egyptian airlines including EgyptAir, Nile Air and EgyptAir Express. The airport processes over 14.5 million travellers passing through annually. Cape Town International Airport is now the second largest airport in South Africa (after ORTIA) and the third busiest on the continent. It is located 20 kilometers east of Cape Town and is considered as one of the best airports in all of Africa. It has five terminals that are easily accessible on foot. The airport is utilised by

more than 8.5 million passengers every year. Benefits of having aviation hubs All over the world, airline connectivity remains the best model to adopt for airlines to operate efficient and effective is through. This is precipitated through airport hubs. Nick Fadugba, the CEO, African Aviation Services Limited, said strong hub airports are keys to airline connectivity, adding that airline connectivity stimulates economic growth. He regretted that West and Central Africa have not been so successful in establishing strong hub airports, reiterating that strong hub airports enable efficient passenger and cargo transfers. “Effective hub and spoke operations multiply the number of city pairs that can be connected,” he added. Other experts say advantages that accrue from being a hub include revenues from payment of landing and parking fees, servicing of aircrafts, airport taxes, business for the hospitality and transport sector, amongst others. What Nigeria requires to become an aviation hub Major global aircraft manu-

facturer, US Boeing, had in 2012 started preliminary discussion with Nigeria’s Federal Ministry of Aviation towards an agreement to develop the country into a regional aviation hub, and reposition the sector as a reference point on all aviation matters in Africa. Boeing stated that the requirements for attaining the goal, include enhancement and sustenance the nation’s aviation safety record, as well as establishing Maintenance and Repair Organisations (MROs) in the country. Also required, it said, was the establishment of a Training Hub in Nigeria, along with technical assessments of all aircraft operated by domestic airlines in the country and a fleet renewal and acquisition programme for the airlines. Boeing further said it was necessary to develop an aviation database and Integrated Air Navigation Systems, Optimisation System Support for Airports and Airlines, as well as access existing spare-parts and material marts in Nigeria, with a view to proposing a business partnership case for the establishment of an integrated spare parts super market in the country.

What Nigeria needs to achieve economic prosperity Continued from page 1

and recession. Between January 2016 and September 2017, 7.9 million citizens lost their jobs, according to the National Bureau of Statistics. Many of these Nigerians are still in the job market today. The United Nations defines extreme poverty as living below $1.90 a day (N684). Anybody without a job can hardly afford N684 per day. This is why experts want the federal and state governments and their agencies to begin to look at the business environment more closely. It is true that the federal government has initiated reforms through the Presidential Enabling B u s i n e s s E nv i ro n m e n t Council, but the impact is not yet strongly felt across sectors. The Manufacturers Association of Nigeria (MAN) said the average lending rate to the sector by banks was over 23 percent in 2017. Access roads to Apapa and Tin Can ports are still bad. Scanners at the ports do not work and demurrages are paid every day owing to human inefficiencies. “There is a need to extend reform action plans of Presidential Enabling Business Environment Council (PEBEC) to Eastern ports, air and land ports,” Babatunde Paul Ruwase, president of the LCCI, said at a press conference recently. “The concessioning of Onitsha seaport should be finalised, while government should improve the security situation along and within the Warri port in order to ward off militants and touts. Stakeholders request that government should approve and publicise a bouquet of incentives to importers and exports that patronise ports outside Lagos,” Ruwase said.

Ruwase recommended enforcement of Executive Order on Single Examination, digitalising export process, reduction of enforcement agencies from 12 to eight, use of National Data Centre and passage of Enabling Port Reforms Bills by the National Assembly. “Our desire is for Nigeria to get to the point where it can move containers and other items to and from ports by rail across the country,” he said. Also, businesses in various states now pay 54 different types of taxes and levies as against 38 in 201314, experts say. “These taxes need to be amalgamated into one or a few, since the whole tax cycle is a multiple chain of taxes on the same income stream,” said Vivian Chigozie-Nmonwu, taxexpert and lead partner of Vi-M Professional Solution in a recent interview. Olusola Teniola, president of the Association of Telecommunications Companies of Nigeria (ATCON), said recently that telecoms business is under threat because government agencies see it as a cash cow. “We are not cash c o w s . Te l e c o m s b u s i nesses are under threat b e cau s e w e have p o o r, weak policies. All the capacities of fibre have not even reached the average Nigerian,” Teniola said at a recent breakfast meeting organised by the Niger ian-Amer ican Chamber of Commerce. Security of lives and p ro p e r t y i s ke y . Cu rre ntly, s e ve ra l f a r m e rs have fled the northeast and several states in the northcentral owing to the onslaught of Boko Haram i n s u r g e n t s a n d h e rd s men. Telecom masts are destroyed by these hoodlums now and again.

Kaduna in strong lead in Nigeria’s doing business ranking, Lagos lags menting five reforms each during the eight-year span. The pace of reforms in the states has accelerated in recent years, although this is largely due to reforms implemented at the federal level for business registration. Kaduna, Enugu, Abia, Lagos and Anambra were the five states that made the biggest strides toward the frontier of good practices. In registering property— where Kaduna made the biggest jump in its distance to frontier score—the state restructured its land registry, now called the Kaduna

Geographic Information Service (KADGIS); replaced percentage-based registration fees with flat fees; and made the issuance of the governor’s consent much more efficient. This overhaul resulted in one of the most significant improvements recorded in the Doing Business in Nigeria series since 2008. It made one-third of procedural requirements redundant reduced the time to register property by more than two months and cut the cost by almost one-third. KADGIS also

improved the quality of infrastructure by scanning all land titles as well as property maps; the digitization process is underway. In the area of registering property, eight states implemented reforms making the process easier, as opposed to ten states between 2010 and 2014. In 2015 Lagos reduced several of its fees and removed the requirement to file an affidavit with the high court before being able to conduct a property title search. Bayelsa and Delta implemented similar improve-

ments. In Abia the state’s Geographic Information System (ABIAGIS) made considerable progress in digitizing its records, introducing online procedures and increasing administrative efficiency. Benue and Plateau authorities introduced temporary measures cutting most state fees in half; Kwara and Ogun also reduced their fees. In Enugu authorities have scanned most of the land titles, improving the quality of infrastructure. And in Gombe a new procedure requiring the

frontloading of evidentiary documents in court by the plaintiff and defendant led to a reduction in the time to obtain a court decision for a land tenure dispute. Four states (Bauchi, Enugu, Katsina and Sokoto) have implemented reforms making it easier to enforce contracts. Enugu cut the time nearly by half, from 970 days to 532. The state’s chief judge issued a practice direction for all magistrates, with the goal of completing civil cases within six months. In addition, the judiciary hired 15 more magistrates in 2015.

