BusinessDay 24 Jun 2019 by BusinessDay

Can Buhari walk the talk on poverty reduction?

Julia Bello-Schünemann

re s i d e nt Mu ha m ma d u Buhari’s much anticipated inaugural speech finally came during the June 12 Democracy Day celebration in Abuja. It left in its wake serious debates, particularly regarding

insight

Julia Bello-Schünemann his promise to lift 100 million Nigerians out of poverty in the next ten years. Reducing poverty

news you can trust I **monDAY 24 june 2019 I vol. 15, no 3378 I N300

is easier said than done. On current evidence, Buhari and his top aides require sound planning on a scale and speed never before seen in Nigeria if they are to reContinues on page 50

Why faster growth rates matter

i g e r i a’s e c o n o my would probably expand 2.5 percent in 2019, according to consensus estimates. The Federal Government expects growth will be even stronger going by its 2.7 percent target. However, both estimates are hardly enough to cheer because it means the economy will grow at a rate too little to absorb a rapidly growing population this year, for the fifth year in a row. Nigeria’s average annual population growth rate of 2.6 percent means on average some 5.2 million Nigerians are born every year or 14,246 daily, each one needing hard and soft infrastructure from power to education and healthcare. Economic growth in the region of 2 percent is hardly enough to cater to those needs, paving the way for more Nigerians to slip below the poverty line. Nigerians are already grow-

ing poor at an alarming rate as the steady decline in average incomes or GDP per capita (calculated by dividing total economic output by population) since 2015 shows.

Shrinking GDP per capita means the economy is not growing fast enough to create economic opportunities like jobs for its people and that is a recipe for poverty.

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Moving Nigeria from poverty to wealth: LOLADE AKINMURELE

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The decline in GDP per capita was sparked by the lengthy collapse in oil prices which curbed economic growth in Africa’s Continues on page 50

NNPC’s oil explorations: A wild goose chase? … Conceals outcome of oil search in Gongola 140 days after DIPO OLADEHINDE

t a time when major oil producing countries are preparing for life beyond oil, Nigeria’s optimism in oil exploration at the Chad basin or Gongola basin has been seen as a poor investment decision and lack of understanding of the future of oil. After about 40 years, the Nigerian National Petroleum Corporation (NNPC) returned to the search for oil in the North in February 2019, a decision which has generated debate concerning viability of the search, primarily Continues on page 50

Inside Analysts say only sound economic reforms can accelerate bank lending P. 2 L-R: Ejiro Foyibo, deputy president (South), Pharmaceutical Society of Nigeria (PSN); Mazi Sam Ohuabunwa, PSN president; Bukky George, founder/CEO, HealthPlus Limited; Emeka Duru, national secretary, PSN, and Foluke Akiniranye, chief retail operations officer, HealthPlus Limited, at the courtesy visit by the PSN President and his EXCO to HealthPlus headquarters, recently.

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news Ignite Investments and Commodities becomes majority shareholder in Forte Oil …acquires 74.02% equity stake

Iheanyi Nwachukwu

gnite Investments and Commodities Limited, led by Prudent Energy Services Limited, has completed the acquisition of Femi Otedola’s 74.02 percent shareholding in Forte Oil plc. Already, Forte Oil plc has appointed new Chief Executive Officer and Chief Financial Officer following the completion of the sale of the billionaire’s shares in the firm’s downstream operations. Olumide Adeosun and Moshood Olajide were on Thursday appointed as CEO and CFO of Forte Oil plc, respectively, after the resignation of Akin Akinfemiwa and Julius Omodayo-Owotuga, the company said in a statement to the Nigerian Stock Exchange. According to the statement, parties to the sale indicated that the Forte brand would remain in place and that the transition of the board of directors had begun and new directors appointed subject to ratification by the shareholders at the next general meeting of the company.

It said Standard Chartered Bank, Corporate Finance & Advisory and Olaniwun Ajayi LP served as financial and legal advisors, respectively, to Otedola, PricewaterhouseCoopers and Stanbic IBTC Capital Limited served as joint financial advisors, while Sefton Fross served as legal advisor to Ignite. Forte Oil, in a notice filed with the NSE, said Ignite Investments and Commodities Limited, led by Prudent Energy Services Limited, had completed the acquisition of Otedola’s 74.02 percent shareholding. According to the firm, the completion is consequent upon Ignite receiving all the necessary approvals from the Securities and Exchange Commission (SEC) and the NSE and fulfilling all relevant terms and conditions attached to the Share Purchase Agreement. “As a result of this and further to the announcement on December 28, 2018, Ignite will take over controlling stake in Forte Oil plc, the downstream company,” it said.

Sugar consumption falls for second straight year

. .analysts point to increasing health awareness, others BUNMI BAILEY

igerians are becoming more healthconscious and are opting for natural sweeteners, which have seen the nation’s sugar consumption decline steadily in the last two years, experts say. According to BusinessDay analysis of the sugar data from the National Sugar Development Council (NSDC), a parastatal of the Federal Ministry of Industry, Trade and Investment responsible for the regulation of all activities in the sugar subsector, sugar consumption declined by 3.8 percent to 1.25 million tonnes in 2018, from 1.3 million tonnes in 2017, after it had dropped by 16.6 percent from1.56milliontonnesin2016. “The increasing health awareness has made people opt for more organic or natural products. People are now going for healthier sugar sub-

stitutes like honey,” Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers, said. “And also corporate organisations are cutting back on their sugar cost,” Mogaji added. Earlier this year, a report by Euromonitor International, the world’s leading independent provider of global strategic intelligence on industries, countries and consumers, said producers of carbonated drinks may be challenged by the emerging health and wellness trend of consumers as they may shift to low sugar juice as an apparent healthier alternative. “The juice manufacturers are set to derive further benefit from this trend over the forecast period and this development is supported by growing concerns over the health risks associated with high sugar consumption,” the report said.

•Continues online at www.businessday.ng

L-R: Ijeoma Nwagwu, faculty, strategy and sustainability, Lagos Business School; Mauricio Alarcon, MD, Nestlé Nigeria; Victoria Uwadoka, corporate communications and public affairs manager, Nestlé Nigeria, and Oreva Atanya, sustainability associate, Lagos Business School, at a workshop on sustainable development organised by LBS and Nestlé.

Analysts say only sound economic reforms can accelerate bank lending BALA AUGIE

ankscouldaccelerate credit extended to the private sector if policymakers implement reforms that would drive economic growth. Analysts say it is practically difficult to dissuade lenders away from parking their money in high-yielding government securities. They add that yields will continue to be attractive so long as the central bank (CBN) continues its aggressive liquidity mop-up to curb inflation. “You are supplying securi-

ties and you are telling banks to stop buying them,” said Omotola Abimbola, associate and investment research analyst at Chapel Hill Denham. “The risk environment is not structured in a way that will favour lending. Banks make decision on asset allocation based on the structure of the economy andtheyhavebeenrisk-aversein creating loans. Loan growth has been negative since the crisis of 2014 and 2016,” Abimbola said. Data compiled by BusinessDay shows the largest lenders made a combined N245.64 billion in interest

from investment securities in March 2019, a 29.15 percent increase from N190.20 billion recorded the previous year. However, that compares with a 12.95 percent reduction in interest income on loans and advances to N353.15 billion in March 2019 from N405.71 billion as at March 2018. During the last Monetary Policy Committee (MPC) meeting, Godwin Emefiele, CBN governor, said the MPC wants the lender of the last resort to provide a mechanism for limiting the ability of banks to put customers’ money into

…As private refineries spring up to fill gap ANALYSIS

STEPHEN ONYEKWELU

ecent conversations around fuel subsidy removal have tended to ignore an even bigger national dialogue around the best business and financial model needed to develop Nigeria’s petroleum refining and distribution system three decades after it peaked and started falling. Nigeria’s golden age of petroleum refining was be-

tween 1975 and 1985. But gross insufficient local refining capacity over the years has pushed the country into reliance on importation of refined petroleum products. The need to make up for the difference between the landing cost per litre of imported refined petroleum products and the pump price gave birth to subsidies. Subsidies on petrol have

gulped N1.8 trillion in 2018 alone, with the difference between landing cost per litre and pump price of Premium Motor Spirit (PMS) standing at N40. Operating capacity utilisation targets for Nigeria’s refineries were meant to meet international standards of 90 percent capacity utilisation, secure crude supply to 95 percent availability and reduce the time needed for turnaround maintenance (TAM). Other operational targets were to

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produce at optimal yields as defined by linear programming model and reduce the cost to $5 per barrel in line with international best practice. However, following the abysmal consolidated capacity utilisation of less than 30 percent for the four refineries in 2018, the Nigerian National Petroleum Corporation (NNPC) embarked on a TAM starting with the PortHarcourt Refining Company Limited in March last year. But uncertainty continues to surround the proposed rehabilitation of these refineries. Many experts have said the Federal Government has a track record of failing at running businesses from the Nigerian Telecommunication Limited (NITEL) to the National Electric Power Authority (NEPA).

NGUS may 27 2020 362.28

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Nigeria failing to fuel its economy 34 years after peak refining performance

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government securities. Emefiele argued that credit to the private sector should improve since Non Performing Loans (NPLs) are down to below 10 percent compared to 17 percent a year ago. Net credit by lenders to the governmentsurged64percentin thefirstfourmonthsoftheyearvs 9.60percentfortheprivatesector. Nigeria’s economic growth slowed in the first quarter after the oil sector, the country’s biggest foreign-exchange earner, contracted.

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NEWS

Nigeria’s emigrant surge poses human capital risk - experts SEGUN ADAMS

he increasing exodus of Nigeria’s brightest talents overseas has seen remittances steal oil’s shine as the economy’s largest contributor to foreign exchange earnings. The emigration of human capital, however, is not without its demerits forcing a rethink whether Nigeria’s biggest export should, in fact, be its productive populace. Nigeria received $22 billion in 2017 from its citizen in the Diaspora; the money received accounts for about 7 percent of its 2018 Gross Domestic Product, but experts remain concerned about the repercussions of the nation’s ‘sale’ of its more productive workforce. “This is not helping us from an economic view as we lose people with valuable skills,” Andrew Nevin, chief economist at PwC, noted on his twitter handle Tuesday last week. In 2017, the number of Nigerians seeking greener pastures abroad stood at 1.3 million, representing a 190 percent upsurge from 448,500 in 1990, according to figures from the United Nations Department of Economic and Social Affairs (UN DESA). According to Enase Okonedo, dean, Lagos Business School, retaining Nigeria’s best minds within the country to help pursue growth and prosperity is essential, considering the country is at a critical stage of

economic development. For the dean, the relative size and quality of human outflow is an important consideration in discussing the issue. “I think in the long run, regardless of how many remittances come to Nigeria, the nation would be at a disadvantage,” she said. The economy has been improving, albeit slowly, since the 2016 recession, but Nigerians are leaving in pursuit of better livelihood. Youths are not very optimistic about prospects in the country and are lured by a developed nation with high capital and less labour hence in need of highly skilled foreign labour to support their economy. Mariam, 26, a self-employed fashion designer with a Master’s degree in Human Resource Management, is in an advanced stage of leaving for Canada. “Young people leave for education, better life and to experience a new culture,” she told BusinessDay. Already, the brain drain is beginning to cause a headache for headhunters who have to find suitable replacements for young professionals leaving the shores of the country. “Immigration schemes are not open for everybody but are designed to select the best hands in Nigeria, and they are causing a shortage of human capital,” a consultant in a Lagos-based Human Resources

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Consultancy, told BusinessDay on condition of anonymity. “I can recall a business owner telling me his biggest competitors for human capital are not fellow Nigerian companies but Canadian firms,” the source said. Given the serious implications, Okonedo believes a better performing economy would improve the situation. “In a way, it is tied to economic growth. If living conditions, job situation and infrastructure improve, people would come back home,” she said but added that it would take a soothsayer to tell how fast the situation can be reversed. The United Nations noted in its 2013 International Migration policies document that some “developed countries have adopted points-based systems to select highly qualified migrants in occupations facing labour shortages,” thereby sieving the crème-de-la-crème of the originating countries. The question remains: is the emigration situation a win-win for Nigerians home and abroad, given the huge support that remittance provides to the country? Boniface Chizea, MD/CEO, BIC Consultancy Services, explained that Nigerians leaving for first world countries is not the best situation for the country, however, it would benefit Nigeria to make more productive use of the remittance.

Rivers sets July 1 rollout date for informal tax drive … completes delineation of state into tax zones Ignatius Chukwu

ivers State Internal Revenue Service (RIRS) has set July 1, 2019 as a final plan and rollout date for the rollout of the state’s muchtalked about informal sector tax drive. The state has also completed tax delineation of the state into tax zones. The executive chairman of the RIRS, Adoage Norteh, who broke the news weekend at a full meeting with stakeholders at the Hotel Presidential, Port Harcourt, said the Nyesom Wike administration had made it clear in launching the tax drive in the informal sector. The executive chairman said he was determined to make Rivers State move into informal tax regime without violence and chaos. He announced the formation of a committee to join the RIRS and review the policy and make suggestions. Speaking at the meeting, Norteh told the over 300 tax group leaders that the market and business unions would

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help to make the drive seamless and without rancour. He said the members would represent the opinions of the informal business people and may help in collection by submitting list of their members. He announced that the union leaders might get some commission for their effort instead of giving the money to tax consultants. He however made it clear that the RIRS would not concede the task of tax assessment and collection to touts or untrained groups. He asked for collaboration instead. The RIRS at the meeting forged an alliance with trade groups to fight touts. Norteh said he was determined to reduce or eliminate revenue touting in the state. He marvelled at the lamentations of groups who recounted encounters with touts that had since printed RIRS receipts and collected money in the name of the government using youth bodies, councillors and others. He educated them once

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again on critical issues that bring friction between the tax authority and taxpayers. He said directors of tax were only on salaries and not the profit made by the company, which must be taxed too. He warned against underdeclaration of income, saying there were many other ways of discovering the truth because of red flags, and made it clear that though religious houses do not pay tax but their operators must be taxed for incomes they personally take home. Some stakeholders made c o nt r i b u t i o n s b u t ma n y urged RIRS to continue the tax education. Speaking, the president of the Port Harcourt Chamber of Commerce, Industries, Mines and Agriculture (PHCCIMA), the chief, Nabil Saleh, said Norteh has done exactly what has been lacking. Youths made presentations and demanded to be involved in the drive but the RIRS boss explained that the agency raises money which the state government spends to develop the state.

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You cannot win the race on a stolen horse

Bashorun J.K Randle • Continued from last week • Pastor’s 19-year-old marriage crashes over micro-organ astor Samson Farounbi has told an Idi-Ogungun Customary Court, Agodi, in Ibadan, that the small size of his manhood made his estranged wife to deny him sex for a long period. Farounbi disclosed this on Monday when testifying before the court on a case of divorce he instituted against Tope Farounbi. He had requested the court to end their 19-year union on the grounds of unrest of mind, threat to life and lack of respect for his family. Narrating his ordeals, Farounbi said his wife, who was a fruit seller, used to return home at late hours every day and refused to have sex with him. “There was a day I challenged her why she always returned late and denying me sex. She confessed that the small size of my penis was responsible for keeping late outside and for refusing to have sex with me. She suggested to buy local herb for the treatment of my micro penis, which cost N5,000, but I priced it down to N4,000. I got myself treated with the Agbo (local herb), but she still felt reluctant to allow me have access to her body,” he narrated. The pastor further alleged that the defendant maltreated his mother

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when she was living with him and that the ill treatment forced his aged mother to relocate to Ilesha, where she died a few months later. He told the court that Tope used to curse every member of his family and always cursed his blood brothers whenever they visited him. “My lord, she is a devil, always fighting people, especially females that come to my church for prayer, accusing me of flirting with them. We have never stayed beyond two years in every house I rented since we married 19 years ago due to her stubbornness and troublesome character. The five children of our union lack home training and she always cursed me whenever I tried to correct any of the kids for doing wrong things. In fact, our first child has run away from home now and I cannot even locate his whereabouts. I urge the court to separate us so that I can have peace of mind to do my pastoral work,” he pleaded. In her defence, Tope denied all the allegations but urged the court to dissolve the marriage as requested by the plaintiff. She accused her husband of womanising, saying he never cared for her welfare but was in the habit of drinking alcohol. President of the court, Mr. Mukaila Balogun and the two court assessors — Messrs Wahab Popoola and Alao Ganiyu — in their unanimous decision dissolved the marriage.” i.) “16 dead as cult war resumes in Rivers state” “No fewer than 16 people are feared dead following cult crises that broke out in two different local government areas of Rivers State, last Sunday. It was alleged that 14 people were killed by the said cultists at Kono Boue and Gbam Boue communities of Khana council, while two people were killed in Ishiodu village, Emohua community, Emohua council. It was also gathered that seven people were abducted when the bandits struck at

Khana council, while many properties were also destroyed. However, there are conflicting reports on the number of deaths in the Khana incident. Whereas some reported 20, others said 14, while the Police claimed five people lost their lives. The clash in Khana is believed to be a reprisal attack from the Iceland cult over the killing of a notable member of their gang earlier. The Paramount Ruler of Kono Boue community in Khana council, HRH, Mene Taalor Tornwe, described the incident as shocking, adding that the cult boys were incited against him and other members of the community. Tornwe, while condemning the killings and burning of his palace and other buildings by the cultists, noted that he had carried out the instruction of the governor of the state to restore peace in the area, but regretted that some persons incited the cultists against him. Also, the Community Development Committee Chairman, Prince Christian Borlo-One, alleged that over 40 persons were feared killed, adding that some persons were beheaded and five abducted. He also called on the government and security agencies to urgently intervene so the community will not be totally deserted. Meanwhile, the Rivers State Police Command’s Public Relations Officer, DSP Nnamdi Omoni, said the Police are aware of the incidents, noting that two people died in Ishiodu village and five in the Khana incident.” ii.) Abraham Lincoln “Nearly all men can stand adversity, but if you want to test a man’s character, give him power.” iii.) Front page headline, “The Punch” newspaper May 21, 2019 “Doctors, nurses lament poor pay, overwork in state hospitals” iv.) Front page headline “The Nation” newspaper May 21 2019

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My lord, she is a devil, always fighting people, especially females that come to my church for prayer, accusing me of flirting with them

“Floods: Lagos urges calm as heavy rains pound city.” v.) Ayn Rand “The ladder of success is best climbed by stepping on the rungs of opportunity.” vi.) Front page headline, “The Sun” newspaper May 11, 2019 “Inside Ibadan drug world” • Disturbing details of an epidemic ravaging a mega city • Rise in number of patients with drug-related mental disorders worries experts. “Although there has been pervasive advocacy and onslaught by security agents to check hard drug peddling and abuse in Ibadan the capital of Oyo State, the menace rather than go away, appears to worsen, bulging into an ogre and digging a cesspool that daily claims and sucks more victims into its vortex of death, evil, bankruptcy, depression, despair and destruction.” vii.) Killed by hunger: Son of Kogi State judiciary worker who slumped and died after being owed salaries for months tells heart-rending story of her last moments. viii.) Front page headline: “Vanguard” newspaper May 11, 2019 “We cut victims wrists, fingers, during operations” – Robbery suspects ix.) Front page headline: “The Nation” newspaper May 9, 2019 “Why Lagos, Ondo, Niger, Benue, Imo, Cross-River, others must prepare for flooding.” – Alhaji Suleiman Adamu – Minister of Water Resources “All the thirty-six states of the Federation including the Federal Capital Territory are expected to experience different levels of flooding. I can say we have almost six hundred local government areas in Nigeria that could be under the threat of floods in 2019, going by our predictions. No person should build structures within the flood plains. People should clean their drainages.” Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