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24 Interview

Private sector resource allocation should prioritise poverty reduction – Suleiman

igeria, Africa’s largest economy was recently rated as the nation with the highest number of extremely poor people by a report by Brookings Institution. Before now, India used to hold the position with a population of 1.324 billion people as against Nigeria’s 200 million. According to the report, the number of Nigerians in extreme poverty increases by six people every minute. According to the report, Nigeria has already overtaken India as the country with the largest number of extremely poor in early 2018, and the Democratic Republic of Congo could soon take over the number two spot. The report noted that at the end of May 2018, “our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall, remarking that by the end of 2018 in Africa as a whole, there will probably be about 3.2 million more people living in extreme poverty than there is today. Earlier in March, the International Monetary Fund (IMF) had said Nigerians are getting poorer, saying there is a need for coherent and comprehensive economic reforms. In this interview with the Managing Director and Chief Executive Officer of Sterling Bank Plc, Mr. Abubakar Suleiman says the private sector should allocate resources in a manner that takes poverty reduction into account. Recently, Nigeria displaced India as the poverty capital of the world. How did we get to this sorry pass and what roles can the private sector and government play in addressing the situation? The first thing to note about this development is the dissonance between Nigeria as the largest economy in Africa and Nigeria as the poverty capital of the world. Once we understand that Nigeria was able to achieve some measure of growth without reducing poverty, it will become clear that what we had was a jobless growth, a non-inclusive growth. When growth is driven largely by exploitation of natural resources such as oil and gas, what tends to happen is that job creation is limited and the wealth that is created will be concentrated. That is why we have quite a few billionaires in the oil sector while the number of people employed in that industry, especially in oil prospecting, is insignificant relative to the contribution of the sector to GDP. Whereas other sectors like agriculture and construction create a lot of inclusive growth because they are labour intensive, what the private sector can do differently is to allocate resources in a manner that takes poverty reduction into account. For instance, at Sterling Bank, we

Abubakar Suleiman, Chief Executive Officer, Sterling Bank Plc

have identified five sectors that are incredibly important to national development and to reducing poverty, and we are focused on financing the identified sectors to catalyse growth. The sectors are health, education, agriculture, renewable energy and transport. Our conviction is that if these sectors are better funded, they have the capacity to drastically reduce poverty not just by creating employment but also by improving productivity. The impact of education on productivity is well known just as the impact of good health care on productivity cannot be underrated. There is also a direct correlation between access to power and productivity. The same thing applies to nutrition and well-being. And finally, people’s ability to move around and also move goods around seamlessly will have a great impact on economic growth. So, the sectors we have highlighted are targeted at poverty reduction and I believe that other operators in the private sector need to have this conversation. There has to be an engagement at the board level where operators in the private sector will commit to reducing poverty in addition to the drive for profitability. However, the shortest road to prosperity is for the government to focus on creating a business-friendly environment. It is also within their right to demand that businesses should, in return, focus on sectors that can have an impact on reducing poverty. A situation where the government tries to do this alone with

its limited resources is not tenable. Unfortunately, the government is not particularly good at collecting taxes and we must strengthen this. But even when the collection of taxes becomes efficient, it will still be insufficient to eradicate poverty. What needs to happen is for the government to use the taxes in creating an environment where businesses can then effectively tackle issues around employment, productivity and growth to generate economic surplus. What is the role of financial inclusion in lifting people out of poverty? I do believe that there are opportunities for improving quality of life through financial inclusion but I think we need to be clear about what financial inclusion is. The tendency has been to see the ability to access a payment platform as financial inclusion. Whereas if all you can do is being able to make faster and safer payment, you are still not financially included. The objective of finance is to enable growth and to improve quality of life. This means that everyone should be able to access credit either to grow their businesses and employ more people or have access to insurance in order to be able to take risks knowing that there is a backup plan. It is also important for people to have access to investment products where the savings can give returns that are commensurate with the risk. I do believe that the key to unlocking poverty lies in economic inclu-

sion. I am absolutely convinced that when per capita income rises and the ability to earn improves, financial services will become available to people as banks expand to capture the new opportunities. As a player in the private sector, we have developed a platform called i-invest that allows people with as modest as a hundred thousand naira invest in treasury bills, which is risk free. For us, we see that as the first and important step to financial inclusion. We have also built a platform called Specta which provides access to credit in a very efficient manner. Over 9,000 people have since April 2018 accessed bank credit in five minutes from the point of application. What are your views on Nigeria’s rising debt service costs as a percentage of revenue? What cheaper alternatives can the government tap to boost revenues and reduce borrowing? The challenge that Nigeria faces with its rising debt is twofold. The first part is not just the absolute amount of the debt which as a ratio of GDP is deemed reasonable but the cost of financing. For instance, when a country finances a debt at five percent per annum and another country finances at 15 percent, the country financing at five percent will have the capacity to borrow three times as much as the country with 15 percent. The idea of using simple debt to GDP ratio is faulty in two ways because the GDP cannot be used to repay debt and secondly, the cost of financing is often ignored by that

As a player in the private sector, we have developed a platform called i-invest that allows people with as modest as a hundred thousand naira invest in treasury bills, which is risk free

ratio. Therefore, debt service cost as a percentage of revenue is more relevant. I am glad that both the government and the media have finally started to focus on this. But how do we resolve this? The second challenge is the poor revenue generating capacity of the government. There are two clear opportunities that the government needs to focus on. The first is to improve the country’s revenue base. We cannot continue to be listed among countries with the lowest tax to GDP ratio because it is inconsistent with our aspiration for growth. If we do not resolve that, we will continue to struggle. Secondly, you cannot continue to pile up debt while you sit on assets that are not your primary focus. The government needs to consider selling assets that do not provide social good because the government is not in the business of investing in a return. The government is in the business of collecting taxes and providing the framework for the private sector to flourish. So, I would say, sell the assets that are not core to the government and continue with the ongoing effort to improve tax collection. Sterling grew its loan book by the most among banks in Nigeria - 20 percent in H1. Where are the opportunities in the economy at a time when loan books are shrinking across board? Our decision to grow our loan book is countercyclical but the objective is to take advantage of opportunities in the market when others are still not ready to focus on growth. Again, we have been very clear as to what we want to achieve. We have the five sectors at the heart of Sterling Bank. These sectors are hungry for financing but they are also great sectors to lend to because the effective demand for the output from these sectors are not materially impacted by economic downturns thereby protecting the credit quality. Irrespective of what happens, people will continue to spend money on health, education, food, power and transport. We feel that these are sectors we must continue to lend to even when credit to other sectors is shrinking. Going by your half-year financial statement, it is clear that interest expenses ballooned to 61%, peeling off a larger portion that could have gone to your bottom line. Should investors worry? Investors have no reasons to worry about the interest rate or the interest expenses in a half-year result. The higher interest expenses are consistent with the higher cost of fund in the market arising from effective return on government borrowing and treasury bills. What needs to happen is for us to focus on ensuring that we protect the margin, and that way the investor’s interest which is the profitability will continue to grow. As

Continues on page 16

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24 Broke at 58

t 58 today, Nigeria is standing on the edge of a financial crisis, and it may be too late for the country to pull back. The 2017 budget implementation report released by the budget office last week has figures that should keep all Nigerians awake and ask critical questions from those who manage the country’s treasury. The report shows federal government revenues of N2.7 trillion in 2017, which was about half its projected revenues for the year and 36 percent or one third of its projected expenditure of N7.44 trillion. Faced with the sharp fall in revenues, the government had to cut its expenditure to N6.5 trillion in 2017. The government spent almost a trillion naira less than it planned to spend in 2017 but the final N6.5 trillion spent was still N3.8 trillion more than

the federal government’s total revenues for the year. To fund the deficit, the government had to borrow a total of N2.5 trillion to help fund its financial obligations for the year. The government borrowed N1.2 trillion from the international capital markets and borrowed the balance of N1.3 trillion from the domestic capital markets, an amount that is more than the net increase in lending to the private sector in 2017 from financial institutions. The government got about three times more money from the banks than the private sector got from the banks. However, the N2.5 trillion that the government borrowed from the banks to fund its deficit was not enough to plug the N3.8 trillion it created spending more than it earned in revenues in the year. This has left the government with a N1.3 trillion hole that it could not close in 2017. This means that there are some contractors sitting out there that have done jobs for the federal government that have not been paid and do not know when they will be paid or if they will ever be paid. The government obviously could not raise the money to pay these contractors. It could have taken on more loans to

pay these contractors but apparently felt it was already too over burdened with debts to take on more loans. Contractor debts do not attract interest rates and the government can usually take its time repaying even though the businesses owed tend to suffer, with some collapsing while waiting to be paid for jobs duly executed. But the government has a reason to be concerned about its debts that keeps piling up. As at the end of December 2017, the country’s total debt stock stood at N22 trillion, which is the equivalent of US$71 billion, data from the Budget Office show. The debt stock went up by US$4.4 billion or N1.4 trillion in 2017. A breakdown of the debt shows that US$18.9 billion is owed to external lenders while the balance of N15.9 trillion is owed to domestic creditors. Already, the federal government has exceeded its own target of ensuring that the country’s total debts does not exceed 19.39 percent of economic output or GDP in any year. When the government closed its books in 2017, country’s total debt stood at 20.12 percent of GDP. However, what would have given the government more concern is the rising debt ser-

vice burden which is beginning to eat up two thirds of government revenues. Debt service consumed a total of N1.8 trillion in 2017. This represents 75 percent of the government actual revenues in 2017. The government is spending an average of eighty kobo of every one naira it earns servicing the debts it is accumulating. The amount spent on debt service is higher than the N1.6 trillion released for capital expenditure in 2017, of which N1.4 trillion was the amount actually utilized. The country is now spending more money servicing debts than putting in place the infrastructure that will help grow the economy to repay those debts. There is a further reason to be concerned about the country’s financial stability. The federal government’s total nondebt recurrent expenditure of N2.8 trillion in 2017 was more than its total revenues of N2.71 trillion. This implies that all the revenues that the government earned in 2017 was just enough to run its operations, that is pay staff and cover the cost of overheads. To cover the cost of capital expenditure, the government had to borrow. The government also had to borrow to repay the interest on borrowed funds. Effectively, the federal government has entered the debt trap zone

where revenues are no longer enough to cover the cost of its operations and repay its debts. Sadly, there is indication that the federal government is digging deeper into the debt trap zone that it has fallen into. The government’s N9.1 trillion expenditure plan for 2018 is the first indicator that the government is going to dig into the debt trap zone than find a way out of it. Even though oil prices have been higher in 2018, oil production struggled in the first half of 2018. There is no indication that there would be a significant jump in revenues in 2018 to justify the higher planned expenditure. What we are likely to see is a significant jump in the 2018 budget deficit if the federal government sticks to its 2018 expenditure plan. To fund the higher deficit in the 2018 budget, the government would have to borrow at a time of rising interest rates in the international capital markets, and very low economic growth back home. Raising money internationally will come at a higher cost, translating into an increase in debt service payments, and a deterioration in the debt service to revenue ratios while raising money domestically will crowd out an already squeezed private sector from the domestic capital markets. This is not ignoring the fact

that the government has been making significant efforts at boosting tax revenues. However, the challenge remains the fragile economic growth which limits the upside potential of any tax revenue drive. The government’s tax drive will therefore not yield the required revenue surge to reduce the debt surge and the plunge into a debt trap. To drive debt service to revenue ratio below a more accommodating 50 percent, based on 2017 debt levels, the government would have to almost double revenues. This means raising an additional N2.7 trillion in revenues into the federal government treasury while ensuring that debt levels do not spike further. Achieving this for now, looks like a steep call, unless the government moves to take some difficult economic decisions to cut down expenditure through ‘unpopular’ economic reforms that will include tax increases, labour cuts, privatisation of key assets and appropriate of petrol and power. The hard decisions will have to be made urgently for the country to pull back from what is definitely a potential financial crisis just when it is celebrating her 58year birthday as an independent country that has failed to become prosperous.

warmed and ready before you get home. Even farming may not be an alternative profession for the uneducated in future. We are already witnesses to the difference in yields between farms in Nigeria and farms in developed countries. There is a clear difference between the yield from an average herdsman in Nigeria and a Cowboy in the US. The rapid development in farming science and technology means that this yield gap will continue to widen in such a way that the average ‘illiterate’ farmer in the remote village naturally becomes uncompetitive. Sadly, the illiterate farmer’s lack of education will also mean that the ability to adopt modern farming techniques will be limited. Popular American author Yuval Noah Harari, notes in her book ’21 lessons for the 21 st century’ which inspired this article that ‘artificial intelligence and biotechnology are giving humanity the power to reshape and reengineer life.’ Those without the knowledge to partake in this process would be left out and bear the outcome of that process. Education is essential tool to survive the knowledge economy. Without education, a country is going nowhere. Ghana is already responding to the threat posed by the

knowledge economy to its citizens. At the FT Africa conference on October 8, Ghanaian President Nana Akufo-Ado promised that his government is determined to ensure that every Ghanaian gets a minimum of a basic education up to secondary level. When asked if Ghana can afford such an expense, he replied that the government has no option but to look for the money to fund such an ambitious programme ‘even if it means diverting all of Ghana’s oil earnings to fund it.’ He emphasized that education has become essential for the future so much that Ghana cannot afford to have anyone left behind educationally. In a knowledge economy, illiteracy becomes the biggest risk not only to economic development and but also a risk to national stability. If a country allows itself to have a mass of people that are basically irrelevant economically, that group of people will pose a huge risk to the existence of the few that are economically relevant as well as continuous stability of the country as a whole. Our mass of ‘out of school children’ will grow to become ‘economically irrelevant’ adults in a knowledge economy, and pose the biggest risk to our existence as a country unless we reverse this trend, starting today.

Our ‘irrelevant’ adults are coming

tanding on the edge of the knowledge intensive economy, Nigeria has 13.2 million children roaming the streets who have never tasted knowledge. The data, from a survey done in 2015, shows that these children who have never stepped into a classroom, are mainly between the ages of six to 14. At this age, it is expected that children should be in school acquiring the knowledge needed to survive in an adult world. Sadly, this is not the case for this children. Data from UNICEF says that about 69 percent of this out of school children are in the Northern part of the country. This means that an average of 7 of every 10 children that have never stepped into a school building to receive formal education lives in the Northern part of the country. Bauchi state is said to have the highest number of out of school children put at 1.1 million followed by Katsina state with about 781,000 children that are out of school. But the latest Human Development Index report published by the National Bureau of Statistics (NBS) paints a glimmer picture of the education situation in the country. The report shows that 39.6 percent of the country’s population have not completed

up to five years of schooling while child school attendance stands at just 23.8 percent of the population. To show how grim the situation the country is facing is, the NBS data shows that the country’s education index, which measures the average number of years of school of an average 25-year adult against the expected number of years of schooling declined in 34 states as well as the Federal Capital territory in the period between 2013 and 2016. This is an indication that the knowledge base of the country declined within the period in 34 states and the FCT. Interestingly, troubled Borno and Jigawa witnessed an increased in the educational index within the period. The only good news from the data is the fact that female education index actually outperformed the male education index within the period, a reflection of the increased focus being placed on female education in the country. However, there are still very grim statistics from the data. For every one male child that is out of school, there is at least two female children out of school. The NBS data shows that 34 million Nigerians have had zero schooling as at 2016. The number males who have had zero schooling stood at

11.9 million while the number of females with zero schooling stood at 22.34 million. The number of Nigerians that have had no schooling at all is more than the population of Ghana. So this is like having a whole country of people that cannot read and write. In an age of knowledge, it is highly dangerous for any country to have a good chunk of its population unable to read and write. The World Bank defines the knowledge economy as one that ‘creates, disseminates, and uses knowledge to enhance its growth and development.’ And as the World Bank rightly notes, even though the concept of knowledge is not new, ‘the increased speed in the creation and dissemination of knowledge is making it an even more important ingredient in rapid economic development’ in recent years. The world has entered into a phase where rapid technological development is fast changing the way we do almost everything. But the scary part of the way technology is developing is the fact that it is taking away jobs at a very past pace. Anything that can be automated is being automated. As a popular advert on radio says, 70 percent of the jobs that will exist in future have not been created.