Inventing a new tax system in the age of big data and digital economy

s Nigeria enters a new republic, one of the biggest challenges facing Nigeria is infrastructure deficit. The country is reeling from inadequate investments in Energy, Roads, Rails, Housing, Mechanized Agriculture, Hospitals and Education among other challenges. These challenges are attributed to the slowdown in economy, occasioned by the drag in oil price – the nation’s top export earner. The slow down has made the government to come up with different policies to beef up the revenue accruing from the traditional non-oil sector. The traditional businesses like trades, manufacturing, services, FMCG, Financial services, Logistics and others have borne the burden of taxation in government’s drive towards ramping up non-oil revenue. However, there are sector that have not received the attention required to tap the maximum tax returns and improve tax revenue. That sector is the digital business sector. This sector controls data, a major intangible asset with potential for taxable profit. The sector controls transactions that frequently escapes the taxman’s hammer. Most tech companies strongly believe that their greatest asset, though intangible, is the users’ data that they have which is utilized to sell products and services to the users at no cost to the business. Today, the top five companies in the world based on market capitalization are all tech companies, with many of them in custody of

users’ data. These companies could be made to pay taxes based on the information and people’s data that they have acquired over the years. Global bodies like OECD and World Bank should come up with an acceptable model on how to make these big tech giants pay their fair share of tax in the jurisdiction that they operate or where their users reside. If there is a unanimous decision to levy tax on data, then the big tech and other tech companies need to provide the regulators with country- by- country information concerning the number of users in their platform and their respective country or place of residence. The tax should be levied at the global level and paid to the respective sovereign governments based on the percentage of the citizens that are in the tech’s data base or based on sort of agreed sharing formula. The European Commission is currently working out a modality on how to bring the tech giants into the tax net based on the data they hold on their users and to equally tax digital transactions that have remained untaxed because of the Permanent Establishment (PE) rules. According to EU, digital businesses and big data companies have an effective tax rate of 9.5% compared to 23.2% for traditional businesses with permanent establishment. There must be a global rally on how to tax these big tech companies and the profits shared equally among nations where value seems to have been created. A global tax model system for big www.businessday.ng

data companies is urgently needed at this time as digital transactions are shaping businesses in a radical way that we are only just beginning to understand. The OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS) haven’t been quite successful in ensuring full taxation of digital transactions. Billions of dollars’ worth of transactions goes on everyday without being tax due to lack of legal framework to tax digital transactions. The OECD plan of ensuring full taxation of digital transaction by 2020 is commendable as some countries, in the absence of uniform legal framework for taxing digital transactions, are adopting unilateral measures to tax digitalized businesses and digitized services, says a report published by KPMG international. The rule that taxes should be paid in the jurisdiction where value is created should be upheld in all cross-border transactions irrespective of where the company providing the services is located. In Nigeria, there is no legal framework yet in place to tax digital transactions. What FIRS have been doing over the past months have been to issue statements on how to tax digital transactions without any operational legal framework. The operational legal framework must be worked out first among parties to the digital business - the regulators, parliament, banks, fintech, agents, sellers, card providers and the platform through which merchandize are sold and bought.

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Emeka Ogbachalu Section 13 of company income tax act need to be modified in the face of new digital realities. The section requires that nonresident companies have a physical presence in Nigeria before their income could be taxed. The current online business models have made this section of the act inadequate and outdated, and requires immediate modification to accommodate the online businesses that have enabled some non-resident companies to rake in millions of Naira every year without commensurate tax paid, thus putting traditional businesses with physical presence at a disadvantaged position. This digital tax should also be extended to the local online business owners that have some how “evaded” council taxes, business development levy and other taxes that ought to have been paid by virtue of their business activities. Ogbachalu, a Tax Consultant, lives in Lagos

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The P in the equation

Patrick Atuanya

t is often said that if you seek any good or service hard enough in Lagos you will find it, but of course there will be a price to pay for it. A trip to any of the pulsating street markets in the mega city of 21 million people, Balogun, Oshodi, Mile-12, Yaba, will reveal capitalism at its purest form, not particularly dissimilar to the trading pits of Chicago which were in the 1970s (before the Computers took over) crammed with hundreds of shouting futures and options traders. As wheat, corn, cattle and hogs flowed into Chicago, a marketplace emerged and businessmen formed the Chicago Board of Trade (CBOT) in 1848 and the Chicago Produce Exchange, a forerunner to the Chicago Mercantile Exchange (CME), in 1874. Participants at the CBOT and CME, (which have since merged in 2007 to form the CME Group), often unruly jostled to buy and sell futures and options contracts for cattle, wheat, bonds and interest rates, just as their Nigerian counterparts haggle to buy or sell a piece of clothing in Balogun

or Foodstuff in Mile-12 market today. Some 170 years after the birth of the CBOT, the laws of demand and supply, and the role of markets in efficiently setting pricing of goods and services cannot be wished away, despite attempts to do so by politicians in Abuja. Free markets and the liquidity they provide are what has built up the most developed countries in the world, and Nigeria cannot afford to be an exception if its leaders truly mean to better the lives of their citizens. Often you hear some analyst saying something like “oil rich Nigeria, has earned xyz billions of dollars in xyz number of years but still has decrepit infrastructure, inadequate to drive growth in its economy.” That narrative (wasted oil wealth) good on paper, is probably only 20 percent of the story and I am being generous here. What those making these statements often fail to state is that no nation on earth has grown rich from simply pumping oil (or any other precious commodity) from the ground and spending it, without developing deep financial markets from which private firms can raise capital to deploy alongside the Government. Before the 2004 Pension reforms, there was little or no long term funds available in the Nigerian economy, Insurance Companies who collected premiums on life and other cover couldn’t deploy such capital into matching investments, and the Government or corporates couldn’t issue

long tenured bonds because there were no long term pool of capital. Today there are N9 trillion in Pension assets, 72 percent of which is invested in Federal Government securities. More of the Pension funds should probably be invested in hard assets such as toll roads and bridges, railways and Airports, however that will not happen right away without reform of Nigeria’s Public Private Partnership (PPP) laws. However the point is that market places such as the Nigerian Stock Exchange (NSE), and the FMDQ OTC Securities Exchange provide the platform for liquidity, Price discovery and secondary trading of securities like FGN Treasury Bills, Bonds, Stocks and Derivatives. The absence of free markets for petrol and electricity is what is leading to the dysfunction in both sectors. In the past 5 years there has probably been 10 major periods of petrol scarcity, while electricity is perennially unavailable to Nigerians, despite the massive demand. This violates one of the basic laws of demand and supply in economics, which states that if demand for a good or service increases, it leads to a higher price, which in turn incentivizes suppliers to ramp up production to take advantage, and increase quantities supplied, until prices reach an equilibrium. It is absurd that there is no rush by firms to increase supply of electricity to energy starved Nigerians, or that no

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Some 170 years after the birth of the CBOT, the laws of demand and supply, and the role of markets in efficiently setting pricing of goods and services cannot be wished away, despite attempts to do so by politicians in Abuja

new refineries have been built in 30 years to take advantage of a growing population that needs fuel to power its cars and homes. The answer to the riddle is that the Government has taken away the P in the equation. That is Government has mandated itself as the Price (P) setter for Petrol which it capped at N145 per litre since 2016 and electricity capped at N10 per kilowatt hour, since at least 2015. The distortions and scarcity caused by Government fixing/influencing prices is evident in other areas of the economy as well. These include Foreign exchange (fx) unavailability (before the introduction of the Investor and exporters window), banning the imports of products for which supply is currently inadequate locally, and the scarcity of decent housing in most Nigerian cities due to the odious land use act which creates an artificial scarcity/ distorts pricing of land by making it difficult for citizens to freely buy and sell their property. The wheat, cattle, corn and hog traders of Chicago learnt more than a century ago that free exchange of goods and services at a price determined by the interplay between demand and supply, could build great wealth for the city and themselves. The politicians in Abuja might take note to heed this lesson, 170 years later. Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

The Nigerian code of corporate governance 2018 Principle 8: the company secretary

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he company secretary is a strategic position of considerable influence at the heart of governanceoperations within an organisation. Governance describes the way that an organisation is directed and controlled, which includes a company’s strategy and decision making, how it achieves its aims, and ensuring that all activities undertaken comply with legal, ethical and regulatoryrequirements.Company secretaries have a broad skill set – corporate law, finance, governance, strategy and corporate secretarial practice – and they advise a company’s board in these key areas, providing support to the Chair, CEO and non-executive directors” ICSA – The Governance Institute. The office of a Company Secretary has evolved over the years to a high-rankingofficer of the company with extensive responsibilities. Now regarded as the ‘guardian’ of the Company’s compliance with laws, regulations, corporate governance and ethics, the Company Secretary is now a highly revered professional. This significant shifthas resulted from the need to ensure the enthronement of effective corporate governance framework as required by regulators, investors and other stakeholders. Principle 8 of the Nigerian Code of Corporate Governance 2018 which deals with the office of the Company Secretary provides that “The Company Secretary plays an important role insupporting the effectiveness of the Board by assisting the Board andmanagement to develop good corporate governance practices andculture within the Company.” In Nigeria, all companies arestatutorilyrequired to appoint a Company Secretary. Section 295 of Companies and Allied Matters Act(CAMA)provides for the qualification of a Company Secretary as follows: “It shall be the duty of a director of a company to take all reasonable steps to ensure that the secretary of the company is a person who appears to have requisite knowledge and experience to discharge the functions of a secretary of a company.”

While the above provision is the only prerequisite for appointing a Company Secretary in the case of a private company, the Act in the same section provides for additional requirements in the case of a public company as follows: “And in the case of a public company, he shall bea) a member of the Institute of Chartered Secretaries and Administrators; or b) a legal practitioner within the meaning of the Legal Practitioners Act; or c) a member of the Institute of Chartered Accountants of Nigeria or such other bodies of accountants as are established from time to time by an Act; or d) any person who has held the office of the secretary of a public company for at least three years of the five years immediately preceding his appointment in a public company; or e) a body corporate or firm consisting of members each of whom is qualified under paragraphs (a), (b), (c), or (d) of this section.” The proposed amendment to CAMA seeks to exempt “small companies” from the requirement to appoint a company secretary. The NCCG Code recommends that the Company Secretary shall be appointed through a rigorous selection process similar to that of new Directors and where the Company Secretary is an employee of the Company, he/she should be a member ofsenior management.In the same vein, the removal of the Company Secretary is a matter for the Board of Directors as a whole. This collective responsibility will reduce the possibility of an individual Director (usually the CEO) exerting undue influence over the Company Secretary. Placing the responsibility for the appointment and removal of the Company Secretary on the Board underscores the strategic role of the Company Secretary. The Board should ensure that the person appointed has the gravitas, competence and objectivity required to provide independwww.businessday.ng

ent guidance and support at the highest level of decision-making in the Company. The Board is also expected to properly empower the Company Secretary to effectively discharge his/her duties and responsibilities. The Company Secretary has both functional and administrative responsibilities. The functional responsibility is to the Board through the Chairman, while administratively, he/she reports to the MD/CEO. Where the Company Secretary is also the Legal Adviser, the reporting responsibilities are more often than not blurred and could impact the independence of the individual. It is good practice to separate the roles as much as is practicable. The Code recommends that Board should approve the performance evaluation of the Company Secretary. The Company Secretary provides guidance to the Chairman and other Directors on their responsibilities and should in conjunction with the Chairman ensure that new Directors undergo a comprehensive induction programme that will cover the expectations of their role as well as an introduction to the Company’s operations. The Company Secretary is required to ensureadequate information flow from the Board to Management and should keep track of implementation of Board decisions. It is the responsibility of the Company Secretary to keep the Board up to date with trends and regulatory requirements that impact the Board and the Company. This u nderscores the imperative of constantly building on their professional knowledge and stayingup to datewith legal and regulatory trends and developments. The Company Secretary must endeavour to protect and safeguard his/her independence and the Board should provide support in this regard. Maintaining an independent stance allows the Company Secretary to provideobjective advice to the Board. Strong values and a high moral compass will serve the Company Secretary well in main-

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Bisi Adeyemi taining his/her independence. Consequently, it is imperative that prior to accepting an appointment as a Company Secretary, prospective appointees should undertake their own due diligence on the entity as would a prospective Director. It is also imperative that the Company’s values align with their personal values and should be mindful of the reputation they have built and nourished over the years. It is interesting to note that the word ‘secretary’ is originally derived from the Latin ‘secernere’, meaning ‘to distinguish’ and ‘to set apart’. Its etymology clearly links to the idea of independence, freedom from outside control and of not being directly subject to the authority of another.It is therefore safe to say the notion of independence has been ‘wired’ into the role of the ‘secretary’ from the start. However, Company Secretaries require exceptional judgement, tact and diplomacy to manage this independence – hence the requirement of appropriate “gravitas”. As regulators and other stakeholders become more demanding, it becomes imperative that Company Secretaries should embrace their strategic role as one that puts them in a position of considerable influence at the heart of organizational governance. Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/pages/page/dkhub

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Monday 24 June 2019

BUSINESS DAY

EDITORIAL Publisher/CEO

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

Lagos-Badagry Expressway: A highway to hell

he euphoria and high expectations that greeted the reconstruction and expansion of Lagos-Badagry Expressway project have died. Work has literally stopped on the light rail with a five-lane expressway on either side. The expressway has become a metaphor for pain, stress and frustration. It has turned into a highway to hell with its contortions, craters and ditches. When the contract was awarded in 2009 nothing could equal the joy of Lagos residents, particularly motorists, property owners and those who have business along the expressway. The project raised much hope. The expectation was that it would not only open up the West African market to Nigerian businesses and tourists, but also affect positively property values, and the economic, commercial and social activi-

ties of people along that axis. But today, the story is different. Hours spent in gridlock, wear and tear on vehicles and loss of personal effects to hoodlums and armed bandits are the daily harrowing experiences of both motorists and commuters. People spend upwards of three hours between Mile 2 and Okokomaiko a commute that should, ordinarily, take between 30-40 minutes. This has both social and health implications, and the economic loss in terms of man-hours can hardly be quantified in monetary terms. There’s no gain saying that the completion of this project will impact positively on the economy of the state government because apart from the regional trade that will be boosted, many companies have positioned themselves to take advantage of the expressway and many more will relocate to this axis. Besides these, many Lago-

sians have invested in property on this corridor in anticipation of the expressway. Once it is completed, they will move in. From all these prospective residents and businesses, state government can generate enormous revenue that will enable it to provide more roads infrastructure and other social amenities for its citizens. Unarguably, the redevelopment of that expressway will open up trade across the West Coast. Annual trade volume on this route is said to run into billions of naira. Apart from trade facilitation, the human element should also be given serious consideration. Yet, a project that was scheduled to be completed in four years has scarcely attained 50 percent completion in 10 years. And has, therefore, instead of being a blessing to the residents of the state, become a curse to both life and living. A similar light rail project in Addis Ababa, Ethiopia that was started two

years after that of Lagos has been operating since 2015 It is heart-warming however, that the new governor of Lagos State, Babajide SanwoOlu, has promised to complete the Lagos light rail. A few days ago, the Federal Roads Maintenance Agency (FERMA) flagged off the maintenance of the expressway, beginning from Igbo-Eleri Junction to Badagry. That is commendable, but piecemeal. Both the federal and Lagos State governments should see the reconstruction and expansion of the expressway for its strategic and economic importance. For these reasons and the fact that the project is part of the development blue-print for Lagos, Sanwo-Olu must muster the will to complete this project. Otherwise it remains a road to perdition for residents, businesses, motorists and commuters who should be the ultimate beneficiaries of the project in the first place.

Bashir Ibrahim Hassan

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

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Monday 24 June 2019

BUSINESS DAY

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Nigeria frets about smuggling, but its trade policy fuels it global Perspectives

OLU FASAN

odwin Emefiele, Nigeria’s central bank governor, is very unhappy and angry. He is deeply frustrated that his Soviet-style command-and-control planning of the economy is being undermined by smuggling and dumping. “Nigeria is very good at making brilliant economic policies”, he said recently, “but we have identified smugglers and dumpers as those sabotaging these policies”. As a result, the governor is threatening draconian, Stalinist measures against the economic saboteurs. Recently, Emefiele announced that the CBN would “block smugglers’ accounts” and “blacklist” from the foreign exchange market and banking industry anyone or firm smuggling or dumping any of the 43 items, including rice and toothpicks, for which importers are denied access to foreign exchange from the official windows. You might wonder: Does the central bank know the smugglers? Well, Emefiele said “We have their names”. Which won’t be surprising. After all, as former finance minister Dr Ngozi Okonjo-Iweala wrote in her book Reforming the Unreformable, “Nigeria must be one of the few countries in the world where smugglers are known and talked about openly, and where these same big-time smugglers walk around freely in the corridors of powers”. So, the CBN probably knows the smugglers. Even then, extrajudicially blocking the accounts of “smugglers” or cutting an individual or a firm accused of smuggling or dumping from the lifeblood of the economy is redolent of Stalin’s regime of terror and totalitarian rule. In civilised societies, alleged smugglers are apprehended and charged before a court of law and those accused of dumping are subjected to rigorous anti-dumping investigations. But such rule of law process

is hardly followed in Nigeria. Instead, in this case, a Presidential Order has authorised the CBN to deal “aggressively” with “smugglers” and “dumpers”. Of course, as Dr Okonjo-Iweala’s statement above suggests, politically connected smugglers won’t face such draconian measures. Only the small fries, the small-scale smugglers, are likely to be blacklisted or have their accounts blocked. And God help any individual or firm that’s wrongly accused of smuggling or dumping – they will suffer without remedies! Of course, smuggling is rife and flourishing in this country. For instance, a World Bank report notes that, “The total amount of potential smuggling from Benin is estimated at close to $5bn, nearly 10% of Nigeria’s official imports”, adding: “Tackling this would lead to an estimated gain of $1.2bn in government revenue”. Recently, the Financial Times published a story entitled “Smuggled rice makes mockery of Nigerian quest to boost farming”, in which it said that “more than 1 million tonnes of rice entered Nigeria through its porous border with Benin in the first three months of this year”. Yet, the government’s Gestapo-style response to the smuggling challenge is shadow boxing, ignoring the real issue. There is a large body of knowledge on the relationships between trade policy and smuggling, but Nigeria is fretting about smuggling without facing the fact that its economic policies, particularly its trade policy, create the huge incentives for the phenomenon. Let’s start with the economic theory of smuggling. The economists Jagdish Bhagwati and TN Srinivasan posit in a paper entitled “Smuggling and trade policy” that smuggling could be a welfare-enhancing activity because it constitutes (partial or total) evasion of high tariffs and import bans that represent a suboptimal policy. Put another way, smuggling is a response to severe policy distortions and can alleviate those distortions. But smuggling can only improve economic welfare if its costs are lower than the costs of complying with trade protection. Smuggling involves a real cost: the hazards of avoiding the legal channels, the risk of being caught, the cost of bribing customs officials, the risk of losing the smuggled imports etc. So, if smuggling is pervasive in a country, it must, from the

point of view of economic rationality, be that the costs of smuggling are far lower than the costs of adjusting to, or complying with, import protection and other policy distortions. So, how does the theory apply to Nigeria? Well, it’s import barriers are among the highest in the world. Indeed, Nigeria has deliberately made protectionism in the forms of prohibitive tariffs, exchange controls and import prohibitions the core of its trade and industrial policies. To protect its highly inefficient and struggling manufacturing and agricultural industries, Nigeria has long maintained import-prohibition lists, while applying high tariffs to most of the products not on those lists. In 2015, the central bank published a list of 41 items, later 43, wide-ranging in scope, whose imports were/are deemed ineligible for foreign exchange through the official windows. With that policy, Nigeria introduced direct exchange control as a protectionist tool. But the very high level of protection has impeded legal trade in Nigeria and provided large incentives for smuggling, and it is wrong for the government to ignore that! Of course, there would be little smuggling if there is no demand for smuggled goods. But truth is, there are high demands for smuggled products in Nigeria because they are cheaper than local ones. For instance, a rice retailer recently told the Financial Times, “Cotonou (rice) is cheaper than Nigerian rice — it is not supposed to be like this,” adding “Nigerian rice should be cheaper.”And that’s the heart of the matter. It defies economic logic to expect rational actors to voluntarily adjust to a policy distortion that worsens, rather than improve, their welfare. If a government policy makes a domestic product very expensive, why would most people not prefer the cheaper, probably even better-quality, foreign one, smuggled or not, if they can easily access it? And, of course, once there are large differentials in the retail prices of local products and like foreign ones, which create demands for the foreign products, there would be incentives for smuggling, unless the costis prohibitive. But to make the cost of smuggling prohibitive, the government has to invest heavily in detection, particularly in stringent border enforcement. The truth, though, is that few developing countries

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It is, indeed, Nigeria’s penchant for making suboptimal economic policies, such as its trade policy distortions and its failure to fully embrace regional integration, that create the huge incentives for smuggling

have the resources to spend on border control and detection. Nigeria, in particular, is noted for its extremely porous borders. It lacks the financial resources, the technology and the disciplined officials to ensure efficient and effective border control. I mean, Nigerian customs officers are among the most corrupt in the world! All this brings us back to the biggest incentives for smuggling: economic and trade policy distortions. That, ultimately, is where the solution lies. Unless Nigeria reduces the incentives for smuggling by significantly lowering its extremely high rates of protection, it would continue to experience pervasive smuggling, which would mean, one, that its desired policy objectives are not achieved, and, two, that it suffers unnecessary decline in the optimal tariff revenues that should have accrued from legal imports. But no country is an island, and, so, having a good domestic trade policy is not enough. It’s important for a country to harmonise trade policies with its neighbours through regional integration because divergent economic policies between neighbouring countries increase smuggling. Which is why Nigeria should be actively involved in ECOWAS and the new African Continental Free Trade Area (AfCFTA).Yet, Nigeria is a perfidious member of ECOWAS and still refuses to join AfCFTA, even though its customs officials believe that non-participation would increase smuggling into Nigeria. So, Emefiele is wrong when he says that “Nigeria is very good at making brilliant economic policies”, but smugglers and dumpers sabotage them. It is, indeed, Nigeria’s penchant for making suboptimal economic policies, such as its trade policy distortions and its failure to fully embrace regional integration, that create the huge incentives for smuggling. And unless it addresses the policy suboptimality and distortions, blacklisting smugglers or blocking their accounts would amount to nothing more than shadowboxing: treating the symptoms of the smuggling disease, not the cause!

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

The logic of migrants and should we try to stop them leaving?

pparently many Nigerians have been moving to Canada recently. Skilled Nigerians at that. Almost everyone in formal employment in Lagos knows someone who knows someone who has packed up their families and migrated to Canada. Canada is not unique of course. We all hear the stories of doctors trooping en masse to the United Kingdom and even places as far as Australia, and young people going to study in the United States and never comings back. And then there are the hundreds or thousands who choose to make the long trek to Europe. The fact that Nigerians migrate is not new but since the 2016 recession there has definitely been a surge. According to data from the international migration database, the number of Nigerians who legally migrated into OECD countries increased by 54 percent between 2011 and 2016. So why are people leaving and in general why do people migrate? Migration is of course not new. Since the beginning of human existence people have always moved from place to place mostly in search of food. We all have hunter-gatherer common ancestors and that logic of moving from places with less food and less safety to places with more food and more safety is still true. We may have countries and national boundaries and all the other

psychological barriers that keep people tied to one place or that restrict people for moving but people usually tend to move to places where they feel they can do better or have a better quality of life. This is true for people who decide to move from Maiduguri to Jos, or from Enugu to Lagos, or from Lagos to Toronto, and so on. The benefits from migrating can be very real in cash terms too. Consider a mid-level financial analyst who chooses to migrate from Lagos to Toronto. Even after taking the differences in cost of living into account, the increase in real income can be very significant. And that is before you include all the other things that can’t be quantified by money such as security or just breathing clean air every day. But what are the consequences for a country that experiences a lot of migration? There is a lot of research on the impact of migrants flowing into a country but that is not the situation Nigeria is in. We are at the other end with people migrating out of the country. On the downside if a lot of skilled migrants leave then that is likely to have an effect on domestic productivity if they are not being replaced. And skilled labour is typically difficult to replace. If half your engineers leave then who is going to build all those bridges and machinery that need to be built? If half the healthwww.businessday.ng

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We should definitely not try to stop people from seeking a better life for themselves and their families elsewhere. We aren’t running a slave economy after all. But we probably want to make sure the pipeline of talent is continuously flowing

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care professionals leave then who will staff the healthcare system? And if half the skilled bankers leave then who is going to manage all that risk? The dynamics for low skilled workers is a bit different. Unemployment tends to be higher for low skilled workers. Note this isn’t really about certificates. Many countries also tend to make it difficult for low skilled workers to migrate into their countries. From the perspective of a country like Nigeria, low-skilled worker emigration is not really a serious problem. On the positive side, migrants tend to send money back to where they came from and those remittances can be large. Over the last few years foreign exchange inflows into Nigeria from remittances has often been larger than foreign exchange inflows from crude oil exports. In other words, our migrants are now our largest export. So, what do we do? We should definitely not try to stop people from seeking a better life for themselves and their families elsewhere. We aren’t running a slave economy after all. But we probably want to make sure the pipeline of talent is continuously flowing. So that if one skilled worker leaves, there is another to take their place. This doesn’t always mean we have to rely only on local talent and training, but we should work just as hard to attract talent from @Businessdayng

ECONOMIST

NONSO OBIKILI elsewhere to Nigeria. We probably also need to think of a way of recovering training costs from those who choose to migrate. It’s a tricky one as on one hand we want to keep on investing in people here but if those people turn around and leave then it’s basically a wasted investment, at least as far as the country is concerned. Businesses know this problem too well. How do we ensure that people keep getting trained with costs recovered from those who choose to leave? Morale of this story is, if skilled talent keeps leaving then who is going to engineer this economic growth we are looking for? Houston, we may have a problem. Something to think about for policy makers.

Dr. Nonso Obikili is Chief Economist at Business Day.

Monday 24 June 2019

BUSINESS DAY

In Association With

Texas and California

A betrayal TheBalkan attack that wasn’t

Texafornia dreaming

Donald Trump orders air strikes on Iran—then cancels them What is the endgame of America’s “maximum pressure” strategy?

FTER YE ARS of fighting through sanctions and proxies, America and Iran have come to the brink of a direct confrontation. On the morning of June 20th Iran shot down an American spy drone over the Strait of Hormuz. Iran claims the aircraft was flying over its territorial waters, while America insists it was above international waters. Although Donald Trump growled that Iran had made a “big mistake”, he soon tried to downplay the incident. “I find it hard to believe it was intentional,” he said before a meeting with the Canadian prime minister, Justin Trudeau. The president suggested that a “stupid”

America’s future will be written in the two mega-states

N THE CABLE-NEWS version of America, the president sits in the White House issuing commands that transform the nation. Life is not like that. In the real version of America many of the biggest political choices are made not in Washington but by the states—and by two of them in particular. Texas and California are the biggest, brashest, most important states in the union, each equally convinced that it is the future (see our Special report in this issue). For the past few decades they have been heading in opposite directions, creating an experiment that reveals whether America works better as a low-tax, low-regulation place in which government makes little provision for its citizens (Texas), or as a high-tax, highly regulated one in which it is the government’s role to tackle problems, such as climate change, that might ordinarily be considered the job of the federal government (California). Given the long-running political dysfunction in Washington, the results will determine what sort of country America becomes almost as much as the victor of the next presidential election will. That is partly a function of size. One in five Americans calls Texas or California home. By 2050 one in four will. Over the past 20 years the two states have created a third of new jobs in America. Their economic heft rivals whole countries’. Were they nations, Texas would be the tenth-largest, ahead of Canada by GDP. California would be fifth, right behind Germany. Texas and California are also already living America’s demographic future. Hispanics are around 40% of the two states’ populations, double the national average. Both states were early to become majority-minority. In California non-whites have outnumbered whites since 2000, and in Texas since 2005. The rest of the country is not expected to reach this threshold until the middle of the century. California and Texas educate nearly a quarter of American children, many of them poor and non-native English-speakers. Their proximity to Mexico, a country that both used to

be a part of, means that as Washington procrastinates on updating America’s immigration laws they must live with the consequences. At first glance the two states seem as different as a quinoa burger and beef brisket. California is a one-party state in which elected Republicans may soon need the kind of protection afforded to the bighorn sheep. In Texas Republicans dominate the state legislature and all the statewide executive offices: no Democrat has won a statewide race there for more than 20 years. The last Democratic presidential candidate to do so was elected over 40 years ago. Texas has no state income tax. California’s state income tax has a top rate of 13%, the highest in the union. Texas has loose environmental regulations. California is trying to use its economic might to force the rest of the country to adopt more stringent standards on carbondioxide emissions. Texas lets its cities sprawl; California has restrictive planning laws. Take a closer look, though, and Texas looks more like a teenage California. The population of Texas has only recently reached the level California was at in the late 1980s. The Golden State was once a prosprawl, low-tax, Republican state,

too. Republicans in Austin, who are feeling the first signs of political competition from Democrats in decades, have begun to focus their attention on the state’s shortcomings such as education. That matters because Texas’s schools, like California’s, perform poorly and its universities are nowhere near as good. In the Texas legislative session which ended last month, politicians focused less on abortion and bathrooms for transgender people, and instead increased funding for public schools. If more Texans managed to vote, they might encourage politicians to do something about the state’s skimpy healthcare provision, too. This might suggest that, as Texas grows up, it will become more Californian. But, ideally, only to a degree— because California has not aged gracefully. It loses Americans each year while Texas gains them. Though the state government has made huge strides—a decade ago it was broke, now it has a healthy surplus and an overflowing rainy-day fund—the state has daunting social problems. Homelessness is just the most visible of them. Unemployment is persistently higher and incomes are more unequal in California than in the land of the

ten-gallon hat. California thinks of itself as a progressive bastion, but it has the highest poverty rate of any state in America. That is partly because regulation makes it so hard to build new homes, pushing housing costs up. It will take more than Google investing $1bn in Bay Area housing to fix that. Texas, meanwhile, lets its cities march outwards as far as they wish. In this limited respect at least, Texas is the more liberal state and California the more conservative one. Americans wanting to move to where housing is cheap, taxes low and work plentiful are voting with their U-Haul trucks and heading to Texas. Just now, Texas has more room than California to innovate and to strike a balance between small government and social support. In America’s federal system no single state is a national template, and yet each holds lessons for all the others. As America’s largest oil producer, Texas is exceptional. By contrast, despite its faults, California remains a magnet for highly educated migrants and a formidable factory of talent and ideas— which is why it has produced Google, Facebook, Tesla, Uber and Netflix and why, despite grumblings about creeping socialism, the big venture-capital firms and Hollywood studios stay.

Iranian officer could have approved anti-aircraft fire without the approval of his superiors. But by evening, American media reported, Mr Trump had approved his own response: air strikes on radar and missile batteries in Iran. Congressional leaders were summoned for a White House briefing. The New York Times reported that American warplanes were already in the air. Then Mr Trump abruptly cancelled the strikes. There has been no official confirmation of any of this, yet the details leaked almost in real time. Perhaps this is simply a head-fake from a president who built a business career on bluster. Indeed, Iranian officials claim that Mr Trump warned them of the strikes in advance. In a message passed via Oman, which has acted as a mediator in the past, he reportedly insisted that he did not want war and called for negotiations. Or perhaps his apparent volteface reflects the turmoil in Mr Trump’s national-security apparatus. He campaigned on ending American military adventures in the Middle East. But his national security adviser, John Bolton, is a longtime Iran hawk who has advocated military action in the past. America Continues on page 19

Monday 24 June 2019

BUSINESS DAY

In Association With

The Conservative leadership

Which Boris would Britain get?

Britain’s probable next prime minister cannot resist playing to the crowd. In today’s ugly politics that is ominous

HE BREXIT monster unleashed three years ago this weekend has already devoured two British prime ministers. David Cameron surrendered hours after the referendum result was announced on June 24th 2016. Theresa May began confidently but soon found herself cornered. Conservative MPs have drawn up a shortlist of candidates to replace her as their leader and thus as prime minister; party members will make a decision by the end of July. The overwhelming favourite among both MPs and activists is Boris Johnson. But which Boris Johnson? The former foreign secretary, who is looked on with a mixture of amusement and contempt in European capitals, has assumed different guises at different times. As mayor of liberal, cosmopolitan London in 200816 he preached the virtues of immigration and the single market. As a leading light in the Leave campaign he effortlessly switched to criticising migration and warning of the dangers of Turkish membership of the European Union, which he had previously advocated. Now, in his bid for the votes of right-wing Tory party members, he talks up the prospect of leaving the EU with no deal—“fuck business” if it gets in the way—and joking that women in burkas “look like letterboxes”. Depressingly, the con trick is working. Despite valiant campaigns by more moderate candidates, Mr Johnson is the person to beat in the members’ vote. Much less clear is how he would behave in office. As the Brexit saga drags on, Britain is growing ever more polarised. In a starkly divided country, which gallery would Mr Johnson choose to play to? The way in which the next prime minister is being selected does not make it any easier to guess what is in store. Rather than face a general election, the leader is picked by 160,000 paid-up Tory activists, who long for Brexit more than almost anything else. A poll this week found that large majorities would leave the EU even if it did “significant damage” to the economy, broke apart the union with Scotland and Northern Ireland or “destroyed” the Conservative Party itself. Candidates have not drawn up detailed manifestos; Mr Johnson, in particular, has been uncharacteristically shy, avoiding most chances to debate with other candidates or be

quizzed by journalists. His lack of a guiding philosophy ought to be a weakness. But in these topsy-turvy times it has become central to his success (see article). Because he is all but empty of political convictions, people use him as a repository for their own. Hardcore Brexiteers have seized on the idea that he will leave with no deal if the EU refuses to offer better terms by October 31st. Remainers whisper to themselves that surely he is a liberal at heart, who would not do anything truly dangerous—and might even call a second referendum in one of the gravity-defying acts of showmanship at which he excels. That his words mean almost nothing is taken by both sides as a sign that he might eventually do what they hope, regardless of what he has promised in the past. This is foolish, and reminiscent of the coalition that backed Donald Trump for president. Some believed Mr Trump’s outlandish promises (a border wall with Mexico, a trade war with Canada), while others thought them part of an act not to be taken literally—and went on to receive a nasty shock. This is not the only similarity between the two blond bombshells. As well as narcissism, idleness and a willingness to take advantage of others, they share a flair for arguing that black is white and vice versa. Britain does not yet suffer from America’s malaise, in which supporters of different parties cannot even agree about

basic facts. But a government led by Mr Johnson, who freely contradicts himself and makes being caught out into a great joke, would lead Britain further down that path. The best case for Mr Johnson is that he might use his skill as a salesman and his way with words to hawk the Brexit deal, or something much like it, to a Parliament that has three times rejected it. Mrs May fell 58 votes short on her final attempt. Both Labour and the Tories have since become much more scared of what Brexit is doing to their supporters, who are flocking to the Liberal Democrats and the Brexit Party respectively. It is conceivable that Mr Johnson—freshly elected, popular in his party and as magnetic as Mrs May is wooden—might persuade enough MPs to change their minds. The idea of him choosing a referendum on the deal so as to break the logjam in Parliament, as this newspaper would like, is far-fetched. But then, so much about him is. Alas, the case against Mr Johnson is more plausible. He is not a signpost but a weather vane and, at the moment, the winds in Britain are blowing in a dangerous direction (see Briefing). The sudden rise of the populist Brexit Party, which came first in last month’s European election and now leads the polls with its promise of a nodeal exit, is terrifying the Tories, many of whom believe the only way to neutralise its insurgency

is to ape it. Since long before the referendum, the Conservative Party has been slowly evolving into one whose supporters are bound more by cultural values than economic ones. Brexit has put rocket-boosters on that trend. The next Tory leader will be under pressure to continue the metamorphosis of his party from a force for free markets into a right-wing populist outfit in the (ironically) European mould. Mr Johnson would be capable of engineering that transformation. An inverted pyramid of piffle Weather vane that he is, Mr Johnson would be unusually reliant on the people around him in 10 Downing Street and the cabinet for ideas, guidance and direction. By contrast with Mr Trump, who resents advice and experts, Mr Johnson is happy to delegate and let others do the work—provided he gets the glory. And whereas most mainstream Republicans at first disowned Mr Trump, thus ruling themselves out of working for him, moderate Tories are flocking to Mr Johnson’s banner, in the hope of landing a plum job in his cabinet. Many of them recognise that a no-deal Brexit would be bad for Britain—and thus, most likely, a disaster for the Conservative Party. If Mr Johnson ends up in power, it will fall to them to rein in his worst instincts. If they fail, it may not be long before the Brexit monster is chewing up and spitting out its third prime minister.

Donald Trump orders air strikes on Iran... Continued from page 18

has not had a permanent defense secretary since James Mattis stepped down in December. On June 18th Mr Trump announced that his acting defence chief, Patrick Shanahan, was also leaving amid allegations of domestic violence involving his wife and son. Confrontation in the Gulf has been building for more than a year, since Mr Trump withdrew from the nuclear deal that Iran signed with America and other powers in 2015. The accord had lifted some economic sanctions on Iran in exchange for limits on its nuclear programme. As the Trump administration sought to choke off Iran’s oil exports through renewed sanctions, Iran kept up its end of the bargain until May, then announced that it would begin stockpiling lowenriched uranium in excess of the prescribed limits. It expects to breach that threshold later this month. It has also seemingly pursued an aggressive, albeit shadowy, response in the region. In May saboteurs blew holes in four oil tankers anchored off the port of Fujairah in the United Arab Emirates. Two more tankers were attacked as they sailed in the Gulf of Oman on June 13th. America blames Iran for both incidents (investigators have not made any formal conclusions). It released photographs that show sailors from Iran’s navy removing what appears to be an unexploded limpet mine from one of the ships damaged earlier this month. The Houthis, a Yemeni Shia militia that receives assistance from Iran, have launched several attacks on Saudi infrastructure with missiles and drones, striking an oil pipeline and an international airport, and missing a desalination plant. The attacks on shipping threaten freedom of navigation in a waterway through which one-fifth of the world’s oil passes. Firing anti-aircraft missiles over the Gulf poses another risk: the region is a busy air corridor full of jumbo jets, particularly from large Gulf carriers like Qatar Airways. In 1988 an American warship mistook a passenger jet operated by Iran Air for a military aircraft and shot it down, killing all 290 people on board. After the drone incident, the Federal Aviation Administration warned American aircraft to avoid Iran’s airspace over the Persian Gulf.