Increasingly, it is being recognised that the capacity for lifelong learning has become an essential survival strategy for those that will live in the knowledge economy. The rapidity of the changes in the world around us means that if you cannot learn and relearn skills, then you rapidly become irrelevant. And that is the huge risk faced by Nigeria’s huge and growing population of people who have never stepped into a schooling environment. They face the risk of becoming irrelevant in the knowledge economy because of their lack of capacity to learn and relearn to live in the knowledge economy. A huge chunk of the country population now faces the risk of becoming irrelevant in the knowledge economy because of their lack of capacity to learn. The internet of things, artificial intelligence are all ways in which technology is advancing so fast that even ‘sophisticated’ jobs are now at risk of technology incursion. Menial jobs are even fading out faster. Who needs a gateman when from your phone, you can view almost everything that happens in your house, and around your house, open your gate, check the temperature of your fridge and even get your food

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24

A harvest of sunshine

Every year, Nigeria losses an estimated $9 billion worth of fresh produce largely because she has no energy plan in its agricultural policies. Large swathes of smallholder farmers depend on rain-fed agriculture and an inability to preserve their produce means that 40 percent of their harvest goes to waste. This situation is driving some smart businesses to look to the sun which seems to hold the promise of a harvest of sunshine, writes ISAAC ANYAOGU.

etween September and November last year, the air around Ba’awa and Kadabo farming communities in Makarfi Local government area of Kaduna State, was tear-inducing, heavy and pungent with the smell of dried pepper. This is due to farmers leaving their peppers to dry on roadsides and other open spaces. Forty-two year old Amina Bako has been drying pepper this way all her life. After the rainy season, she hires paid labour to pour out vast quantities of peppers harvested from her husband’s farm over a sack spread out on the ground under the glare of the fiery Kaduna sun. “We wait up to five days to dry and be strong, and then we store it,” she said in fluent Hausa, “but it has too much problem.” Not only is the process tedious, it is less rewarding. A valuable cash crop, an annual harvest of pepper represents about 40 percent of many families’ cash earnings for the year. By leaving them out to dry on open spaces, they are damaged by birds, rodents and rain, as well as contaminated by dust and debris. Some lose up to 30 percent of the harvest. “Now it is different,” Amina says with a grin on her face, and a gleam in her eyes, as would someone whose dreams have come true. For only N200, Amina dries a bag of pepper in half the time through an innovative solar-powered pepper dryer installed by Habiba Ali’s Sosai Renewable Energies Company, which is connecting rural women farmers with renewable energy powered agricultural processing technologies. For 12,000 euros, Ali acquired the Innotech 18 Meter Tunnel Solar Dryer with support from Power Africa partner, the U.S. African Development Foundation (USADF). Not only do the new solar dryers produce clean high

quality peppers, they are able to dry them in half the time, so farmers can dry twice as much of their produce and sell it at premium rates. “Baawa and Kadabo communities have over five hundred able bodied men involved in farming. Pepper is the key crop in this region and the people depend on it for cash, so over three quarters of these farmers grow peppers but about 40 percent is lost after harvest,” says Ali, MD/CEO of Sosai. Her solution now assists the farmers dry their pepper in about two days. In these communities, women undertake 70% of post-harvest activities, so Sosai Renewable Energies is working with women to serve as the custodians of the solar dryers. They rent out the use of the dryers, for between N200-N500 per bag, using the proceeds to pay back the cost of the dryer in instalments. This involvement in the management of the dryer has led to both women’s economic and social empowerment. “First and quite importantly is that these dryers save time, saving them 2.5 days of the 5days it would normally take to dry the peppers. This has ensured that they get their peppers on time to get to the market and they do a better bid because they now have cleaner peppers ensuring they sell at a 20% premium.” Besides just driving up profits, Amina like dozens of other women in the communities are now empowered enough to care for their families and keep their children in school. Sosai also provides clean cook stoves, water filters, solar refrigerators, solar lamps and solar dryers through a lease-to-own model. These products and services are distributed through community center solar kiosks that are run by women entrepreneurs. This structure allows Sosai to

increase the incomes of both their products’ consumers and women entrepreneurs. For farmers, Sosai offers solar dryers, refrigerators and other services that enable them to preserve and package their product. This allows farmers to sell at a premium by taking advantage of off-season sales of preserved fruit. According to the Food and Agriculture Organisation of the U.N. (FAO), nearly one-third of all food produced globally for human consumption goes to waste, much of this a function of poor post-harvest processing techniques. President Muhammadu Buhari speaking at the 20th anniversary of the Nigerian Agip Oil Company (NAOC) Joint Venture’s Farmers’ Day held in Yenagoa, last year, lamented post-harvest losses estimated to be about $9bn annually in the agricultural sector. This happens because Nigeria depends on rain-fed agriculture as its 264 dams with combined storage facility of 33 billion cubic meters (BCM) of water lie idle. Findings from a BusinessDay investigation last year, indicated that dams in Ogun, Oyo, Ekiti and Kwara states constructed to generate power and serve irrigation purposes have been abandoned. Many of the farming communities do not even have power supply because Africa’s most populous country has not harnessed hydropower potentials from 127 sites across 20 states capable of yielding about 500MW of power according to a 2013 United Nations Industrial Organisation Development Organisation (UNDIO). “Now is the time for the Ministries of Agriculture, Trade and Investment and Power to sit down and design a Powering Agriculture Programme for Nigeria. Solar drip Irrigation and renewable energy powered storage and transport systems should be designed

along major agricultural corridors like LA-KA-JI,” says Godwin Aigbokhan, Renewable Energy Market Adviser at National Competitiveness Council of Nigeria. The LAgos-KAno-JIbiya (LAKAJI) Corridor is a 1,225 km transport route that runs from the port of Lagos in the Southern part of Nigeria, through the commercial center of Kano, and ending in Jibiya at the border with Niger. Nigeria currently loses about 40 to 50 per cent of fresh fruits and vegetables produced as a result of poor packaging, handling and preservation. “This loss happens when food rots in markets, when it is poorly stored and can no longer be consumed, and when there is insufficient uptake from buyers,” explains Mamadou Biteye, the managing director for the Rockefeller Foundation Africa Regional Office. In the absence of quick, official action, private organisations are rising to the challenge. Like Femi Oye’s GoSolar Africa which has recently introduced a solar powered refrigerator, capable of extending the shelf life of foods and vegetables from 2 to 21 days in markets around the country. Solar kiosk “The Solar Refrigeration kiosk operates with pure sine wave MPPT intelligent equipment that can transform the direct current to stable alternating current. It has decent appearance easy operation and visual indication of LCD with the project protection function, high charging efficiency and low-no load loss. Its capacity ranges from 21.2 Cubic meter, 33.2 cubic meters and 63.1 CM sizes,” said Oye in an interview with BusinessDay. The company is re-purposing discarded fridges and converting them to solar fridges. It is also setting up cold rooms for storage of vegeta-

bles. Oye said farmers and market women are targeted in developing the product because they face a lot of challenges preserving their farm produce and leftover goods which reduces their profit. “Customers pay from 50 naira / kwh ( $0.14/Kwh) of storage capacity. Go Solar operates an entrepreneurship business model that engages association of women, farmers and youths across the country. Customers and Farmers takes their farm produce to a nearby Cold Kiosk and deposit with our Operator for storage. Users don’t have to purchase a Kiosk, simply pay per use (PAYGo Model),” Oye. So far the company has deplored its solar Cold Kiosk and Solar Freezers are installed all over the country, you can find our recent deployment in Sokoto state, Lagos, Ogun and Oyo State. “The next five years will experience huge deployment of Solar Freezers, Cold kiosk supporting about 1million small holder farmers across Nigeria. We are already deploying consumer units of GoFreezers for SMEs and Market Women,” Oye said. The project is also creating an ecosystem of sorts. “We are working primarily with local Smart entrepreneurs, Technicians and Secondary School Students. Our business is supported by the Power Africa USADF, GIZ and WinRock international,” said Oye. Better quality of life A visit to farming communities in Abuja and Kaduna indicate that for many of these farmers in rural areas, quality of life is just as important as keeping their farm produce fresh. The Babban Gona (“Great Farm” in Hausa) an agricultural franchise, developed by Doreo Partners an impact investing firm with a proven track record of exclusively investing in profitable, high growth, early stage businesses is improving the livelihoods of Nigerian smallholder farmers. Babban Gona assists hardworking smallholder farmers reach their full potential by providing a private sector channel for cost effective delivery of enhanced agricultural technologies and end-to-end services that optimize yields and labor productivity, while simultaneously improving market access. The group aims to transform subsistence farmers into intensive successful commercial farmers. But closely following on the heels of the company is Anergy Solar Limited offering the farmers an opportunity to power their homes at night, charge their mobile phones and catch up with the latest happenings in the country. Kunle Odebunmi, a Co-founder of Arnergy and a professional accountant, says, “The Babban Gona corporate has over 20,000 farmers and many of them live very far from the nearest electricity grid. So we decided to work with their corporative to provide them power, to enable them charge their phones, give them access to information with the objective of improving the quality of their lives,” said Odebunmi. In Charwa/Chakun, in Markarfi Local government area of Kaduna state, each of the homes have sufficient solar electricity to power three LED light bulbs, an electric fan, a radio set and mobile phone charging system.

Monday 22 October 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24

Population growing higher than food production raises red flag ODINAKA ANUDU & JOSEPHINE OKOJIE

i g e r i a’s p o p u lation is rising rapidly but food production is not moving in the same trajectory, sparking fears of food insecurity in Africa’s most populous country. “ We a r e n o t p r o d u c i n g e n o u g h c u r re n t l y b e c a u s e farmers are still farming using old farming techniques and our yield per hectare is still very low when compared with other nations of the world,” said Abiodun Olorundenro, chief executive officer, Green Vine Farms. “Our population is growing very fast and we are yet to increase our productivity. This is even making the few available more expensive for consumers and that is the recent rise in food prices across the country,” Olorundenro said. Nigeria is populated by almost 200 million people who must feed from staple foods, ranging from yams, rice, cassava to beans, bananas and tomatoes. However, there is still much

demand-supply gap in most of the staple foods, even as the population growth rate stands at 2.6 percent per annum. The country’s population is projected to surpass the 300 million people mark by 2050, according to The World Population Prospects 2017. Latest data from Agriculture Ministry show that Nigeria is the largest producer of yam with 40 million metric tons (MT) per annum but yam demand in the country is 60 million MT per annum, leaving a gap of 20 million MT. Nigeria produces 42 million MT of cassava but has a demand of 53.8 million MT of the crop, leaving a gap of 11.8 million MT yearly. National supply for Irish potato is put at 900,000 MT per annum but with a demand of 8million MT and a gap of 7.1 million MT. Similarly, local production of sweet potato is estimated at 1.2 million MT, while demand is 6million MT, leaving a gap of 4.8 million MT. More so, Nigeria produces 400,000 MT of wheat annu-

ally but has a demand of 4 million MT, which leaves a gap of 3.6million MT. Nigeria’s ginger production is 310,000 MT but demand is 650,000 MT, leaving a gap of 340,000 MT.Nigeria’s rice production has risen to over 5.3 million MT but demand is still 7.2 million MT, leaving a gap of 1.9 million MT. Maize production in the country is put at 10.5 million MT but demand is 15 million MT, leaving a gap of 4.5 million MT. Local Soybean production is 750,000 MT but domestic demand is 2 million MT, meaning there is a gap of 1.3 million MT. Acha production is 78,000 MT but with local demand reaching 187,000 MT, there is a gap of 109,000 MT. Sesame production is 200,000 MT but demand is 600,000, leaving a gap of 400,000 MT. Local shea nut production is 200,000 MT but demand is 1.4 million MT, implying there is a gap of 1.2 million MT. Castor production is 014,000 MT. However, demand is 510,000, leaving a gap of 496,000 MT.

Nigeria produces 2.5 million metric tonnes of tomato but the country needs 6 million MT of it to survive, leaving a gap of 3.5 million MT. Sorghum production in the country is 11 million MT while demand is 12.5 million MT, showing a gap of 1.5 million MT. “What explains high prices of food in Nigeria?” Bismarck Jewane, CEO of Lagos-based Financial Derivatives Company Limited asked while analysing the 8-year-high food inflation in Nigeria at Channels TV recently. “It is either there is high demand for foods or that we are not producing enough. But the answer is that we are not producing enough,” Rewane said. Ibrahim Kabiru, national president, All Farmers Association of Nigeria, said Nigeria must now increase its mechanisation to meet the ever-increasing mouths needed to be fed. “We must start farming all year round and provide farmers with improved seeds varieties to increase our yield per hectare to produce enough for our population,” Kabiru told

BusinessDay. According to Ifeanyi Okeleke, executive director of Kenfrancis Farms, Nigeria can only feed itself and depend less on other countries if there is more private sector investment. Nigeria is in a bit of quagmire as Fulani herdsmen attacks and recent floods further compound woes of several farmers. Insurgency in the northeast has done a greater damage with thousands of farmers abandoning their farms and homes to seek refuge at state capitals. Moreover, analysts say that government is not attracting enough investors, putting the country’s food position in jeopardy. A typical example is cocoa, whose trees and farmers have become old with little investments. “Government needs to attract more private capital to agriculture. Some of our trees are aging and need to be replenished. Secondly, inputs are expensive and high quality seeds are lacking. We need investments and government intervention in these areas,” he said.