Monday 24 June 2019

BUSINESS DAY

In Association With

Never gonna let you go

After its 16th bail-out, Ghana hopes to put the IMF behind it Debt is back under control, but an election is coming up

IRENS WAILING, a black government car pushes through the traffic, past the beggars and street vendors, up a potholed road. Vehicles like these, the perks of a growing number of political appointees, are a common sight in Accra— and a source of popular outrage. Since Nana Akufo-Addo took office as president in January 2017 the number of government ministers has soared by 42% to 125, each with a car, guards and a taxpayer-funded home. Outside Ghana Mr AkufoAddo has been hailed as a hero. When he was sworn in, it was as if he was a passenger in a plummeting aeroplane who had just been handed the controls. His predecessor, John Mahama, had taken a high-flying economy— growth was 17% in 2011 thanks to the first production of oil from its Jubilee Field—and promptly put it into a nose-dive. Under Mr Mahama inflation soared, the economy slowed and public debt ballooned, with much of the borrowed money squandered on higher wages for public em-

ployees. After taking the controls Mr Akufo-Addo said he would deliver “Ghana Beyond Aid”. He swiftly imposed discipline on government spending (new ministers notwithstanding). Fifty-three years after the IMF first bailed out Ghana, the 16th rescue package for the country ended in April. The fund now praises the government’s economic management. A glowing staff report said Ghana had tamed inflation (which fell back to 9% this year after reaching 17% in 2016). It also won acclaim for cleaning up rotten banks and

achieving a budget surplus (before interest payments). Yet the praise should be tempered. Some 3.1m people, or about one-tenth of the population, live on less than $1.90 per day, the World Bank’s measure of extreme poverty. It has been a stubborn problem. Although Ghana cut its poverty rate in half in the 20 years to 2013, most of that progress occurred in the 1990s, when it fell by almost two percentage points a year. Since 2006 progress has slowed to about one percentage point per year. Many of the government’s

flagship investment programmes have been sunk by mismanagement. One especially embarrassing example is that of the Komenda Sugar Factory, which was built three years ago with a loan from the Indian government, and which was supposed to provide more than 7,000 jobs. Yet it is idle because it does not have any sugar cane to process. In all about one-third of infrastructure projects in Ghana are never finished. Worse still, many were paid for with borrowed money. A rebasing of GDP last year has flattered the country’s balancesheet. Ghana’s debt-to-GDP ratio, which hit 73% in 2016, looks quite tame this year at 62% (it would have been 76% under the old GDP measure). But simply changing the estimated size of the economy does not magically bring in more tax. Interest payments still consume one-third of government revenues, which is more than it spends on education or health. Increasing the amount raised in taxes will be tough, because most of the economy is informal. The IMF notes that taxes make

up a smaller share of GDP (14% in Ghana) than in most other developing countries and classifies it as being at “high risk of debt distress”. Investors are also wary and demand much higher interest rates to hold Ghana’s foreigncurrency bonds compared with Nigeria’s or Kenya’s. One reason is that they worry the government will start spending freely ahead of elections in 2020, as governments often have in the past. Gregory Smith of Renaissance Capital, a bank, points out that budget deficits were almost one percentage point of GDP higher in each of the seven election years since 1990 than in non-election years. The trend has accelerated: in 2012 and 2016 deficits ballooned by almost three percentage points of GDP. Mr Akufo-Addo won the election in 2016 with the preposterous promise of a factory in every district. This time he might do better by breaking the old pattern of running up debts before an election, only to turn to the IMF afterwards for another bail-out.

Pay up or be pummelled

Burundi’s “eternal supreme guide” enforces an “election tax” Ruling-party thugs can collect it as often as they want

ODSHORT-CHANGEDPierre Nkurunziza, Burundi’s president, when endowing people with democratic values. But someone gave him more than his share of selfconfidence. Last year he christened himself the country’s “Eternal Supreme Guide”. He then changed the constitution so that he could stay in power until 2034. Naturally, he claims to have been appointed by God. Nonetheless, he is still keen to hold an election in 2020. Alas, his cash-strapped government cannot afford to pay for it. After years of human-rights abuses, donors have cut off most aid. Mr Nkurunziza’s solution is more abuses. In 2017 he introduced an annual election tax of 2,000 Burundian francs ($1.09) per household. The youth wing of the ruling party has been given the task of collecting it. Known as the Imbonerakure (“those who see far”), their day job is to rough up dissidents. Since the new tax was introduced they have roamed neighbourhoods, armed with sticks, to collect the election tax as many times as they please. “This election tax has given these men the green light to extort money from the population all the time,” says Lewis Mudge of Human Rights Watch, a pressure group. In the past four years Burundi has

sunk ever deeper into poverty. More than half of children under five are chronically malnourished. Threequarters of Burundians live in extreme poverty, says the World Bank. People have grown poorer, on average, since 2014. This was a sharp downward lurch for a country that had been making steady progress since the end, in 2005, of a genocidal 12-year-long civil war between Hutus and Tutsis, the two main ethnic groups. About 300,000 people are thought to have died in the conflict. The peace treaties that ended it called on the Hutus and Tutsis to share power and put checks on the authority of the president, who was limited to no more than two terms

in office. This fragile peace unravelled in 2015 when Mr Nkurunziza decided to stand for a third term. (He insisted that his first did not count because he had been appointed by parliament.) His love of office was, however, not matched by his people’s love for him. Many took to the streets in protest and army officers mounted a short-lived coup. The Eternal Supreme Guide responded brutally. Human Rights Watch reckons that about 1,700 people were killed in 2015-18 by state security forces and the Imbonerakure. Bloated corpses were found, weighed down with stones, in Lake Tanganyika. In 2016 the European Union, which had provided about half the govern-

ment’s budget, stopped handing over direct aid. It also imposed travel bans and financial sanctions on senior politicians. Yet these measures have had little effect. Mr Nkurunziza has brazenly sent foreign witnesses packing. About 30 international NGOs have left or been pushed out. In February the UN was forced to close its humanrights office in Burundi. This month the government suspended the last independent civil-rights group, Parcem, which had campaigned for better governance. In this darkness, brutality is flourishing. Around 350,000 people have fled, some so desperate that they have gone to the eastern provinces of the Democratic Republic of Congo, which are themselves ravaged by armed militias. One middle-aged woman in Congo says the Imbonerakure would arrive at her door three times a month. “They would come to the house at night and say: ‘Give us the money for the election or we will kill you,’” she says. “We haven’t even got enough money for school fees, how could we pay for the election?” On their last visit her husband refused to give them money, so they beat up the whole family, including her small children, before dragging him away. She has had no

news of him since. In the countryside men from the Imbonerakure sit at the roadside, demanding that passers-by display their election-tax receipts. Burundians are also being strong-armed into building offices for the ruling party. A young man says that the thugs accosted him one morning saying: “Pay us money or go and prepare the bricks.”

Monday 24 June 2019

BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

COMPANIES & MARKETS

Lead Fixed Income Fund reports N44m PAT on expanding subscriber base Pg. 24

COMPANY NEWS ANALYSIS INSIGHT

INSURANCE

Nigerian insurance stocks see biggest gain in 6 years as Linkage Assurance, NEM surge OLUWASEGUN OLAKOYENIKAN

tocks of Nigerian insurance companies recorded their best weekly performance in more than 6 years on the Nigerian Stock Exchange (NSE) on the back of gains recorded by Linkage Assurance and Nem Insurance, even as market’s bearish sentiment extended to the third straight week. Despite the market shedding 0.65 percent of its value, the NSE insurance index, which captures the performance of the mostcapitalized and liquid insurance companies, surged 8.34 percent to close at 125.65 points at the end-week Friday, June 21, 2019, the biggest gain recorded by the sector since February 2013. Linkage Assurance plc snapped a four-day winning streak at the Lagos bourse to close at 66 kobo on Friday, bringing its total return for the week to 37.50 percent. As a result, the stock emerged the best performer on the NSE. Similarly, Nem Insurance, the third-biggest insurance company listed on the NSE by market capitalisation, followed closely having delivered 33.33 percent value for

its shareholders in a week, the stock’s best weekly outing since end-week, January 18, 2019. Nem Insurance closed at N2.80, its highest level in 6 months. Other insurance firms which recorded gains include Law Union and Rock Insurance, Prestige Assurance and the biggest listed insurance firm by market capitalisation, Axa Mansard. The three companies gained 8.70 percent, 8 percent and 1.57 percent to close at 50 kobo, 54 kobo and N1.94 per

share, respectively. Nigerian insurance companies are bracing up for a recapitalisation after the National Insurance Commission (NAICOM), the apex regulator of the sector, in May 2019 directed the industry operators in the country to increase their minimum paid-up share capital within 13 months or forfeit their licences. The capital base of life insurance companies was raised from N2 billion to N8 billion. General companies got a raise from N3

billion to N10 billion, composite insurance companies’ capital requirement was increased from N5 billion to N18 billion, re-insurance companies was moved from N10 billion to N20 billion. Linkage Assurance offers individual and group life insurance products as well as non-life insurance products such as motor and casualty insurance, while Nem Insurance provides general and non-life insurance policies. Checks by BusinessDay on

companies’ financials reveal that the issued share capital of Linkage Assurance and Nem Insurance as at end-March 2019 stood at N4 billion and N4.2 billion, respectively. Linkage Insurance’s gross premium written rose marginally by 2 percent to N2.21 billion in the first three months of this year from N2.17 billion achieved in the corresponding period of 2018. Although gross premium income for the firm slumped 4 percent to N1.48 billion in the review period, that was not enough to upset the insurance company’s net premium income which increased by 13 percent to N1.06 billion. This increase contributed to the 17 percent surge in its bottom line to hit N439.2 million in the first quarter of 2019 compared with N375.3 million recorded in the same quarter last year. Nem Insurance grew its gross premium written by 19.8 percent to N6.79 billion in the first quarter of 2019 from N5.67 billion. The firm recorded 35.19 percent growth to N4.4 billion in its net premium income for the period. As a result, post-tax profit jumped some 13 percent to settle at N849.5 million from N751.9 million.

TELECOMS

Vodacom restructures African unit, sells operations in Nigeria, 4 others ISRAEL ODUBOLA

ohannesburg-based mobile operator, Vodacom Group Limited, has announced a strategic repositioning of its Vodacom Business Africa (VBA) unit. The company entered into agreement to sell its Business Africa operations in Angola, Nigeria, Ghana, Angola and Ivory Coast, and intend partnering local buyers. Vodacom, a subsidiary of the British multinational telecom conglomerate, Vodafone Group Plc, has given a nod to sell its Business Africa’s Angolan operations and assets to Internet Technologies Angola. Synergy Communications will acquire 100 percent of Vodacom Business Africa (VBA) operations in Nigeria, Zambia and Ivory Coast, while Vodafone Ghana will take over VBA operations in Ghana. The companies are in the process of concluding the acquisitions, which are subject to approval of regulatory authori-

ties in the five markets. Given this, the mobile operator will enter into service provider agreements with Synergy Communications in Nigeria, Zambia and Ivory Coast; International Technologies Angola (ITA) in Angola and Vodafone Ghana in Ghana. In each of the five markets, the respective buyers will acquire all of the operations and assets held by Vodacom. The company stated that it will no longer directly service global enterprise customers in the five markets, but will continue to operate as a PanAfrican telecommunications network provider through local service provider agreements. Vodacom’s chief executive officer, Shameel Joosub, explained that the repositioning of the company’s business Africa operations is to put the mobile operator on a path of sustainable growth, and doesn’t connote the shutting down operations in the said markets. “Crucially, Vodacom is not

exiting any of the territories related to this transaction and remain focused on continuing to deliver exceptional services to our global and multinational clients in these markets through long-term commercial agreements” said Joosub. He added that the telecom company will through local service providers, will continue to service clients in each market, and leverage collective strengths to meet the changing requirements of each client across the five markets. Vodacom noted that the new model aligns with digital technology and would foster better local collaboration. Synergy Communications has presence in Botswana, Mali and Mozambique, and the acquisition reflects its aspiration to be the leading provider of cloud and digital services in key markets across Sub-Saharan Africa. From its roots in South Africa, Vodacom has grown its operations to include networks in Tanzania, Democratic Re-

public of Congo, Mozambique and Lesotho, and provide voice, messaging, data and converged services to over 50 million customers in more than 30 African countries.

L-R: Roel van Neerbos, president, FrieslandCampina Consumer Dairy; Jacobs Ajekigbe, chairman board of directors, FrieslandCampina WAMCO; Oyinkan Ade-Ajayi, non-executive director, and Ben Langat, managing director, FrieslandCampina WAMCO Nigeria PLC, at the 46th annual general meeting of the company in Lagos. Pic by Pius Okeosisi

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

Monday 24 June 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

FUNDS

Lead Fixed Income Fund reports N44m PAT on expanding subscriber base ENDURANCE OKAFOR

ead Fixed Income Fund, an open-ended fund managed by Lead Asset Management Limited, reported a 14.7 percent increase in its profit after tax (PAT) for the year ended December 31 2018, fuelled by the increase in new units of subscribers. Data compiled from the company’s financials revealed that it grew PAT by N5.64 million, from N38.36 million reported in 2017 to N44 million in 2018. In the review period, the Fund recorded 3.83 million units of new subscribers to the tune of N459.55 million in 2018, 32.37 percent increase when compared to the N347.16 million reported a year earlier. “All expectation were met, the unit holders are actually happy- since the Fixed Income Fund was created, we have

paid dividend twice in a year.I think we are doing very well, our current yields is about 13.6 percent, which is clearly above inflation rate and the indices are looking quite attractive even for Nigeria as a country,” Taiwo Olashore, Managing Director of Lead Asset Management Limited told BusinessDay at the company’s second Annual General Meeting (AGM). Registered and authorized in Nigeria as a Unit Trust Scheme under Section 160 of the Investment & Securities Act, Lead Fixed Income Fund recorded a growth in revenue by 7.27 percent in the review year, from N47.99 million it generated in 2017 to N51.477 in 2018. Thus, the Manager is proposing 25 percent dividend for full-year ended 31 December 2018 in line with the provisions of the Trust Deed. That

is N2.08 dividend payment per unit to members whose name appears in the Register of the members as at close of book for the review year. Commenting on her investment with the fund manager Oyekanmi Marian said “I am a subscriber with Lead Asset Management, I signed up with them in 2018 and I find it very interesting, because the way the Fund appreciated is very fast and made me realize the Fund is a serious business.” BusinessDay analysis of the company’s investment options revealed that the Fund allocated its resources to: Treasury bill, Bonds, commercial paper and cash at bank in the year under review. According to the company, asset Allocation requirement of the Fund was invested in accordance with the set Asset Allocation classes during the period under review.

L-R: Delvin Hainsworth, managing director, Foods, Flour Mills of Nigeria; Monsur Ejide, chairman, Ejide Nigeria Limited, and Paul Gbededo, GMD, Flour Mills of Nigeria, at the 2018-19 Flour Mills of Nigeria customers forum and awards in Lagos. Pic by Olawale Amoo

HEALTHCARE

MDaaS Global nears $1m seed funding deal ODINAKA ANUDU

ealthtech Company MDaaS Global is closing on $1 million seed funding deal to replicate its innovative diagnostic centre business model across West Africa. Led by Consonance Investment Managers, with participation from Techstars, FINCA Ventures, an investment initiative of FINCA International, and others, the round will see MDaaS expand operations, supporting the company’s plan to open 100 additional centres in Nigeria and West Africa over the next five years. MDaaS Global is building a network of tech-enabled diagnostic facilities in Nigeria. MDaaS was created to address the lack of high-quality,

affordable diagnostic services available for low- and middleincome sub-Saharan Africans, starting with Nigeria’s 130 million low- and middle-income patients. Where available and up-to-date, health services are unaffordable for most of Nigeria’s population, and expensive out-of-pocket costs discourage patients. MDaaS leverages its vertically-integrated supply chain, technology platform, and patient-centred design to provide modern, convenient services at a price point patients can afford. It offers a wide array of high-impact diagnostic procedures from simple malaria tests to echocardiograms and pap smears. And MDaaS’ affordability is helping change the healthcare narrative, with basic procedures, like

obstetric ultrasounds, starting at just $4. Founded in 2016 by Oluwasoga Oni, Opeyemi Ologun, Genevieve Barnard Oni, and Joseph McCord, MDaaS was incubated at MIT’s Legatum Center for Development and Entrepreneurship and was part of the inaugural Techstars Impact class of 2018. The company launched its flagship diagnostic centre in Ibadan, Nigeria’s 3rd most populous city, in November 2017 under its patient- and physician-facing brand BeaconHealth. To date, the company has served over 9,000 low- and middle-income patients, speedily identifying health issues and connecting them with a variety of medical specialists and affordable treatment options.

L-R: Tolulope Adewole, CMO, SYNLAB Nigeria; Clare Omatseye, president, Healthcare Federation of Nigeria; Pamela Ajayi, CEO, SYNLAB Nigeria and Odein Ajumogobia, former minister for foreign affairs, at the official opening of SYNLAB’s ultramodern wellness facility in Lagos.

TECHNOLOGY

Microsoft4Afrika, ICE Commercial Power collaborate to connect 10,000 SMEs to solar power JOSEPHINE OKOJIE

lobal tech giant, Microsoft, through its 4Afrika initiative, has entered into a partnership with ICE Commercial Power, a Nigerian-based renewable energy provider, to provide reliable solar power to about 10,000 Small and Medium Enterprises (SMEs) across the country over the next two years. Emmanuel Ekwueme, chief executive officer, ICE Commercial Power, who disclosed this in a statement made available to BusinessDay, said the partnership with Microsoft4Afrika will enable the company leverage a powerful cloud platform to deliver quality service to its customers. ICE had piloted its business

model with a focus on small businesses with many of them suffering most owing to the country’s electricity supply woos, making a greater percentage of them having higher production cost. “The team at Microsoft 4Afrika and Microsoft Nigeria has been very supportive from day one, and with their partnership, our earlier pilot program has been a great success. This next phase will enable us to scale our technology to reach more small businesses across the country,” Ekwueme said. He noted that a major technology component of the ICE operation involves utilizing cloud-connected solar equipment, which helps facilitate remote monitoring and mainte-

nance, adding that the company maintains an integrated web and mobile-based platform that helps to facilitate payments processing for customers. Commenting also, EduAbasi Essien, ISV Lead West Africa for Microsoft4Afrika, said the partnership was vital for wealth creation and youth engagement in viable business enterprises in the country. “SMEs play such a vital role in driving economic growth and job creation on the continent that enabling their success is a key part of what we do through the 4Afrika Initiative. We’re excited to partner with ICE Commercial Power on connecting SMEs to alternative energy sources, minimising business downtime and maximising productivity,” Essien said.

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L-R: Rose Hamis, company secretary, Chemicals and Allied Products plc; Solomon Aigbavboa, acting chairman, CAP plc, and Omolara Elemide, acting managing director, at the 50th annual general meeting of the company in Lagos. Pic by Olawale Amoo

L-R: Olukunle Iyanda, president/chairman of council, Nigerian Institute of Management (Chartered) (NIM); Oluwatoyin Ogundipe, vice chancellor, University of Lagos/guest speaker, and Pat Anabor, deputy president, NIM, at the 2019 NIM colloquium, with the theme “Democracy and the Electoral Process: The Nigerian Challenge” in Lagos. Pic by Olawale Amoo

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Monday 24 June 2019

BUSINESS DAY

cityfile FRSC goes after tricycles without plates from August 1

Niyi Toluwalope (m), MD/CEO of Etrazact International plc, with some pupils of Teslim Elias primary school Isale-Eko, at a CSR event at the school.

20 human traffickers nabbed in Benin …as 38 victims rescued by NAPTIP IDRIS UMAR MOMOH, Benin

o fewer than 20 suspected human traffickers have been arrested by the Benin zonal command of the National Agency for the Prohibition of Trafficking in Persons (NAPTIP). Zonal commander in charge of Edo and Delta zone, Nduka Nwanwenne, informed at the weekend that the suspects were arrested between Janu-

ary, 2019 and May, 2019. According to him, while some of the suspects are already court, others are still being held in the command’s custody pending completion of investigation on their cases. Nwanwenne further disclosed that within the period, 38 trafficking survivors were rescued, with 46 cases reported, while 36 cases were pending in courts. He explained that the major challenge with regard to speedy determination of cases has been

retirement of judges. He, however, noted that with the recent visit of director-general, of agency, Julie Okah-Donli, to the chief judge of Edo State, two special courts have been designated to handle human trafficking cases. In line with the policy of NAPTIP to rehabilitate and reintegrate survivors into the society, Nwanwenne said that the director-general has directed the zonal command to empower 20 survivors of human trafficking.

“The survivors have undergone and completed training in various vocational fields, including catering and hospitality management, fashion and design and cosmetology. However, in the last two years, no fewer than 100 survivors had been empowered by the agency,” he said. Nwanwenne added that a template had been put in place to stop beneficiaries of the empowerment scheme from disposing of the items or attempting to be re-trafficked.

Boko Haram hampering development of northern communities ABDULWAHEED ADUBI, Kaduna onal coordinator, Nigeria Customs Services (NSC), Zone ‘B’, Abubakar Bashir says activities of the Boko Haram insurgents are hampering development across communities in the northern part of the country. Bashir said as a result, the revenue generation of the zone has been seriously threatened and therefore requires concerted measures to reverse. The Customs boss poke during a visit of the Nigeria Union of Journalists (NUJ),

Kaduna State council, to his office. According to him, prior to the advent of the Boko Haram insurgency and other security challenges, the zone was known for sub-Saharan trading activities and high volume of cargo goods coming into the entire north. “This zone and the entire northern part is the life-wire of the country in terms of trading activities. This is even traced to the history of sub-Saharan trading routes domiciled in Kano, Chad, Burkina Faso. www.businessday.ng

“The volume of cargo goods coming to the north was so much, but insecurity has reduced the cargo drastically. But Boko Haram and other security issues have hampered a lot of economic activities in the zone.” He, however, said there was the need for improved Customs-community relationship, as there was the lack of information flow from the communities to Customs. ‘We will reach out to the communities, traditional leaders and groups for adequate information.

We need to showcase to the people how to make proper exportation and importation.” Bashir said the Customs was planning to organise import and export seminar in the zone where relevant stakeholders would be invited to improve their services. “This is going to be the first of the kind in the zone,” he said. C ha i r ma n , Ni g e r i a Union of Journalists (NUJ), Kaduna State council, Yusuf Adamu assured the Customs zone ‘B’ coordinator that the union would partner with the Customs.

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t will no longer be business as usual for tricycles and motorcycles operating without valid number plates, as the Federal Road Safety Corps (FRSC) has directed a nationwide clampdown on them with effect from August 1. The corps marshal, Boboye Oyeyemi, issued the directive on Friday, in Abuja. The FRSC said the move became necessary as a result of the difficulty encountered in identifying such category of vehicles when used to commit traffic and criminal offences. “This development has become imperative following the corps’ renewed commitment to ensuring security of lives and property of citizens, by controlling and reducing the rate of crime. “Motorcycles and tricycles without number plates are believed not to be captured in the National Vehicle database hence, in the event of a crash or crime cannot be traced,” said Oyeyemi in a statement. According to him, “the National Road Traffic Regulations (NRTR) 2012 was made pursuant to section 5(e) of the FRSC (Estab-

lishment) Act, 2007. The Act specifies the type of identification number plates for all categories of vehicles including motorcycles, tricycles and omnibus. Regulations 8 (1a and 1b) also states that a vehicle may be registered in anyone of the following categories – motorcycles or tricycles. Also, regulations 39 (9) of the NRTR 2012 provides that all private and commercial vehicles shall as from the commencement of these regulations have on them, vehicle identification number plates referred to in this regulation. And it shall be an offence for any vehicle not to have the said identification number plates. Vehicles in this context include motorcycles and tricycles. “ To this end, commanding officers nationwide have been mandated to engage relevant stakeholders and associations to intimate them on the proposed clampdown,” the corps marshal said. The FRSC, however, urged the general public to desist from patronising motorcycles and tricycles without number plates as they stand the risk of being abandoned in times of crash or crime.

Police arrest fake medical doctor in Osun

he police in Osogbo have arrested a 30-year suspected fake medical doctor, Rafiu Naheem, in Inisa, Odo Otin local government area of Osun. Spokesperson of the police in Osun, Adekunle Ajisebutu, said the suspect was arrested by detectives attached to the Criminal Investigation Department (CID) of the command. Ajisebutu said the suspect, a school certificate holder, without a formal training, had been operating an unregistered clinic in a one-bedroom mud apartment, treating unsuspecting patients of different ailments. “Intelligence revealed that the suspect had been placing patients on admission, and had been procuring abortions and handling very complex medical conditions, which he lacks professional expertise to handle. “He was thereby endan@Businessdayng

gering the precious lives of innocent people who patronised him,” he said. He said the suspect confessed to the crime but blamed his action on joblessness, adding that the suspect also revealed that although he had no certificate, he learned auxiliary nursing at a yet-to-be identified private hospital. “When a search was conducted in his illegal ‘clinic’ located in a filthy environment at Inisa area, Odo Otin local government area of Osun State, following items were recovered: stethoscope, sphygmomanometer (blood pressure gauge), drips, injection and syringe. “Others are: circumcision set, HCG Pregnancy Rapid Test (urine) accurate, scalpel and other theater instruments, drips, thermometer, analgesic and assorted drugs,” he said. He said that the suspect would be arraigned in court immediately. NAN

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Monday 24 June 2019

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real sector watch

Why NESREA should not add to manufacturers’ problems ODINAKA ANUDU

igerian manufacturers have enough problems. They struggle with poor infrastructure, high cost of production, low patronage, smuggling, poor access to capital and multiple taxes. Therefore, the National Environmental Standards and Regulations Enforcement Agency (NESREA) should not add to these problems. NESREA was established in 2007 to ensure compliance with environmental laws. The agency, which is under the Ministry of Environment, has the power to establish and enforce administrative penalties, seal and close down premises or facilities whose activities pose imminent threat to life and property even while a warrant or court order is being sought from court. While the agency makes efforts to ensure that the environment and human health are protected from harmful environmental practices, some manufacturers in the chemicals and electrical space say it takes time to get NESREA clearance. For starters, NESREA

Noimot Salako-Oyedele, deputy governor of Ogun State with Adeyinka Adesope, group managing director of Palton Morgan during a courtesy visit of staff members of the Palton Morgan Group comprising PropertyMart, Grenadines Home, Mcpalton, Mitcherutti Contractors and Paltonloitte to Abeokuta,Ogun State recently.

clearance is required by the Customs when a manufacturer imports chemicals or electrical-related input. BusinessDay checks on the website of NESREA revealed that getting the agency’s clearance involves four steps. The clearance is expected to be obtained in 48 hours if all the requirements are complied with, according to the agency’s website, but some manufacturers say this is not often the case. At an interactive session

between the agency and the Manufacturers Association of Nigeria (MAN) weekend, some manufacturers complained that they had to pay almost N2 million on air quality and air toxic clearance, audit report, and N1 million to NESREA-listed consultants to get clearance. Even with the consultants, delays have become inevitable, thereby stalling delivery of raw materials to factories, manufacturers said. More so, manufacturers

How poor policy hurts manufacturers ODINAKA ANUDU & GBEMI FAMINU

ecently, Grif, maker of aluminium drums, exited Nigeria because the company could not get annealed cold-rolled steel which was its key raw material. The cold-rolled steel is one of the items on the Central Bank of Nigeria’s list of 41 items restricted from accessing foreign exchange since 2016. Yet, as of today, nobody manufactures annealed cold-rolled steel. Right from the government of Goodluck Jonathan, Western Metal Products Company Limited (WEMPCO) has been the only company allowed to produce annealed cold-rolled steel and supply to other downstream firms which use it to make aluminium products and wheel barrows. But for a

long time, the company has been unable to produce the steel and is even accused of importing the product. Consequently, most of the barrow and aluminium makers are left stranded. Federated Steel from China, maker of iron rods, has exited Nigeria and sold its assets to MNIL Limited. Another iron rod maker, Universal Steel, has shut down. Sources close to the company attributed its closure to smuggling and unbridled import of iron rods, which are 20 to 30 percent cheaper. BusinessDay gathered from reliable sources in the steel sector that Industrial And Farm Equipment Company, a maker of wheel barrow, has exited. Nigeria had 21 enamel makers in 1980s but only about five companies are barely existing. Like Grif, Wahum is about to shut down as it can’t produce because it is unable to get www.businessday.ng

cold-rolled steel. Generally, the steel sector and its ancillary sub-sectors are struggling. First Aluminium is also in dire straits as the company continues to be hobbled by cheap aluminium products. Qualitec Industries, a major maker of roofing sheets, is nearing shut-down, having downsized workforce by over 50 percent in the last four years. When BusinessDay visited its factory at Ota, Ogun State, only few workers were in its rolling mills and caster section. “We are really struggling. In the metals industry, the majority of the companies are dead,” Kufile said. Nigeria exited recession in 2017, which claimed at least 50 manufacturers, mainly SMEs, according to the Manufacturers Association of Nigeria (MAN). Much of the problem was caused by poor access to dollars to import inputs.

are meant to renew their permits each year and get audit reports every three years, which combine to raise production costs. “You will all agree with me that despite the effort of our government, our members are confronted with varied challenges in the process of carrying out their businesses,” Segun Ajayi-Kadir, director-general, MAN, said. “The activities of NESREA are crucial to safeguarding our environment. It, there-

fore, suffices to say that the agency can provide solutions to the challenges being confronted by our members in their various locations as it relates to the environment,” Ajayi-Kadir, represented by Ambrose Oruche, director of corporate affairs, said. Okey Akpa, chairman, Chemical & Pharmaceutical Sectoral Group of MAN, said manufacturers are constantly faced with environmental challenges bothering on regulations, obtaining permits, overregulation, balancing the ecological system in the wake of growing concern for environmental sustainability, the use of green energy and multiplication of functions by government agencies. Akpa, represented by Shoji Oladimeji, vice president of the group, explained that without the alignments of the functions of these agencies, manufacturers would be burdened with additional costs of production which would continue to make products manufactured in Nigeria uncompetitive in the international market. On his part, Oladimeji said most of the manufacturers not complying with NASREA regulations were those that do not belong to MAN. Jide Mike, former director-general of MAN, urged

the agency to check secondhand products that litter the country. Defending NESREA, Aliyu Jauro, director-general, / CEO of the agency, said good environmental governance presupposes effective and adequate environmental compliance monitoring and enforcement mechanism to address environmental problems at all levels. Represented by Miranda Amachree, director of inspection and enforcement at the agency, Jauro said sustainable development could only be achieved in an atmosphere of good environmental governance. He said some of the consultants engaged by manufacturers do not look at documents any more, adding that delays happen because manufacturers have not submitted all the required documents. “You need to have an environmental officer in your facility,” he advised. He explained that the new Extended Producer Responsibility has been on since 2009 and operational guidelines prepared since 2014, adding that some practices like burning of cables to get copper can cause health challenges when inhaled. She said this is what the agency is trying to prevent from happening.

Innovation sustains Cadbury Nigeria …pays shareholders N471m as dividend

adbur y Niger ia Plc (“Cadbur y Nigeria” or “the Company”) has announced a dividend of N471million for its shareholders, in line with its current efforts to create more value for investors. Atedo Peterside, chairman, Cadbury Nigeria, made this known at the Company’s 54th annual general meeting (AGM), in Lagos over the weekend. Attributing the company’s positive growth in the year under review to success of its cost-cutting measures, effective marketing strategy, and superlative performance of its various brands, he assured that Cadbury Nigeria will continue to sustain its dividend policy. “We re-launched our iconic cocoa beverage drink, Bournvita, with a new improved taste, last year, in line

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with consumers’ tastes and preferences. Feedback from consumers indicate that the new Bournvita has gained wide acceptance. “Cadbury Hot Chocolate 3-in-1 brand, our treat portfolio, recorded substantial growth, driven by its unique offering, while our gum and candy brands also recorded success in their respective categories. In addition, we sustained our current price competitiveness, and increased our route-to-market coverage/footprint in 2018.” Shareholders at the AGM applauded the company for increasing its dividend payment from 16 kobo in 2017 to 25 kobo in 2018. They charged Cadbury Nigeria to continue to evolve ways of consolidating on the performance of its brands, while exploring other options including local manufacture of Hot Chocolate 3 in 1, which @Businessdayng

is currently imported from Ghana, to create more jobs locally. They also commended Mondelez International and the board of directors of Cadbury Nigeria for the appointment of Oyeyimika Adeboye as the first female managing director of the company, effective 1st April, 2019. In their various remarks, the shareholders said the appointment has restored confidence in the ability of Nigerians to lead multinationals. However, they charged Adeboye, who took over from Amir Shamsi to justify her elevation by sustaining the momentum and taking the company to greater heights. They also welcomed the appointment of Ogaga Ologe, the company’s erstwhile financial controller, who was appointed as the new finance director.

Monday 24 June 2019

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real sector watch

FG must stop substandard diapers from coming into Nigerian market — Wemy CEO Paul Odunaiya is the managing director of Wemy Industries, a company that manufactures well-known diapers such as Dr Brown’s and Nightingale. In this interview with Odinaka Anudu, Industry Editor, Odunaiya explains why his firm experienced a dip few years ago, assuring that it is back and has come to stay. You were out of the market for almost three years. What really happened? hree years ago, we had a massive setback because of recession. We had a lot of plans and we were in the process of securing a facility from the Bank of Industry (BOI). However, we were on the brink of closing down. So, we were basically on life support, trying to survive as a business. By the grace of God and the relationships with international suppliers who gave us goods on credit, we got going. But we started building back-up. The BOI loan we applied for was approved, but not without challenges. There is a massive testimony behind our return to the market. The money we got then could only be deployed in 2018 because of all the financial debts and devaluation of currency, which affected our business and other businesses. Also, BOI has been very supportive. The bank also enabled us to access other intervention funds. We approached them and explained to them that we are an indigenous company and they supported us. Because of the downturn of the economy, we laid off over 200 workers. But thankfully, the hard work has begun to bear fruits. We were able to deploy the funds such that a lot of machines are arriving now. So, we are back in the market for our baby diaper segment. The intervention funds also helped us in dealing with some of our debts as a business and also gain additional working capital. That has been a plus for us. We have been able to deploy that into our business. The impact of the BOI intervention fund and the investment we got from BOI will come to light this year. We have started seeing some impact on our baby diaper sales. Remember, we are the pioneer manufacturer of baby diaper in Nigeria and Africa. We started it in

1979. The future of Wemy Industries is better today than it was in 2015. We have brought in our adult diaper machine already and very soon we will be the pioneer manufacturer of adult diaper in Nigeria and West Africa. Not to forget, we are also the pioneer and market leaders of baby wipes in Nigeria. Other people have taken the mantle in the diaper business but we are coming back, because it was during the recession that one of our competitors entered the market. Dr Brown’s is back. There is a massive demand. Our old customers are coming back. Generally, the industry seems to be struggling. What is happening? It is a combination of many factors. From a business point of view, devaluation is not necessarily a bad thing. Controlled devaluation is what we need. But if you have one price today and another price tomorrow, you will not be able to plan properly. It is bad for business. Price instability is crippling businesses. Influx of substandard products is also an issue. Currently, I am discussing with Ministry of Industry, Trade and Investment to come up with a diaper policy that will increase tariffs to 55 percent so they don’t allow foreign companies to dump seconds or substandard diapers on the Nigerian market. You see them in nylons and colourless bags and they give these to our babies. We then go ahead to sell and use them on our babies. Because many of these diapers are not of good quality; they could cause rashes and infections. Some might even leak and soil the baby. These substandard diapers are packed in white bails and sold to Nigerian merchants at ridiculously low prices, hence their large volumes in the market. What we need is to stop this kind of products from coming into this market. I think that is what the ministry is www.businessday.ng

triates and they have very expensive machines.

Paul Odunaiya

working with us to achieve. It is a hygiene product and we won’t allow that. If they won’t allow their babies to use seconds, why should our babies use them? With what they do, rather than use two or three diapers in a day on your child, you now use seven or eight. So, what are your plans now? Well, what affected us was that we were trading and manufacturing at that time. But as of today, we are 100 percent manufacturing. The other plan is to hedge our business against some of these factors. We plan to expand our business to enable us to produce at lower costs and also to add businesses into our portfolio that will allow us to export and earn foreign exchange (FX). We import 80 percent of our inputs today. So, part of our plan to hedge against devaluation is to export and earn FX. That is why we have set up the adult diaper machine. Most West African countries import adult diapers. So, we will provide import substitution for them by manufacturing them in this plant. We intend to export to ECOWAS countries. We have also tried to expand our local inputs in terms of packaging. On some product lines,

we source 60 to 70 percent locally; on some lines, it is 10 percent. But most of our packaging materials are all done locally. We anticipate that within five to 10 years, with the advent of Dangote plant, we will expand our backward integration. Hygiene business is a universal business and it allows us to go to other countries. Women will always have babies. There will always be ‘incontinents’. We also have people from the US who say they would like to buy from us in Nigeria because the advantage of a devalued currency is that it is cheap for them. There is an opportunity to sell to other countries. There is an opportunity that does not show itself until you start investing in something. If we have a good market for diapers as you have just said, why are some manufacturers shutting down? My thinking is that it is the high cost of operations. There is a profit motive in being in Nigeria. The companies are here because they are making money. If they don’t make money, they will leave. I suspect they may not be meeting their projections due to increased competition and overhead costs. Some of them employ a lot of expa-

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When I met you in 2015, you were optimistic. Are you still that optimistic now? I have felt the heat and fire. I think we had the worst recession in 25 years. However, if you don’t go through that fire, it won’t prepare you. It trains you. If you are always experiencing success, without experiencing failure, you won’t know how to deal with difficult situations. I think our ambitions are still the same. We will be a listed business, but we are a lot more careful now than before. But I think going through that has made us an efficient company. We don’t allow any inefficiency, any waste now. We manage what we have. We have started employing more people. Within the last two to three months, we have employed over 100 people. I can tell you that with the intervention fund, our business will grow bigger than it was. We are now 120 to 130 workers. We were 400 before the recession. We are likely to get to 300 this time. We are looking for engineers. There are unemployed engineers and we have found a lot of them and employed a lot of graduates. We have to be a bit more careful in investing in people. We can’t just import expatriates and pay them heavily. We believe in training our people because it is a lot cheaper. We are making it attractive for them. Is any investor talking to you at the moment? A private equity was talking to us but recession affected all those business dealings. There will likely be an announcement soon if everything goes well. We don’t need as much money as we needed before. Too much money or too little money could be dangerous. But it is a big market. Wemy Industries is a goldmine of the business. I want Nigerians to know that we @Businessdayng

are the representatives of Nigeria in this business. That is why we want to be listed. When we are listed, everybody can buy and say ‘this is my business’. It’s high time we had our own. Are you getting any incentive from the government? We have the capacity to satisfy the market. But we want tariffs increased. Once tariffs are increased, we will invest more and employ more. Instead of having 300 staff, we will import a machine and employ 1,000. In China, I know of a company that is listed which employs about 20,000 workers because they are producing for their market and also exporting. The more we invest in this business, the more we engage technicians, engineers and graduates. Can you satisfy demand if government decides to restrict importation of diapers? Let me first address the market issue. Northern Nigeria and Niger have the highest birth rate in the world. But the challenge is the purchasing power of our people. So, you must make products that have low price points. We still have a low penetration rate. In villages, they still use cloth nappies. Now to the question. Our installed capacity is about 700,000 units of diapers a day, but we are doing just 30 percent of that for now. It is not that we can’t do more. We don’t have enough engineers and workers. Once we sort out issues, we will do close to 90 percent of that. The industry can satisfy the market without doubt. How can government do to improve the industry? We need a diaper policy. Nigeria should not encourage the influx of substandard products into the country. There is multiplicity of agencies duplicating their functions. Government needs to address this and also issues around the Customs.