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24

Private sector resource allocation should... Continued from page 6 you can see from the half-year result, that has not affected our profitability and that is what you should expect by the end of the year. In May this year, Mr. Asue Ighodalo, chairman of Sterling Bank Plc, announced that the bank is considering changing its operational structure from that of a bank to a holding company. How far has the bank gone ahead towards achieving this? We continue to evaluate the optimal structure for the businesses that we do and at this point, we feel that we may have to change the structure to optimize return to investors. We are currently in discussion with all the stakeholders and we will inform the market if a decision is reached to proceed with the proposed structure. Also, Mr. Ighodalo was recently appointed as chairman, the board of directors of the Nigerian Economic Summit Group (NESG). How does this appointment reflect on the performance of the firm? The appointment of our chairman as the chair of the NESG is a testament to the quality of our governance. Mr. Ighodalo is one of the most informed people in this country and his accomplishments speak for itself. His engagement in nation building spans decades. We feel that this is also fully aligned with our commitment as an institution to balance profitability with impact by actively contributing to the society in which we operate. When should we expect the next phase of the N100 billion Commercial Paper issuance that the bank started in 2016? And do you still have plans for raising additional capital? Our participation in the commercial paper market is part of our effort to diversify our funding base and it is something that is ongoing. So, it is not a one-off transaction. As long as the pricing or the cost of issuing commercial papers is competitive, we will continue to issue on an ongoing basis. On raising capital, we just concluded a Tier 2 Capital Round that is quite significant and we believe that that is sufficient for the plans that we have for the rest of the year. At the end of the year, we will review our business plan and if there is a need for any incremental capital, we will then proceed with it. The Monetary Policy Committee (MPC) raised some concerns about the economy at its last meeting. What is your take on that and what do you think the government should be doing to avert another slide into recession? The MPC has taken the decision that is required to ensure the economy survives any headwind that may arise

from the potential trade war between America and China as well as the rising interest rate in the US. The government has also taken this risk into consideration in their effort to continue to revitalize the economy with capital projects in key sectors. What will be key drivers of profit for Nigerian banks going forward? We are likely see more profit from effective intermediation as well as providing valuable financial advisory rather than fees from payments services. When the fees from payments start to decline, it will propel banks to focus on lending to key sectors to offset any reduction or decline in payment fees. How is the bank designing its digital technology platform to attract and retain millennial customers? As an institution, we believe in the concept of co-creating. Therefore, when it comes to attracting millennials, our strategy is to actually work with the target customers in designing the platforms that they will use. So, part of our strategic process is working directly with millennials in building their own banking solution. We believe that the idea of visiting the banking hall to carry out transactions is one that is fairly strange to them. They cannot see why all of the transactions that they need to carry out with their bank cannot be done on their mobile. So, we are building digital platforms to ensure that all their transactions can be effectively carried out on mobile devices. We are also engaging them on social media, not just to continue to inform them and sell products to them but to better understand and take feedbacks from them in building our products. What measures are in place to combat cyber attacks? Are you utilizing innovative technology to effectively deal with regulatory challenges? We have made a significant f investment in ensuring that we have up-to-date solutions to counter cyber attacks. We have also partnered with the best providers across all the sectors where we see the potential exposure. So, rather than relying on our in-house effort, we now work with professionals across the world to provide the safest possible platform for our banking. Regarding the regulator, we have observed that the effort towards countering cyberattacks have become more collaborative and we are effectively working together to implement the changes that will protect the entire industry because when it comes to cyber-attacks it is impossible to protect just one institution. To be safe, you must protect the e ecosystem and that is what is

Predicting stock market performance in October, November IHEANYI NWACHUKWU & BALA AUGIE

f pasts trends are anything to go by, October and November may be unfavourable for stock investors who should brace up for negative returns. BusinessDay checks on the stock market performance in the month of October in past five years shows the Nigerian Stock Exchange (NSE) All Share Index (ASI) yielded negative returns in three out of the five years. Amidst scarcity of positive macro stories, the aforementioned trend has reawakened many analysts to reiterate their cautious outlook for domestic equities, with selloffs likely to persist ahead of the 2019 elections. In October 2013, the NSE ASI at 37,622.74 points represented positive return of 2.84percent; October 2014 it was 37,550.24 points (-8.88percent); while in October 2015 it stood at 29,177.72 points and represented negative return of 6.53percent. In October 2016, the NSEASI was 27,220.09 points (-3.94percent), while in same month of 2017 it was 36,680.29 points, which implies positive return of 3.50percent. Christian Orajekwe’s team of analysts at Cordros Capital confirmed that historical data on monthly equities market performance show that October and November are sell-off months, “while December typically delivers positive return”. Amid dearth of positive triggers, they noted that month of October is showing its true colour for a negative return following an all-red session in first trading week. FSDH research analysts in their recent outlook said the performance of the equity market in the last five years “shows that the market recorded negative performances in three of the five years between September and October.” “Given, the current bearish trend in the market, the equity market may follow the downward trend recorded in 2014, 2015 and 2016”, FSDH research added. The value of listed equities on the Nigerian bourse declined by 5.97percent in September; down by N760billion to N11.96trillion while the NSE ASI decreased to 32,766.37points. The NSE ASI shows negative return in

Oscar Onyema, CEO, Nigerian Stock Exchange

excess of 15.16percent as at Tuesday October 9. Analysts say portfolio inflow into the Nigerian equity market will remain subdued over the rest of the year, and they angled their expectations on political uncertainties, the trade spate between the United States and China. “Higher yield in developed economy and tensed political climate in the country was the major reason for investors pulling out despite the relative stability in exchange rate”, Damilare Asimiyu, economist and research analyst at GTI Group said in recent note. Foreign portfolio investors who brought in N437.14billion into the stock market as at August took N469.71billion out of the same market, according to the trading figures from major custodians and market operators on their Foreign Portfolio Investment (FPI) flows. Total transactions on the Nigerian Bourse declined from January high of N394.44billion to N133.84billion in August.

Lagos-based Financial Derivatives Company analysts said, “The stock market will remain deeply in negative territory in October.” “Technical analysis will determine most investment decisions. Third-quarter (Q3) 2018 financial performance will be largely positive. Impressive performance will not overturn market’s negative sentiment,” Financial Derivatives Company noted. Many companies have started releasing their ninemonth 2018 scorecards. On the back of sluggish economy expansion some analysts expect Custom Street traders to prepare for another round of slow growth in profit for Nigerian companies in the third quarter of this year. There is the possibility of seeing pockets of gains, though may not be sustained, as most share prices which are in the oversold positions are attractive to domestic bargain-hunting investors. Also, some analysts do not expect investors to sell-

off on stocks that are known for delivering good numbers in the third quarter. Nigeria’s economy remains fragile as Gross Domestic Product (GDP) grew by 1.50 percent in the second quarter of 2018, a downturn from 1.95 percent in the first quarter. Consumer goods firms are grappling with unsold goods caused by low consumer spend and the receding revenue will deal a great blow on their margins. “As we head for fourthquarter (Q4) of 2018, will the trend continue, and even when it does, is it likely that monthly sell-offs would be as heavy as in the recent past quarters? Nigerian macros have not been impressive this year, and likewise earnings. Macro outlook is positive, but not bullish. And the political space is predictably charged, with recent events, in our view, raising concerns importantly around how easy it will be to accept defeat at the polls, ” the FSDH analysts said in their October 9 note to investors.