Monday 24 June 2019

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Ghana follows Nigeria back to back, increases capital base for insurance companies …gives operators 2-years to comply …to accept fresh capital injection, retained earnings Stories by Modestus Anaesoronye

ollowing Nigeria back to back, the insurance regulatory authority in Ghana, the National lnsurance Commission (NIC) has increased the minimum capital requirement for all insurance and reinsurance entities, as well as insurance brokers and loss adjusters operating in Ghana. The commissioner for Insurance of Ghana, Justice Yaw Ofori who disclosed this in a statement said insurance companies operating life and non-life (composite) are to increase their new minimum capital requirement from initial GHC 15 million (2.75 million dollar) to GHC 50 million (9.28 million dollar), while reinsurance companies initially operating with GHC 40 million (7.43 million dollar) are to increase theirs to GHC 125 million (23.21 million dollars). Insurance Broking companies and loss adjusters capital base was also increased from GHC 300,000 to GHC 500,000; while reinsurance brokers remains at GHC 1 million.

L-R: Saratu Umar Garba, company Secretary; Thomas Etuh, chairman; Polycarp Didam, managing director/CEO; and Aminu Babanginda, non-executive director, all of Veritas Kapital Assurance Plc during the Company’s 42nd Annual General Meeting in Abuja

The recapitalization is fixed to end on 30th of June 2021, with commencement date of 30th June 2019. The Nigerian insurance regulator, NAICOM had in a circular issued on Monday May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion, to N20 billion. According to the Commission,

the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies shall be required to fully comply not later than 30th June 2020. The Ghana statement titled “New Minimum Capital Requirement (MCR) for Insurance Entities”, the NIC said as part of ongoing efforts to stabilize, strengthen and enhance the capacity of the financial services

sector to support socio-economic development, the National lnsurance Commission has revised the Minimum Capital Requirements of all insurance entities. “The new Minimum Capital Requirements for the lnsurance industry will help strengthen the balance sheets of regulated lnsurance entities, thereby enhancing their underwriting capacity, make resources available for investment in essential technology and the development and distribution of appropriate products which will help increase lnsurance penetration. According to the statement, increasing the Minimum Capital Requirement is only one of a number of steps being taken by the NIC to develop a robust lnsurance industry. Other steps include improving strengthening the regulatory framework, implementation of Risk Based Supervision and solvency requirements, strengthening risk management and Corporate Governance structures and practices within the industry and thus improving the claims payment culture. It further noted that Risk management is at the core of lnsurance. lnsurance entities must therefore

ensure that they are adequately capitalized to bear the risks they underwrite. The capacity of an lnsurance company to accept risk, among others, depends on the financial strength of the company. Currently, there are 142 regulated lnsurance entities made up of 24 life lnsurance companies, 29 non-life lnsurance companies, 3 reinsurance companies and 85 lnsurance brokers and loss adjusters. The total asset of the insurance sector as at 2018 is in excess of GHS56 billion and the total Gross Written Premium is about GH 53 billion. The commission also said it has been holding consultations with various stakeholders on the revision of the MCR since 2017 having regard to the developments in the financial landscape. To ensure that the capitalizatlon exercise achieves its intended objectives of improving the financial capacity and liquidity of the lnsurance industry, (re)insurance companies will be required to meet the new requirements through Fresh capital (cash) injection, Capitalization of audited profits (retained earnings) and or a combination of the above options.

Veritas Kapital to consolidate on transformation initiatives, promise shareholders stronger future

nderwriting firm, Veritas Kapital Assurance Plc says it’s consolidating on its transformation initiatives started in 2018 to bolster performance and make the company a game changer among insurance companies in the country. Thomas Etua, chairman of the Company who disclosed the plans at its 42nd Annual General Meeting held in Abuja said Veritas Kapital Assurance will stay abreast with in-

dustry trends in her quest to grow market share and attain market leadership position. “Your Company is consolidating on major components of the businesses, service delivery, processes and operations to deliver superior returns in the short-term to our esteemed shareholders” Etua said this is believed will reposition the company as not only a major industry player, but also a potential game changer, expressing confidence about the future of

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the company. Reviewing performance of the Company in the 2018 financial year, he said Veritas Kapital Assurance Plc recorded a 40 percent growth in gross premium , from N2.32 billion in 2017 to N3.29 billion in the review year. With effective risk management practice, the firm recorded an underwriting profit of N873.15 million, as against N76.78 million in the previous year, showing a 1,037 percent increase.

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According to the chairman, despite the harsh operating environment, the firm maintained a strong balance sheet, with total assets standing at N11.06 billion, from N 10.24 billion, an increase of 8 percent, while shareholders fund stood at N7.7 billion, a 157 percent increase higher than statutory minimum capital requirement for non-life insurance companies in the country. Veritas Kapital Assurance Plc is one of Nigeria’s leading insurance

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companies in Nigeria. Formerly known as UnityKapital Assurance Plc was incorporated in 1973 as a private liability Company under the name, Kano State Insurance Company. The company was registered as a general business company; this move was endorsed and approved by the National Insurance Commission (NAICOM) and offers non-life Insurance products and services to individuals and institutions across Nigeria.

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Insurers step to maximise potentials as market disruption, technology changes consumer expectation …meets at consultative forum to review position Stories by Modestus Anaesoronye

nsurance industry like many other sectors is faced with a sweeping change that is driven by disruption and technological innovation. These are driving consumer taste and expectation, and so requiring that any industry that does not want to be left behind would have no other option than to understand the change, embrace it and maximize its potential. This is the focus of the Nigerian insurance industry when it meets beginning from Sunday June 30-July 2, 2019 at the Transcorp Hotel, Abuja for the 2018 National Insurance Conference with the theme “Disruption, Innovation and Business Growth, which would be delivered by one of the most savvy and iconic bankers in Nigeria, Herbert Wigwe,

managing director/CEO of Access Bank Plc. Muftau Oyegunle, chairman of the National Insurance Conference Planning Committee said the business world is witnessing an age of dramatic change characterized by evolving business models and propelled by technological innovation and disruption that is shaping business operations, hence operators must always create platforms to address the changing dynamics. According to him since the insurance industry occupies a central place in the nation’s economy, the industry could ill-afford to be stagnant in a rapidly moving world. As could be seen, even at the moment, the evolving new business models have capability to affect insurance product conception, marketing and acceptance by the consumers. It is believed that Wigwe would lend delegates some

L-R: Daniel Braie, managing director; Joshua Fumudoh, chairman; Moses Omorogbe, company secretary and Bernard Griesel, non-executive director, all of Linkage Assurance Plc during the 25th Annual General Meeting of the Company held in Lagos.

of the practical strategies that have seen Access Bank stay above waters in the financial ecosystem in view of the challenging environment besetting the financial sector and the nation’s economy generally.

Regency Assurance shareholders back company recapitalisation efforts

hareholders of Regency Alliance Plc, have urged the board of the company to retain dividend of the 2018 financial period as part of its support to enable the company meets the industry minimum capital requirement. They made the suggestion during the company’s 25th annual general meeting in Lagos. The chairman of the company, Baba Gana Kingibe, had announced a dividend payout of N200.062m for the financial year under review. He said, “As a way of appreciating our esteemed shareholders, your board is recommending a total dividend payout of N200.062m, representing 3k per 50k share for eligible shareholders.” But the shareholders suggested that the dividends should be ploughed back into the business in lieu of pending recapitalization. The gross premium production rose by 1.30 per cent from N3.368bn in 2017 to

N3.408bn in 2018. The effect of increased premium generation, he added, was however significantly eroded by the 24.30 per cent increase in net claims, 8.93 per cent increase in underwriting expenses and 3.94 per cent increase in management expenses when comparing the 2018 figures with that of 2017. He said there was an increase of 24.37 per cent in the investment income of the company, which was reflective of the high deposit rates and government yield rates offered during the year. The chairman disclosed that there was an increase of 6.68 per cent in profit after tax from N196.475m in 2017 to N209.599m in 2018. “It is expected that our company, building on the gains of past financial discipline and strategic positioning, will continue to produce better results in the future,” he said. The chairman said the total asset base of the company grew by 6.48 per cent www.businessday.ng

from 7.345bn in 2017 to N7.821bn in 2018. “This was due primarily to the effect of the foreign exchange translation loss arising from consolidating RegencyNem Insurance Limited Ghana’s account. “Total assets for our group and our company as at December 31st, 2018 stood at N9.853bn and N7.821bn respectively,” he said. The chairman said that the company’s expansion into retail insurance was being pursued with renewed vigour. According to him, the company intends to increase its market penetration through the deployment of an e-commerce platform on its website. After presenting the 2018 performance of the company, the chairman, Baba Gana Kingible announced his departure from the board. He expressed his gratitude to the company’s Board, Management, Staff and indeed the shareholders for their support in the last 9-years.

The Special Guest of Honour is president Muhammadu Buhari, while the Insurance Industry Consultative Committee (IICC) Chairman, Eddie Efekoha is the chief host. Oyegunle noted that in a

bid to make the conference which is the fifth in the series robust, sub-themes are to focus on “Digital disruption; threat and Opportunity” to be delivered by Siegfried Jegels,; “Transforming Insurance business through

inclusive insurance” by Eme Essien Lore while “Regulations, Innovation and Business Growth would be delivered by Doyin Salami. Also, issues relating to regulations and business growth would be handled by the Commissioner for Insurance, Mohammed Kari. “Needless to state that the business world today is rapidly changing due to evolving business models propelled by technological innovation and disruption. The nature of disruption could be massive and rapid with damning consequences for altering product lines, services and business models in fundamental ways. In the light of this, business leaders are expected to be well equipped to make right decisions and take steps towards emerging stronger while exploring positive disruption, analysts said while looking at the insurance market.

NEM CEO, Smart becomes AIO vice president

he African Insurance Organisation (AIO) has appointed the Chairman of Nigeria Insurers Association (NIA) and Managing Director, NEM Insurance Plc, Tope Smart as the vice president of the Organisation. The appointment took place at the just concluded AIO conference at the end of its 46th Conference and General Assembly held in Johannesburg, South Africa from the 8th – 13th June, 2019. Smart took over from Delphine Traoré, regional chief operating officer, Allianz Africa who was appointed AIO President at the end of the Assembly. This is coming following Nigeria’s acceptance to host the conference next year, 2020. In his acceptance speech, Smart assured members of the AIO of an effective and efficient work relationship. He disclosed that the hosting by Nigeria has the full backing of the Federal Government. Known with ‘FIRST’ since his young age, Smart born 14th April 1964 had his Secondary Education at Com-

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munity Grammar School, OmuoEkiti where he completed his O’ level examination and emerged as the overall best graduating student in 1981. In 1987, he graduated with a Second Class Upper degree in Insurance at the University of Lagos, and also won the University’s prize for the overall best graduating student in Insurance department; as well as the Unity Life and Fire Insurance Company Limited prize for the best graduating student in Insurance in the same year. Smart proceeded immediately after graduation for the National Youth Service Corps program at Everyman Insurance Brokers, Abuja where he was involved in the overall operations of the branch office, and was later offered employment as a Branch Manager with the same firm. He however left Abuja to join NigerianFrench Insurance Company Limited as one of the pioneer staff in 1989. In 1991, Smart completed his professional examination with the award of CII London where he equally won the prize for Distinction in Prop@Businessdayng

erty and Pecuniary Insurance. He served Nigerian French in various capacities and became an outstanding staff in the company. No wonder, he was rewarded with a double promotion and was made to head the Marine Unit of the company, a position he held till he left the company. In 1991 he left Nigerian French and joined hands with two other people to pioneer Perpetual Assurance Company Limited as Assistant Controller. He later rose to the position of a Controller, barely a year after the company commenced operations in 1992. In 1994, due to his continuous impressive results he was again promoted to the position of Assistant General Manager (Operations) of the company. In the year 1995, Tope Smart joined Vigilant Insurance Company Limited as the General Manager/Chief Executive Officer. In view of the outstanding results posted in two years, the Board in 1997 approved his elevation to the position of Managing Director/Chief Executive Officer with shareholding in the company.

Monday 24 June 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Can Algorithms help us decide whom to trust? DAVID DE CREMER, JACK MCGUIRE, YORCK HESSELBARTH AND KE MICHAEL MAI

he use of artificial intelligence and algorithms to manage business processes, hire employees and automate routine organizational decision making is increasing. But the reality is that, at least in some cases, humans display strong feelings of aversion to the use of autonomous algorithms. If AI is to become an important management tool in our organizations, algorithms need to be seen as trusted advisers to human decision-makers. We analyzed the responses of 136 participants in an online simulation. Participants were told they would be partnered up with another person to work on a task. They then received a judgment score indicating

their partner’s trustworthiness, determined by either an algorithm or a 15-minute conversation between the leader of the study and the unknown person. Our results suggest that people think of humans and

algorithms as good at providing different types of information, including about whom to trust. Humans are more intuitive, more socially adept and better at taking up another person’s perspective. But algorithms can

provide information about whom to trust when information is less intuitive and more factual. So, although humans were judged to possess the necessary social skills to assess trustworthiness, they did not

feel that the use of an algorithm would provide less reliable trust information. When participants were asked which assessment method they preferred to use, most participants opted to use AI (61%) rather than the judgments of the human (39%). What are the implications of these findings for organizations? First, many team projects are often temporary, and trust needs to be built quickly. Our findings show that AI presents a reliable and legitimate assessment tool to facilitate this type of “cognitive” trustworthiness information. Second, social skills like perspective-taking, intuition and sensitivity are prerequisites to determine someone’s trustworthiness, and are considered to be uniquely human. Our findings nevertheless indicate that when it comes down to starting a work relationship

with a colleague, algorithms seem to be accepted as being equally reliable. Third, supervisors will have to learn to develop a sense of awareness about when it is effective to delegate assessments of the work climate to an algorithm. Finally, supervisors will also have to learn how to communicate the trustworthiness information provided by AI to their teams in ways that will not be ignored.

(David De Cremer is a professor at NUS Business School, National University of Singapore. Jack McGuire is a lab manager and research assistant at Judge Business School, University of Cambridge. Yorck Hesselbarth is a doctoral student at ESCP Europe in Berlin. Ke Michael Mai is an assistant professor at NUS Business School, National University of Singapore.)

Scaling culture in fast-growing companies JORDANA VALENCIA

ver the past few years, there has been a marked increase in “hypergrowth” companies across the globe. “Hypergrowth” refers to the steep part of the S-curve, where industries and firms grow at an explosive pace. Human capital also grows dramatically, as employee count steeply rises to support business growth. While hypergrowth companies face many obstacles, research shows that talent is their primary growth challenge. And one of their biggest talent priorities is how to scale and maintain culture. Culture, or the underlying beliefs and values that

shape an organization, can indeed be difficult to manage when a company scales from 10 to 1,000 employees. But it is possible. Here are a few tips for hypergrowth firms that want to scale their

culture to hundreds (or thousands) of employees across the globe: — DEFINE CULTURE IN TERMS OF A FEW CLEAR, OBSERVABLE BEHAVIORS. This ensures that everyone is working

from the same cultural definitions, and that abstract values can be seen in concrete ways. Thus, employees can more easily learn, measure and reinforce values. — BUILD AN ACCES-

SIBLE DIGITAL LIBRARY OF LEARNING CONTENT. Ask yourself: What knowledge, skills and attitudes are needed to produce each behavior? What content could help employees learn these, and how can it be accessible to all? — USE BLENDED LEARNING PROGRAMS TO SCALE CULTURE TRAINING. For hypergrowth companies, blended learning expands employee reach dramatically, which is especially helpful if head count is quickly skyrocketing, and lowers training costs over time, which helps preserve valuable resources during rapid growth. — ENSURE MANAGERS RELENTLESSLY RE-

Partnership our core value

through 125 years

As your trusted advisor and business partner, we stay true to our promise to always deliver the ultimate ‘gold standard’ of value and excellence. Let’s journey to the next 125 years together.

INFORCE TARGET BEHAVIORS. Studies show that highly personalized recognition is crucial in reinforcing desired behaviors. It is especially valuable for hypergrowth firms because it requires little to no resources to execute: It is free, very easy to implement and highly effective in shaping employee behavior. What’s important is that recognition is immediate, frequent and highly personalized. It takes only a few seconds, but it can make a strong and lasting impact on institutionalizing target behaviors.

(Jordana Valencia works with startups in Southeast Asia.)

Monday 24 June 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

Why every company needs a chief experience officer DENISE LEE YOHN

ustomer experience and employee experience are now two of the driving forces of business. Independently, each function leads to valuable relationships — with customers and employees — but when CX and EX are managed together, they create a unique, sustainable competitive advantage. Companies should consider integrating the two disciplines and installing a chief experience officer to lead the combined effort across the entire organization. What a lot of companies miss is that a great employee experience leads to a great customer experience. Skillful

leadership that integrates and aligns the customer and employee experiences is needed in the C-suite. A chief experience officer, or CXO, can help

an organization develop and unleash the combined power of both disciplines. If an organization separates leadership of CX from EX, dis-

connects are likely to arise, even if those roles are part of the executive team. Moreover, separating the functions leads to competition between the two for resources and attention. Integrating them into a single department, or at least uniting the two departments under a single leader, lets companies take advantage of synergies between the two. A CXO can be responsible for: — Increasing customer understanding among all employees. — Increasing employee understanding among company leaders. — Driving deliberate, disciplined design and delivery of experiences to customers and employees. — Creating connections be-

tween CX and EX, and advocating for the integration they require. — Championing customers’ and employees’ perspectives in the company’s strategic decision-making. — Measuring the impact of CX on employees, the impact of EX on customers and the impact of both on the company’s key performance indicators.

(Denise Lee Yohn is a leading authority on positioning great brands and building exceptional organizations.)

Customers notice size reduction more than growth asymmetry in estimations of change. Another idea is to highlight the increase in quantity as a percentage, because this percentage is always mathematically larger than the percent decrease in cost of the same nominal value. For example, a 50% increase in product quantity (package size) leads to the same improvement in the product’s unit price as would a 33% price discount. The reason 50% = 33% is that the former is applied to the denominator (quantity), and the other to the numerator (price).

PIERRE CHANDON

oes this sound familiar? You are marketing a new option, say with 20% more product or 50% more minutes on a calling plan, but you can’t get customers to pay for even a fraction of the additional value. However, the moment you shave just a few percentages off the regular quantity, the same customers notice it immediately. Why do people get so mad about product downsizing? Part of the answer is that our eyes are much better at spotting size decreases than size increases. In a series of studies with Nailya Ordabayeva, a colleague at Boston College, we found that human eyes are very bad at geometry. When an object is doubled in size through a proportionate increase in all dimensions, it looks smaller than it really is. This is because our eyes act as if they are adding the increase in the height, width and length of objects instead of multiplying them. When it comes to downsizing, however, our re-

search shows that judgments of size are amazingly accurate, hence the negative reaction when companies try to downsize their products. We replicated this phenomenon, which we called “the accuracy of less,” in five studies. On average, we found that a portion that is doubled in size is judged to be only 72% larger than the original size, whereas one that is halved

appears to be 53% of the original size. In the end, we found that this asymmetry exists because a decreasing size cannot go below zero, which helps people estimate sizes as they diminish. When sizes increase, however, they can theoretically grow to infinity. Without an upper bound, it is hard for people to estimate how large something has become.

One effective solution to this problem is to make information about the product quantity loud and clear. When customers have the information they need, we find that they interpret it accurately. Another solution is to prompt people to think about just how many times smaller a downsized package is when compared with the original; formulating size ratios reduces the

Brought to you courtesy of First Bank Nigeria

(Pierre Chandon is a professor at INSEAD and director of the INSEAD-Sorbonne Behavioral Lab. This article originally appeared on March 7, 2017.)

Monday 24 June 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Why family businesses don’t last beyond one generation The Solid Wealth Messenger

Grace Agada

hen you wait for a crisis before you put together a long-term business succession plan the preservation of your business is already guaranteed to fail. While you love your business and want to run and manage it for as long as you like, you cannot live forever. It is therefore counterproductive for you not to make the timely decision of whether to sell or not to sell your business. So maybe you are still waiting on your son who has rejected the idea of taking over from you to change his mind or you just want to avoid family conflict, or maybe you even cannot process the idea of selling off your business to a total stranger, it is this kind of delay that causes many family businesses to die after the Business owner is gone. The Truth is you are not getting any younger, and there lies the problem. The ownership and control of your business will inevitably change whether you like it or

not. If you want to see your years of labor flourish long after you are gone this is the time to put together a well- drafted succession plan. Sometimes the best option you have is to sell the business, but this sales process can be smooth and organized or it can be rough and bumpy. By working with many business owners, I have come across three kinds of approaches to business succession. The first is what I call, “The Ignore Approach”, the second is “The Consider but Do Nothing Approach”, and the third is “The Consider and Do the Right Thing Approach” which is ultimately where all business owners should be. The single most important question every business owner needs to answer is: “Should I sell my business or pass it on?” Sadly, the most prevalent approach to answering this question is the ignore approach. People who ignore this question do so for any of these four reasons; the fear of poverty, the fear of conflict, the fear of mortality, and the fear of losing control. The fear of poverty is borne out of the fact that many business owners have dedicated all their lives investing all they have back into their business. They do not have enough financial assets outside of their businesses to support their desired lifestyle, making transferring their business a

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

big risk. While investing back into your business may be good advice in the early years of your business, it is seldom a good advice for matured businesses. This is because the business asset is a highly risky asset and just like any other risky asset, you need to take money out of it to balance your risk. You also need to build your personal wealth independent of your business wealth. The fear of conflict, the fear of facing mortality and the fear of losing control are three emotional fears that are the most difficult fears to overcome for business owners. Regardless of whether you choose to sell your business or pass it on, conflict of opinion will arise. However, delaying to plan for your exit will not eliminate this conflict either; it will only defer it until after you die. Given that the likelihood of you facing mortality isn’t open for debate, you have no choice than to boldly face this fear. Letting this fear prevent you from acting proactively now is giving up the opportunity you have to decide on what you want to do with your years of hard work, to someone else who may have a different agenda. The fear of giving up control usually comes when you do not have something bigger to move on to. For most business owners, their current business is where their life stops. They do not have any new ideas or a higher pursuit to dedicate their time to when they relinquish control. Great business owners are constantly growing, discovering new ideas, new ways, and new opportunities that their time on earth will permit them to execute. There are many problems still left unsolved in your industry and the world is replete with problems begging to be solved. If you are swamped with the day to day operations of your business, it is hard to see beyond it. The second kind of approach business owners take is to consider business succession but do nothing about it. These business owners recognize that change is inevitable. They know that the change of ownership and who succeeds them in business is central to their long term business

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preservation plan. Yet, they somehow convince themselves that there is still time. They continue this way until they run out of time and their sales decision becomes a forced crises management decision. Their ability to negotiate a decent sales price disappears, key management staff leave, and potential heirs change their minds. They lose the privilege to make beneficial decisions until the decision is forcibly made for them. The third kind of approach business owners take is to consider business succession and do the right thing about it. These business owners tackle the question of future ownership in a bold and transparent manner. If their decision is to sell their business, they already know that they have to put the necessary plans in place. If their decision is to pass it on, they understand that they have to find, groom, prepare and test their options of successors. They also know that some important and delicate discussions need to take place within the family. “Will the successor be blood related or not.”; “What are the criteria for becoming a successor?”; “How do we prepare a successor?”; “Would female and male children be given equal chances?”; “what will happen if a successor fails the test or dies?” Answering these important questions and having these delicate conversations requires time, planning and dedicated effort. It is an effort you have to put in now so that you don’t face the unfavorable consequence of inaction, later in the future. If your business succession plan is still unclear, we can help you get started. There are three key pillars that must form part of a good business succession plan.. To know more about these pillars, text “Business Succession Pillars” to 08101860042. It is time to act. You only have today; tomorrow is uncertain.

‘

The fear of poverty is borne out of the fact that many business owners have dedicated all their lives investing all they have back into their business. They do not have enough financial assets outside of their businesses to support their desired lifestyle, making transferring their business a big risk

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

Monday 17 June 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 21 June 2019

Top Gainers/Losers as at Friday 21 June 2019 LOSERS

GAINERS Company

Closing

Change

NESTLE

N1400

N1350.3

-49.7

DEALS (Numbers)

5.5

STANBIC

N41.5

N40.65

-0.85

N60

2.5

CAP

N27.9

N27.5

-0.4

VOLUME (Numbers)

N182

N184

AFRIPRUD

N3.54

N3.41

-0.13

N10.5

N11.55

1.05

FIDELITYBK

N1.8

N1.73

-0.07

Closing

Change

SEPLAT

N497

N510

MOBIL

N164.5

N170

N57.5

DANGCEM WAPCO

Company

ASI (Points)

Opening

29,851.29 3,089.00 189,956,606.000

VALUE (N billion) MARKET CAP (N Trn)

4.161 13.154

Lafarge Africa: Q1’19 result shows strong improvement in profitability Stories by Iheanyi Nwachukwu

ecently, Lafarge Africa Plc released its financial results for the first-quarter (Q1) period ended March 31, 2019 which signposts strong improvement in bottom line figures. The results at the Nigerian Stock Exchange (NSE) shows that despite a 2.6percent decline in revenue from N80.64billion in Q1’2018 to N78.51billion in Q1’2019, the company still grew profit before taxation (PBT) by 104.2percent to N123million in Q1’19. The record PBT Q1’2019 compares with loss before tax (LBT) of N2.94billion the company recorded in the corresponding first-quarter period of 2018. The cement maker reported profit after tax (PAT) of N3.145billion in Q1’19, as against loss after tax (LAT) of N2.002billion in Q1’18, which represents an increase of about 257.1percent. The company recorded significant reduction in net debt. Its successful rights issue was fully

subscribed in Q1 2019 for N88.4billion. Lafarge expects market demand for cement to remain strong in this second-quarter (Q2), adding that implementation of its new strategy 2022 will further improve operational and financial performance. Michel Puchercos, CEO of Lafarge Africa said, “Our Strategy 2022 ‘Building for Growth’ in Nigeria is delivering the expected results with strong increase in operating Earnings before interest, tax, depreciation and amortization (EBITDA) and profit. Our momentum is very positive and is expected to be sustained in 2019,” Puchercos said. He said, “South Africa continued the turnaround plan with significant improvement in Q1

2019 compared to prior year. “Our strategic decision to divest South Africa with a sale to another affiliate of the LafargeHolcim Group, will strengthen our balance sheet.” “The Rights Issue together with the divestment of our South African Operations will deleverage Lafarge Africa by circa N246billion, enabling to fully repay US Dollar Shareholder Loan and short-term naira overdraft.” “This will support Lafarge Africa’s ambition to accelerate the execution of its Strategy 2022 and to fully focus on the development of the Nigerian market,” Puchercos said. On May 31, 2019 Lafarge Africa signed an agreement with Caricement B.V. an affiliate of the LafargeHolcim Group, for

the divestment of its entire 100 percent shareholding in Lafarge South Africa Holdings (Pty) Ltd for a consideration of $317million or N114.1billion. Closing of the Proposed Sale is expected in third-quarter (Q3) 2019 and is subject to customary and regulatory approvals as well as the approval of Lafarge Africa’s shareholders’ meeting. The Proposed Sale is expected to enhance the value of shareholders’ investments in Lafarge Africa. The proceeds of the Proposed Sale ($317million) will be used to completely extinguish Lafarge Africa’s shareholder loan of $293 million as at July 31, 2019, and related interest due. This full repayment of the shareholder loan will protect and preserve Lafarge Africa’s net income and cash flows. The improvement in cash-flow and net income, resulting from the reduction in debt service outflows, will enable Lafarge Africa to consider additional investments in cement production capacity and to improve its market share in Nigeria. The Proposed Sale is expected to boost the Lafarge Africa’s profitability, through positive cash flow generation.

Industry experts explore opportunities for Islamic Finance in Nigeria

he Nigerian Stock Exchange (NSE), in partnership with REDmoney Group, organised the inaugural edition of the IFN Nigeria Forum. The Forum themed, “Harnessing the Islamic Finance Sector for Infrastructure Development and Economic Growth” held on June 18 in Lagos. The IFN Nigeria Forum 2019 brought together decision-makers, regulators and investors, who exchanged views and experiences on opportunities in the Nigerian Islamic finance market.

It featured a mix of panel sessions, onstage interviews and interactive sessions on a number of themes in Islamic finance including, Corporate Financing and Capital Raising in Nigeria; Funding Infrastructure and Social Welfare Requirements in West Africa and Islamic Finance, Investment, Banking and Takaful in Nigeria. In his opening remarks Oscar N. Onyema, Chief Executive Officer (NSE) represented by Jude Chiemeka, Divisional Head, Trading Business, NSE, applauded the Federal Government of www.businessday.ng

Nigeria, the Debt Management Office, the Securities and Exchange Commission, the National Pension Commission for showing unwavering commitment to the deepening and growth of Islamic Finance in Nigeria. According to him, “the Islamic finance sector presents numerous opportunities for enhancing the economic fortunes of Nigeria and The Exchange will continue to work with market stakeholders to ensure the development of a robust Islamic finance sector. In 2016, for example, we de-

veloped and publicized our rules governing the listing of Sukuk and similar debt securities to provide regulatory guidance for issuers seeking to list their instruments on our platform. In line with the SEC’s Non-Interest Capital Markets Product Master Plan, we have also identified five strategic pillars critical for the growth of the sector. These include a strong regulatory framework, capacity building, product development, robust primary and secondary markets, and market awareness programs such as these”.

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Global market indicators FTSE 100 Index 7,407.50GBP -16.94-0.23%

Nikkei 225 21,258.64JPY -204.22-0.95%

S&P 500 Index 2,952.79USD -1.39-0.05%

Deutsche Boerse AG German Stock Index DAX 12,339.92EUR -15.47-0.13%

Generic 1st ‘DM’ Future 26,800.00USD +26.00+0.10%

Shanghai Stock Exchange Composite Index 3,001.98CNY +14.86+0.50%

Shareholders commend Stanbic IBTC’s 2018 performance, impressive dividend payment

hareholders of Stanbic IBTC Holdings Plc, a member of Standard Bank Group, have commended the financial institution for its outstanding financial performance for the 2018 financial year. The company was also commended for its dividend payment of N1.50 per share, which was unanimously endorsed by the shareholders. The commendation was made last week Wednesday in Lagos at the company’s 7th annual general meeting. According to the shareholders, the result is even more impressive considering the difficult operating environment in 2018. The shareholders, under the aegis of different shareholder groups, expressed their satisfaction with the board and management of the company for their adroit management of resources to ensure a positive performance. They assured of their support, going forward, to ensure the company consolidates on the performance in the 2019 financial year. Speaking on the 2018 result and the capital market performance of the Stanbic IBTC stock, a shareholder and president of Trustee Shareholders Association, Mukta Mukta, said “This is a welcomed development and a good value creation”. While thanking the shareholders for their commendation, Chief Executive, Stanbic IBTC Holdings Plc, Yinka Sanni, assured that the financial institution will not relent in its efforts to continue to deliver value to shareholders and other stakeholders. “We will continue to leverage on our universal financial services capability, unrelenting focus on cost control, digitization and client centricity while operating as an ethical organisation to ensure that we continue to grow our capacity to provide incomparable high quality end-to-end financial solutions to our customers in a sustainable manner and remain profitable as a group,” Sanni said. Stanbic IBTC released its audited financial results for 2018 to the Nigerian @Businessdayng

Stock Exchange in March 2019. The results showed the group grew its topline earnings for the financial year to N222.4 billion, compared with the N212.4 billion it achieved in the same period of 2017. Bottomline grew by 54percent as profit after tax moved up to N74.4 billion compared with the N48.4 billion achieved in December 2017. Other key performance indicators were equally impressive. The group’s total assets grew by 20percent to N1.663trillion compared with the N1.386trillion in December 2017. Profit before taxation was N88.2 billion, up by 44percent compared with the N61.2 billion in 2017. Customer deposit grew by 7percent to N807.7 billion from N753.6 billion in the corresponding year. Of note was the company’s ability to reduce its toxic assets appreciably. The gross nonperforming loans decreased by 50percent to N17.7 billion compared with N35.3 billion in 2017. This decrease impacted positively the gross non-performing loan to total loan ratio, which improved to 3.9percent, well below the regulatory mark of 5percent, as against the 8.6percent recorded in 2017. The non-performing loans figure is even more impressive when viewed against the 14percent (N458.9 billion in 2018 - N403.9 billion in 2017) increase in gross loans and advances achieved in the financial year. Based on this result, Stanbic IBTC had proposed N15.36 billion in dividend payment for the year. Sanni said the balance sheet size was impacted by “growth in risk assets and financial investment portfolio,” a reflection of investment expertise and quality management, which saw its non-interest revenue rose by 15percent to N102.6 billion from N89.2 billion in 2017. According to Sanni, “Strong growth in fees and commission income as well as writebacks, which resulted from recoveries made on previously written off loans and reversals on some non-performing loan, contributed to the strong showing.”

Monday 24 June 2019

BUSINESS DAY

Access Bank Rateswatch

Market Analysis and Outlook: June 21– June 28, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

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

Broad Money Supply (N’ trillion)

35.17

Increased by 3.95% in Apr’ 2019 from N33.83 trillion in Mar’ 2019

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

24.90 2.11

Increased by 3.76% in Apr’ 2019 from N23.99 trillion in Mar’ 2019 Decreased by 2.22% in May’ 2019 from N2.16 trillion in Apr’ 2019

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

11.4

Increased to 11.40% in May 2019 from 11.37% in April 2019

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

13.5 13.5 (+2/-5)

Adjusted to 13.5% in March 2019 from 14% Lending rate changed to 15.5% & Deposit rate 8.5%

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

45.16 62.74 1.73

June 19, 2019 figure — a decrease of 0.13% from June start June 21, 2019 figure— an increase of 3.18% from the previous wk May 2019 figure — a increase of 5.49% from April 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

21/06/19

14/06/19

29,851.29 13.15

Change(%)

30,046.70 13.23

(0.65) (0.59)

Volume (bn)

0.19

0.15

30.75

Value (N’bn)

4.16

2.83

46.99

MONEY MARKET NIBOR Tenor

Friday Rate (%) 21/06/19

OBB O/N CALL 30 Days 90 Days

Friday Rate (%)

Change (Basis Point)

21/06/19

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

YTD Change

(%)

65.13 2.20

3.81 (5.98)

1.04 (28.01)

0.00 101.25 66.15 12.64 532.25

(100.00) 1.50 (0.35) (2.17) (0.79)

1398.16 15.35 270.40

3.40 2.47 2.60

(100.00) (22.24) (14.65) (17.55) 22.78 6.12 (10.70) (17.51)

8.7100

5.2857

342

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

9.2100 5.0000 12.0934

5.7143 5.5357 12.2189

350 (54) (13)

Tenor

21/06/19

14/06/19

(16)

Index Mkt Cap Gross (N'tr)

2,933.04 8.65

2,880.94 8.82

1.81 (1.96)

Mkt Cap Net (N'tr) YTD return (%) YTD return (%)(US $)

5.46 19.40 -36.41

5.44 17.28 -38.56

0.37 2.12 2.15

12.7207

Friday (N/$)

21/06/19

12.8821

Friday

1 Month

(N/$)

Rate (N/$)

14/06/19

Friday

Change

(%)

(Basis Point)

21/05/19

Official (N) Inter-Bank (N)

306.95 360.69

307.00 360.51

306.90 360.42

BDC (N) Parallel (N)

0.00 362.00

0.00 361.00

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

(%)

BOND MARKET AVERAGE YIELDS Tenor

1-week Change

14/06/19

FOREIGN EXCHANGE MARKET Market

Indicators

Friday (%) 21/06/19

Friday (%)

Change (Basis Point)

14/06/19

3-Year 5-Year

0.00 14.43

0.00 14.47

0 (4)

7-Year 10-Year 20-Year

14.67 14.45 14.59

14.73 14.66 14.66

(6) (21) (6)

30-Year

14.67

14.66

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

(%)

Change (Basis Point)

21/06/19

14/06/19

Index

2,933.04

2,880.94

1.81

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

8.65 5.46

8.82 5.44

(1.96) 0.37

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

19.40 -36.41

17.28 -38.56

2.12 2.15

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

91 Day 182 Day

3,000.00 4,000.00

9.6 11.89

19-June-2019 19-June-2019

364 Day

10,614.11

12.02

19-June-2019

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

Rate(%)