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24

Nigeria footdrags as Angola kicks off oil reforms DIPO OLADEHINDE

ngola’s President João Lourenço has commenced oil reforms in its state owned Sonangol with the aim of boosting production in Africa’s second biggest oil producing country. Since João Lourenço became president of Africa second largest producing oil country Angola in September last year, he has moved to overhaul state-owned oil company Sonangol which has been criticised in time past by transparency and rights groups for lack of transparency as both producer and regulator. In place of Sonangol, the Angolan government will create a National Oil and Gas Agency which will take on the role of the national concessionaire that will allow the agency to manage oil blocks, sell oil blocks and reduce the near total grip state energy firm Sonangol has over the sector. “A government that is new in Angola is already championing reforms in its oil sector while we have a government in Nigeria who has a Petroleum Industry Governance Bill (PIGB) right in his front but can’t sign it into law,” Ademola Henry, Team Leader at

Facility for Oil Sector Transformation (FOSTER) said. On what it will mean for investment, “certainly investors will want to move more to Angola’s oil and gas industry where there are more regulatory efficiency than a place like Nigeria were there are still corruption lapses,” Henry told BusinessDay by Phone. Diamantino Azevedo Angola’s oil minister said Sonangol’s role as national concessionaire would be transferred to the National Agency of Petroleum and Gas in the first half of next year in a reorganisation scheduled for completion in 2020.

“The agency will be tasked with conducting bids for new oil concessions, managing production-sharing agreements as well as representing the state in the sharing of profits from oil concessions,” Azevedo said yesterday in. Sonangol, which partners with companies including Total and BP, to pump oil in the southwest African nation, will focus on the exploration, production as well as refining and distribution of oil and gas. The oil minister cited irregularities and excessive bureaucracy at oil-bloc tenders as some of the reasons for the

decline. Sonangol will focus on its core business, making it more efficient and agile. According to the statement from the ministry, the restructuring of Sonangol will also involve the shedding of under-performing assets outside the oil sector in which the company invested during the oil boom as the new model is part of series of measures taken by Lourenço aimed at revamping the sector, including tax breaks for the development of marginal fields and new legislation for gas rights. Based on the new model, Sonangol’s will focus on the

exploration and production of crude oil and natural gas, refining and liquefaction of gas, export and logistics and distribution of refined products and petrochemicals. “Angola and other African countries such as Ghana, Uganda, Tanzania and Mozambiq are borrowing from Nigeria’s PIB. So they are learning from us and putting it into actions while Nigeria continues to allow sentiment and patronage obstruct its own development,” Wumi Iledare, professor of Petroleum Economics and oil and gas expert, said. The implementation of the new model was split into three stages, the first one, (until December 2018) involves preparation for the transition, the second (January-June 2019) the transition itself and the third (July 2019 to December 2020) focusing on optimisation and completion of the new model. “If these small African countries are efficiently utilising what we rejected, then it’s very sad, which is why our NNPC is struggling and can’t compete with its peer that started at the same time,” Iledare said. Angola hopes the shift will help reverse a decline in oil output in the OPEC member by reducing bureaucracy and speeding up the pace at

which company investments can be approved. “By this act alone, Angola will soon start attracting investment to its deep water assets which are not as prolific as that of Nigeria,” Iledare told BusinessDay. Stakeholders in Nigeria oil and gas sector have expressed fear that the fate that befell the PIB that was sent to ex-President Jonathan could befall the PIGB awaiting president Buhari’s assent as the two were sent for assent on the year that precedes general elections. “We had a PIGB that was thoroughly debated, thoroughly analysed, and thoroughly scrutinised. Right now, nobody knows the fate of the bill,” Iledare lamented. In 2014, a harmonised Petroleum Industry Bill (PIB) consisting of all the four areas of governance, administration, fiscals and host community was passed and sent to former President Goodluck Jonathan for assent a few months before the general elections. The bill went with the election while the country keeps licking the wounds that its non-approval inflicted on the entire economy of the Africa’s biggest crude exporter. “If we don’t reform our oil and gas sector quickly, we would end up like Venezuela,” Iledare warned.

Governance goes on holiday in Nigeria as politics takes centre stage CHUKA UROKO

overnance at all levels – local, state and federal – in Nigeria has gone on holiday as political activities pursuant to the February 2019 general elections take centre stage. Economy is a major victim of the inertia in government. All government business seems to have been kept on hold as ministers, commissioners and other heads of government agencies have returned to base to canvass for votes, either for themselves or for their principal seeking a second term in office or fighting to install his surrogate. “Nothing is happening now because government functionaries are politicking. This shows that our democracy is still immature; we should be able to separate politics from governance. In developed societies like the US and UK, politics and governance run almost on parallel lines,” noted Femi Akintunde, GMD, Alpha Mead Group in an interview.

Akintunde pointed out that government business in those societies runs seamlessly even as politics is heating up because there are policies and programmes that must be followed through, irrespective of who was in government when such policies were made. The implication of the situation we have on hands is that apart from the economy, the citizens are being subjected to undue hardship. In Lagos, for instance, Apapa, the country’s premier port city, has become a metaphor for stress and suffocation as a result of port congestion and gridlock. The Federal Government, about three months ago, commenced rehabilitation work on the dilapidated Ijora Bridge. For so long, the bridge, which is the only major outbound route from Apapa ports, has been closed, forcing all motorists to take a narrow alternative route out of the port city. The rehabilitation work, which is taking place at two separate spots on the bridge, is being delayed because

Femi Akintunde the materials needed for the work have to be imported. “The materials needed for the rehabilitation are to be imported and work will resume at the site as soon as the materials are available,” assured Adedamola Kuti, Federal Controller of Works in Lagos. Kuti explained that the de-

lay in rehabilitating the part of the bridge that was burnt by fire being handled by Julius Berger was because approval for the rehabilitation has not been given. Apparently, the delay in approving the job proposal is because politicians in government who have the final say are too busy for government busi-

ness at the moment. Lagos as a city seems to be gradually shutting down as the battle for the soul of the state increases with ferocity. Lagos economy is adjudged the most buoyant in the country. The city is touted to become the second largest in Africa by Gross Domestic Product (GDP) and this is predicated on the expected gains from policy reforms by the current administration which is encouraging private investments. A study by an Associate Director at Oxford Economics, Mark Britton, says Lagos is set to overtake Johannesburg as Africa’s second largest city by GDP by 2035. The state governor, Akinwunmi Ambode, said early this year that the state’s GDP was set to hit $136 billion. The city is also forecast to become the most populous African city. Its population is expected to be 28.5 million by 2035, more than double its current size. Today, consideration for all these potential and how to sustain their growth, have been set aside by the government and its managers.

“Governance is on holiday in this state and, indeed, in all other states of the federation,” said Madumere Ibezimako, a public affairs analyst, in a telephone interview, noting that the directive by the governor for potholes on Lagos roads to be filled are not being carried out because the governor is politicking. “ Wo r k h a s l i t e r a l l y stopped on the many projects which this government initiated because the governor is fighting his battle for survival. The entire state is almost at standstill with congestion, gridlock and waste scattered on all streets and roads,” Ibezimako noted. Because of this, “some Lagos residents, especially those who live on the outskirts of the city, do not see any cause for Ambode’s return to power. It takes me over four hours commuting to work on the Island from where I leave in the Alimosho area of the state. Coming back takes between three and four hours and that is happens every day”, lamented Emmanuel Idowu who spoke to BusinessDay.

Monday 22 October 2018

BUSINESS DAY

C002D5556

Monday 22 October 2018

NES #24

Ten things Nigerians and the government should know about competitiveness in the fourth industrial revolution

s globalization has led to unprecedented gains for many from the movement of goods, services, people and ideas, there are also those who are losing out – economically, politically or culturally. This has in part contributed to the rise of polarized political debate and populist, nationalist and, at times, extremist agendas, both in the West and in emerging markets. Against this context of citizens’ concerns about jobs, inequality and globalization, policymakers are looking for new pathways to prosperity. A wide range of new technologyintensive, high-skilled occupations are expected to be in demand in the future, along with new growth broadly across sectors such as education, health, care, green energy and more, calling for a new approach to “industrial policy” in the digital age. It is against this background that the World Economic Forum introduced the new Global Competitiveness Index 4.0, a much-needed economic compass, building on forty years of experience of benchmarking the drivers of long-term competitiveness and integrating the latest learnings about the factors of future productivity. This 2018 global competitiveness ranking saw Nigeria falling from 112 to 115, well behind African peers Kenya, Ghana and Mauritius. The GCI 4.0 is organized into 12 pillars: institutions; infrastructure; ICT adoption; macroeconomic stability; health; skills; product market; labour market; financial system; market size; business dynamism; and innovation capability. The Index also introduces a new progress score ranging from 0 to 100, with the frontier (100) corresponding to the goal post for each indicator and typically representing a policy target. This approach emphasizes that competitiveness is not a not a zero-sum game between countries—it is achievable for all countries. As countries reset their path to competitiveness, there are ten key take-aways for Nigerians and the government: 1. Competitiveness is not a luxury good. In fact, all economies must pursue the drivers of productivity, regardless of their current level of income or current areas of strength, if they want to grow faster in the future and build resilience against shocks. While there is a strong correlation between competitiveness and income level, some economies are over-performers and others under-performers when it comes to putting in place the building blocks of competitiveness at their current level of income. Economies that under-perform relative to their current income level may have difficulty sustaining that level without improving their competitiveness. There is no compensability between the twelve levers of competitiveness– a sound financial system cannot compensate for poor physical infrastructure, just as ICT adoption cannot compensate for the lack of an entrepreneurial and innovation ecosystem. Countries

must pursue all twelve avenues but create their own sequencing strategy to balance and focus efforts, taking advantage of cheaper capital and technology. 2. Investing in people is good for social and economic outcomes. There is no trade-off between social inclusion and a country’s level of competitiveness. In fact, the health, education and skills of a population are among the key drivers of productivity, particularly in the context of economic and technological transformations. With the right skills, workers can become the agents driving and managing such changes, rather than being displaced by them. Investing in people can no longer be an afterthought – it is a fundamental building block of growth and resilience in the Fourth Industrial Revolution. 3. Embracing globalization in

the 4IR goes beyond free trade. Openness remains a fundamental driver for competitiveness: more open economies are more innovative and their markets more competitive. However, the definition of openness must look to concepts beyond trade and include the freedom of people’s movement and ideas exchange. Collaboration across borders is particularly critical for a dynamic innovation ecosystem. Using such a definition, we find that Singapore, Germany, Netherlands, Sweden, Finland and the United States are some of the most open countries in the world, while Brazil and India emerge as relatively “closed”. 4. But open economies must also embrace social protection. While openness is a ‘win-win’ between countries it is at times a ‘winlose’ within countries. This means that even as governments must pur-

sue openness for greater long-term prosperity, they must also support those who lose out to globalization. Attempting to address inequality by reversing globalization is counterproductive. Instead of protecting specific jobs or the products resulting from those jobs, policies should focus on improving the conditions of those specifically impacted by globalization through redistributive policies, safety nets, investments in human capital, more progressive taxation, and opportunities to transition to new economic opportunities. 5. Creating an innovation ecosystem goes well beyond research and development. Innovation has become an imperative for all advanced economies and a priority for a growing number of emerging countries. And yet for 77 of the 140 economies studied, innovation capability is the weakest pillar, with innovation powerhouses, such as Germany, the United States and Switzerland, still outliers. While scientific publications, patent applications, R&D expenditure and research institutions are all well-established aspects of developing innovation capability, they are not enough. For good ideas to move through to commercialization, a number of “softer” factors are equally important. This includes the ability of companies to embrace disruptive ideas (where the US leads), the attitude toward entrepreneurial risk (where Israel leads), diversity of the workforce (where Canada leads), and flat hierarchical structures in companies (where Denmark, Sweden and other Nordic countries lead). 6. Technology offers a path to economic leapfrogging but only in combination with other factors. While technology is not a silver bullet, it is a vital tool for growth and prosperity so its allocation and governance is critical. The promise of leveraging technology for economic leapfrogging remains largely unfulfilled. There are, at most, 4.5 billion smartphones in use in the world and more than half of humanity has never gone online. It is vital that economies provide greater access to ICTs to the majority of their populations. At the same time, it would be misguided to rely on technology alone to solve all problems. For many of the least competitive economies, the root causes of slow growth continue to be the ‘old’ developmental issues such as institutions, infrastructure and skills. For technology-based leapfrogging to offer a new path to development for low-income economies, these issues cannot be ignored. 7. Institutions still matter. Weak institutions—defined as including security, property rights, social capital, checks and balances, transparency and ethics, public-sector performance and corporate governance—continue to be the Achilles heel hindering competitiveness, development and well-being in many countries. For 117 of the 140 economies studied, their institutions pillar performance is a drag on their overall competitiveness score. Governments must pay attention

to both traditional and emerging aspects of the institutional environment as a factor of productivity. For example social capital—a broad concept that captures the quality of personal and social relationships, the strength of social norms and the level of civic participation in society—is highest rated in Australia and New Zealand, while freedom of the press is best rated in Norway and intellectual property protection most advanced in Finland. 8. As do infrastructure and the financial system. The quality and breadth of transport infrastructure (road, rail, water and air) and utility infrastructure lower transportation and transaction costs and facilitate the movement of goods and people. Basic elements of such infrastructure are still missing in many economies, encumbering their competitiveness. The financial system is also still an area of relative weakness for several economies. Finland, Hong Kong SAR, Switzerland, Luxembourg and Norway have the most stable financial markets (all scoring above 95), while India, China, Russia and Italy—all with a score of 84 or less— are among the G20 economies that have specific vulnerabilities in their financial systems. 9. In a time of constant change, there is a need for constant agility. Amidst the transformations and disruptions brought about by the 4IR, the adaptability and agility of all stakeholders—individuals, governments, and businesses—will be key features in successful economies. For governments in particular, “future orientation” entails aspects such as adapting legal frameworks to digital business models, providing a stable environment for doing business, responding effectively to change and having a long-term vision. Singapore’s government is the most ‘future-ready’, followed by Luxembourg’s and the United States’. The United Arab Emirates and four other Gulf countries appear in the top 10, which also features Malaysia. On the other hand, the governments of Brazil, Greece and Venezuela are perceived as among the least ‘future-ready’. 10. Achieving equality, sustainability and growth together is possible – but needs proactive, far-sighted leadership. There is a worldwide consensus on the need for a more holistic model of economic progress that promotes higher living standards for all, respects planetary boundaries, and does not disadvantage future generations. While, there is no inherent trade-off between equality and growth, the relationship between performance on the GCI 4.0 and on environmental measures is less conclusive. The most competitive economies have the largest ecological footprints, but they are the most efficient (their footprint per unit of GDP is the lowest). It is therefore incumbent upon leaders to set longer-term priorities and put in place proactive efforts to create virtuous cycles between equality, sustainability and growth.

Monday 22 October 2018

BUSINESS DAY

Monday 22 October 2018