Date

Global Economy The Federal Reserve left the benchmark interest rates unchanged last week despite recent pressure from the President of the United States. The Federal Open Market Committee (FOMC) chose to keep the federal funds rate between 2.25% and 2.5% and left its forecast for 2019 economic growth unchanged while it revised higher for 2020 after their two-day policy meeting in Washington, D.C. The FOMC cited a strong labour market, a moderate rise in economic activity, low unemployment rate and "solid" job gains for its decision. The Fed dropped a promise to be "patient" in adjusting rates and said that will act as appropriate to sustain the economic expansion. Fed officials now expect rate cuts in 2019. Elsewhere, the Bank of Japan held its key short-term interest rate constant at -0.1% at its June meeting, hours after the Federal Reserve hinted at possible interest rate cuts later this year. Policymakers also kept the target for the 10year Japanese government bond yield at around 0%, but warned that downside risks regarding overseas economies were likely to be significant so that close attention should be paid to their impacts on firms' and households' sentiment. In a separate development, Euro Area trade surplus contracted to EUR 15.7 billion in April of 2019 from EUR 17.1 billion in the same month of the previous year. According to European Statistical Office, imports rose at 6.6% to EUR 177.2 billion in April from last year's EUR 166.3 billion, while exports increased at 5.2% to EUR 192.9 billion from EUR 183.4 billion. Intra-euro trade rose 3% year-on-year to EUR 163.7 billion in April. For Q1 2019, the country's trade surplus decreased to EUR 59.6 billion from EUR 63.6 billion in the same period of 2018. Domestic Economy The Consumer Price Index (CPI) which measures inflation rose by 11.40% year-on-year in the month of May 2019, which is 0.03% points higher than the 11.37% recorded in April 2019. The food index increased by 13.79% (year-on-year) in May, higher than 13.70% recorded in April, thus indicating further pressure in the prices of food items. The core sub-index, which excludes prices of farm produce decreased to 9% from 9.3% recorded the prior month. During the month, the highest increases were seen in the prices of potatoes, yam and other tubers, bread and cereals, milk, cheese and egg, vegetables, fish, meat, oil and fats. Others are tobacco, dental services, medical & hospital services, cleaning, repair & hire of clothing, actual & inputted rent for housing, repair household appliance and repair and hire of footwear. In other news, the Nigerian Stock Exchange (NSE) published its monthly Domestic & Foreign Portfolio investment report for May 2019. The report revealed that the total transactions at the nation's bourse increased by 48.49% to N221.13 billion from N148.91 billion recorded in April 2019. In May 2019, the total value of transactions executed by domestic investors significantly outperformed transactions executed by foreign investors by 30%. Consequently, total foreign transactions increased marginally by 0.43% to N77.25 billion from N76.92 billion the prior month. Total domestic transactions which is split into retail and institutional investors revealed that institutional investors outperformed retail investors by 34%. Total retail transactions increased marginally by 61.41% to N47.23 billion in the reference month from N29.26 billion in April. Likewise, the institutional composition of the domestic market climbed by 126.14% to N96.64 billion in May 2019 from N42.73 billion in April 2019. Stock Market Indicators at the local bourse witnessed a bearish week as stocks closed lower due to lack of immediate external and internal catalysts to drive the market and economy as delay in appointment of the economic management

team have delayed implementation of the 2019 budget, while many investors wait on the sidelines, watching to see the government's plan to stimulate the economy. The index dropped by 0.65% to settle at 29,851.86 index points from 30,046.70 index points the previous week. Similarly, market capitalization lost 0.59% to close at N13.15 trillion from N13.23 trillion last week. This week, we expect the lull in the market to continue in the absence of positive market triggers. Money Market Rates at the money market edged upwards last week due to retail Secondary Market Intervention Sales (SMIS) auction. Shortdated placements such as Open Buy Back (OBB) and Over Night (O/N) rates closed higher at 8.71% and 9.21% from 5.29% and 5.71% respectively the previous week. However, the 30-day NIBOR closed lower at 12.09% from 12.21% the previous week. This week, liquidity may be bolstered by Open Market Operation (OMO) maturity of about N38 billion. Foreign Exchange Market Last week, the naira depreciated against the greenback across most market segments. At the NAFEX window the local currency witnessed a depreciation of 18 kobo to close at N360.69/$. Similarly at the parallel market, naira depreciated to N362/$ from N361/$ the previous week. In contrast, the official window saw a slight appreciation as it ended N306.95/$, a 5 kobo appreciation from the prior week. The relative stability of the local currency continues to be supported by the intervention of the apex Bank across various market segments. This week, the naira is expected to remain around prevailing levels due to the apex bank's sustained supply of liquidity. Bond Market Average bond yields moderated southwards across most segments in the week ended June 21st, 2019 as bargain hunting was observed on some select instruments. Yields on the seven-, ten- and twenty-year debt instruments settled lower at 14.67%, 14.45% and 14.59% from 14.73%, 14.66% and 14.66% respectively. The Access Bank Bond index climbed by 1.81 points to close at 2,933.04 points from 2,880.94 points the previous week. We expect client inflows to dictate market direction in the near term. Commodities Oil prices soared last week after Iran shot down a US military drone, raising fears of a military confrontation between Tehran and Washington. Bonny Light, Nigerian benchmark crude settled at $65.13 per barrel last week, 3.81% higher than the previous week. The price was also supported by a drop in US crude inventories. In a similar vein, precious metals prices extended gains last week triggered by US Federal Reserve's hint that there could be possible interest rate cuts later this year. Consequently, gold price closed at $1,398.16 per ounce, up 3.4% from the previous week's close. Silver also edged up, settling at $15.35 per ounce compared to $14.98 per ounce the preceding week. This week, oil prices will likely continue its upward trend supported by efforts of the Organization of the Petroleum Exporting Countries (OPEC) and its allies as they appear to be in no rush to boost production. Precious metal prices are expected to retain its bullish trend with the Federal Reserve looking to soften its monetary policy, right along with the European Central Bank. MONTHLY MACRO ECONOMIC FORECASTS Variables

Jun’19

Jul’19

361

362

Inflation Rate (%)

11.30

11.23

11.21

Crude Oil Price (US$/Barrel)

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

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Aug’19

Exchange Rate (Interbank) (N/$)

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Monday 24 June 2019

BUSINESS DAY

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BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

Start-Up Digest

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Meet Nigerian entrepreneur revolutionising livestock industry ODINAKA ANUDU

very Nigerian alive today needs to pay attention to Ibrahim Maigari Ahmadu, an IT expert and co-founder/ chief executive of Livestock247.com, the country’s first livestock online marketing and listing platform. A lawyer by training, Ahmadu has been in the livestock industry in the last seven years, revolutionising a sub-sector viewed primarily through cultural and ethnic lenses. Through his platform, livestock sellers meet buyers. The former make money from huge sales while buyers get fit-for-slaughter cattle. The story does not end there. He has now delved into solving one of Nigeria’s biggest challenges—farmers-herders crisis. His strategy is simple: He tells herders to stay where they are; he provides pasture, water, funding and market, thereby preventing nomadic movement of cows through farms, which often results in conflicts, blood and tears. The entrepreneur tells Start-Up Digest that his firm’s big vision is to mitigate spread of animal-to-human disease transmission in Africa. He explains that one big challenge facing Nigeria’s cattle production is lack of functional animal identification system. “If there is a break-out of mouth cow disease, how do you trace it?” he asks. “It means you may not know what you are eating. That is why global brands like McDonalds are not in Nigeria,” he says. His firm creates a platform whereby livestock producers, consumers, financial service providers and insurance firms come together with a view to mitigating the spread of diseases and putting a structure to a sector that has been under the control of middle-men for years. “We are investing heavily in production,” he says, adding that Livestock247.com is trying to solve a very serious problem—cattle rustling. “We partnered with MTN Nigeria to develop the cattle tracking system. We developed this system ourselves. During that time, we developed relationships with rural farmers. Before we even launched our products, we had to go round the country and familiarise with rural farmers. And they are not as uncivilised as many people think they are. They are literate in their own way,” he explains.

Ibrahim Maigari Ahmadu

Ahmadu says the cattle business is a multibillion enterprise and not about culture or ethnicity. “The cow does not understand Igbo, Hausa, Yoruba or Efik. Most livestock producers are looking for market. They want to get away from the shackles of middle-men; they want good margins,” he states. There is a popular livestock market in Jigawa State called Maigatari Market, which is busiest on Thursdays. Traders and buyers come from Mauritania, Congo Brazzaville, several parts of Central Africa and other countries to buy or sell cows. The entrepreneur says he is now trying to re-orient livestock producers there to ensure their market runs 24/7. “When you go there on Friday, the place is quiet. And I ask them, why don’t you have a market on 247 basis?” “We are bringing the financial service providers to this market because it is a business that is credit based. Maigatari Market turns almost over $3 million a week. They do over N500 million, but 80 percent of this is cash. We partnered with Sterling Bank to have what we call Experience Centres and we are bringing

NAFDAC suspends new SMEs tariff hike after BusinessDay report Josephine Okojie

he National Agency for Food and Drugs Administration and Control (NAFDAC) has suspended the recent hike in fees rate for registration, lab analysis, change of company’s name and package size extension, among others, which it imposed on operators of small and medium scale enterprises (SMEs). This was after it was reported last Monday by BusinessDay. The suspension came after members of the NAFDAC governing council board met to deliberate more about the issue. A document seen by BusinessDay and signed by Mojisola Adeyeye, director general of NAFDAC, stated that the observations by various stakeholders in the sector on the new tariff hike has been reviewed and the regulator’s governing council has agreed to suspend the tariffs pending engagement with stakeholders on the issue. “The council in a meeting yesterday (on Wednesday) considered the observations from stakeholders and agreed to meet with them over the issue with a view to reviewing

the tariffs,” Adeyeye said in the statement. “Meanwhile the approved tariffs have been suspended pending the outcome of the meeting with stakeholders,” she added. BusinessDay had on Monday reported the complaints of various operators of small business in the country over the new increases in fees. All of them spoken to said NAFDAC did not engage them before increasing the tariffs by over 600 percent in some of the items. Reacting to the suspension, Femi Egbesola, national president, Association of Small Business Owners of Nigeria (ASBON), said that SMEs are happy with NAFDAC over the suspension of the new tariffs. “If government does anything that really will impact negatively on us as citizens and business operators, either in a sector or collectively, we all must come together to fight a common cause, without fear or favour, with which much really and truly can be achieved,” Egbesola said. “That is what we have done with the recent hike and now the regulators are willing to engage us in reviewing the tariffs,” he added.

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financial services to the cattle market. That is financial inclusion. We are bringing together the banks and the under-banked through our system. So, we are helping them to sell their cattle and now we are telling them they don’t need to come with cash. Have an account with this bank and you don’t have to come with cash to the cattle market because it breeds rural banditry and kidnapping,” he states. He says that 95 percent of the 20 million cattle in Nigeria are owned by the pastoralist communities. He believes that traceability has been a landmark innovation in the livestock business. “What you are getting for nothing, you get get a fit-for-slaughter that is traceable and you are getting value for money,” he avers. “The traceability is working at the moment. There is a microchip that we implant on the animals. It is not harmful on the animals and is based on World Organisation for Animal Health (OIE) specifications. The body is like the World Health Organisation (WHO) of the animal space. There is also the International Standards Organisation. We design our products in line with OIE. Fortunately, Nigeria and other 180 of countries are all signatories to OIE,” he says.

Forty-two percent of all the livestock in West Africa are in Nigeria but we can’t export one kilogram of beef because of our poor animal identification system, he said. “Botswana, Namibia and South Africa export beef. Nigeria has over 20 million cattle but can’t export one beef,” he says He points out that his firm’s new Livestock Fattening Project will bring bite to the industry. He has an agreement with financial partners who are investing almost N500 million in the project. “What they are trying to do is to show to the government that the market-driven approach is the solution,” he says. “The farmers-herders crisis happens because every year. During the dry season –from November to February— herders start moving southwards because rains stop early in the north. So, they start looking South-West and converge at the Middle-belt. They also congregate around the Ikom Belt. By March/ April when the rain starts again, they go back. As they go back, people are already in the farm. That is why you have farmers-herders crisis. When you sit down with them, you see it is a competition of resources. The pastoralist is looking for pasture and water. The farmer, on the other hand, has every right to go to the farm. What we are telling them is, look, you say government is not investing in livestock development, there are no pasture and grazing land, stay where you are, we will give you money for feeds and also give you the bulls to fatten. We will give you money for drugs and vaccines. We will give you a veterinary doctor to supervise you. We will give you the market. Over 1,000 companies have applied to participate in the programme. Our plan is to do 24,000 cattle in 2019 to 2020. We are starting with Osun, Taraba, Kaduna, Katsina, Kano, Abuja. We have escalated it to reach Lagos and the South-East,” he explains.. He adds that one other thing his firm is trying to do is to de-ethnicise livestock production the way poultry business has gone mainstream. He explains that livestock business is no longer a cultural thing. He tells Start-Up Digest how he makes money. “We are a platform. We bring buyer and sellers together. People that want to buy, sell, transport livestock come to our platform. Insurance companies and investors come to our platform and they pay some fees.”

Mbari Uno launches own hub for emerging designers IFEOMA OKEKE

n a bid to drive economic growth through human capital development and propel communities to be involved in innovating solutions to their peculiar problems, Mbari Uno (House of Collaboration) is set to launch first-of-itskind Design Hub and community-focused centre for emerging and established designers. The event will hold on July 1st, 2019, at 11am at the Hub situated at 10C, Ladoke Akintola Street, Ikeja G.R.A., Lagos. The launch, which is aimed at showcasing the Hub and its facilities, will feature a product exhibition, workshop, audio recording, photo sessions, meal tasting, Chef’s Day for design enthusiasts and professionals to experience the Design Hub. According to Julia Obinna, Hub Manager, “Within the Hub, there are named spaces that offer different things. The Show

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Room is a combination of a concept store, reading room, and a lounge. This malleable space can be used for product and art exhibitions. It can serve as a reading room and small fire culture events such as poetry reading and digital product presentations. There is Kol’s Bistro which is a char-grill based serving locally inspired delicious cuisine, drink, and coffee among others. The Work Room is an open plan co-working space that is designed to inspire collaboration and innovation. “There is a Learn Room which is an auditorium-styled space that can sit up to 35 persons and is used for seminars, meeting, and training among other things. For Multimedia, there is Sylvan Studios, which is a photo, audio, and video recording and creating facility.” The hub offers a prime space for design professionals, practitioners and design enthusiasts and make social impact through proprietary exhibitions, workshops and design activism projects, it was gathered.

@Businessdayng

Monday 24 June 2019

BUSINESS DAY

Start-Up Digest How Gbemisola reshapes Nigeria’s catering industry Jonathan Aderoju

bemisola Bianca Omogbemi is a food vendor and caterer. Although a graduate of International Relations, the young entrepreneur makes ends meet through her passion for cooking. She is the chief executive officer and chief chef of Adunni Cooks, a company that is known for its diversity in cuisines and delivery to customers. She started the business officially in 2017 while still in school in order to make extra cash and be able to provide what she needed. Gbemisola was inspired by her grandmother. “I grew up with my grandmother who used to cook in large quantity. Back then, everyone in the street would come for lunch and she would be happy to feed them. That was when I developed the love for cooking. I was very tender then and I grew up with that passion,” she says. She started her business with N7000, which was her personal savings. “I started with just N7,000. I was so desperate to prove myself and then I set out to get ingredi-

Gbemisola Bianca Omogbemi

ents for fried rice and got 3kg of turkey. I had advertised and hyped myself for days on WhatsApp before then, so I got three lunch orders and I even added free drink to impress ,” she narrates. “I still cook for that particular client till date. I thought of ways to make extra cash and I started

selling roasted plantain and fish. I also catered for birthdays and convocations and, today, we are here to make a difference.” She says her business has had tremendous growth since its inception. “The business has gone from taking four to five lunch orders to actually catering for

Why U.S. sponsors Global Entrepreneurship Summit ODINAKA ANUDU

he United States of Amer ica suppor ts the Global Entre preneurship Summit (GES) annually because it wants countries across the world to prosper. Addressing a group of foreign journalists at the Hague, the Netherlands, Peter Hoekstra, U.S. ambassador to the Netherlands, said the U.S placed value on entrepreneurship as it was one easy way of growing economies, reducing unemployment and creating wealth. “The United States wants the rest of the world to be successful,” he said. Hoekstra said the U.S. was keen to connect young and vibrant entrepreneurs with investors to enable them scale their businesses and take new ideas back to their countries. The GES aims to showcase inspiring entrepreneurs and investors from around the world, creating new opportunities for investment, partnership, and collaboration. It connects entrepreneurs and investors with international counterparts to form lasting relationships, and highlight

entrepreneurship as means to address some of the most intractable global challenges. The summit typically includes a wide range of workshops, panels, ignite talks, pitch competitions, mentoring, and netw o rk i n g s e s s i o n s a i m e d t o give participants tailored opportunities to gain skill and relationships that w ill help their ventures grow. This year’s summit was held at the Hague between June 3 and 5, with 1,000 entrepreneurs from 140 countries and 300 investors attending. It was the first time the summit would be held in the European Union. Hoekstra said it was held in Europe to reinforce to the EU how “important our relationship with them is.” “The EU is promoting the idea of entrepreneurship, the values and the ideas,” he said. The Netherlands was picked as the co-host for the GES this year. Independent checks show that the country is the thirdlargest direct foreign investor in the United States. The DutchAmerican trade and investment relationship is said to be supporting close to 625,000 American jobs with Texas, California and Pennsylvania benefiting most. www.businessday.ng

Speaking on why the Netherlands was picked as the cohost this year, the ambassador explained that the U.S and the Netherlands had always had good trade relations and were important partners on many fronts. “The Dutch have been phenomenal in what we do,” he said. Earlier at the opening reception of the GES, Michael Pompeo, United States secretary of state, had said that his country would continue to create the right environment for entrepreneurs. “People like you here you are a living proof that innovation is driven by competition and not by government,” he told about 1,000 entrepreneurparticipants. He said government leaders could bring value to entrepreneurs only if they would create the necessary environment for growth. For Pompeo, government must protect the physical and intellectual properties, saying that property rights were the bedrock of successful economies. He added that entrepreneurs needed the rule of law and the basic predicable environment to unleash their potential.

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events and I’m truly grateful for the growth,” the young entrepreneur says. As a young graduate and youth in Nigeria, she has helped curb unemployment by engaging five people and looking to do more when the business expands further. Three of these employees work as service boys for outdoor functions and the other two are kitchen assistants. She uses quality ingredients from Mile 12 market and gets her major spices from neighbouring West African countries. Like every entrepreneur, Gbemisola encounters some challenges in her business. Her biggest challenge is visibility. “I think the major challenge for me would be visibility, that is, knowing the right event planners that would trust your brand,” she says. “In a lot of parties you attend, it’s the same vendor over and over. In as much as I understand that no one wants to take risks where it concerns catering for their events , I think it’s important to branch out a little bit,” she explains. She gives more insight on why people should patronise her business. “For me, I do this for the love of good food. I genuinely love what

I do and I put my heart and soul into it. In as much as I want to make profit, I never compromise standards. It’s important that it’s healthy, tasty, and ultimately worth the money spent,” the entrepreneur proudly says. Speaking on her expansion plans, Gbemisola says, “Currently, I’m working on branded spices. I have resourced a good amount of spices and recipes and I want to take people on this flavour-filled journey. I have also partnered with an amazing grilling company Bargrillque, and we are working on some really fun ideas. I’m a fan of healthy food and so would be producing a range of organically-grown fruit juice later in the year.” The young entrepreneur gives some pieces of advice to younger and upcoming entrepreneurs. She tells them to never compromise on quality. She says starting out always seems tough but rewards often come later. “If it’s what you genuinely love to do, then it would be worth it at the end. Enjoy your process and do not compare your brand to another. Appreciate small beginnings and always be ready to learn, and there’s no such thing as knowing too much.”

Honeywell Group partners LSETF to boost digital talent development in Lagos ODINAKA ANUDU

n furtherance of its commitment to programmes aimed at ensuring that Nigeria keeps pace with the technologies and competencies that define the 21st century through people empowerment, Honeywell Group Limited has partnered the Lagos State Employment Trust Fund (LSETF) to help youths in Lagos State acquire relevant skills required to compete in today’s global marketplace. The Talent Development Programme, which will be run under LSETF’s Lagos Innovates Programme, will provide student loans that cover up to 80 percent of training cost for beneficiaries, who are then schooled by any of LSETF training partners, for up to three months. Some of the courses offered are Full Stack Development with JavaScript (React JS, NodeJs, Express and Mongo DB + API Development), Full Stack Development for Mobile Applications (React Native, API Development), Python Programming for Web and Data Science. (PYTHON OOP, DJANGO & Data Science, and Frontend Design & Engineering: (UI/ UX, HTML, CSS, ES6 & React JS). To pilot the first phase of the programme, Honeywell Group has provided N10 million, which will be matched by LSETF, to provide a total pool of N20 million to train the first batch of students. Commenting on the partnership, @Businessdayng

Tomi Otudeko, head, innovation and sustainability at Honeywell Group, said: “We are pleased to partner with LSETF on this strategic and exemplary initiative that will impact positively on the lives of young people in Lagos State. We are impressed by the work LSETF is doing and our investment in technology training is borne, first, out of our stated mission to ‘use enterprise to make our world better’ and, secondly, out of our conviction that to innovate and thrive in the new economy, young people need to build tech skills.” Teju Abisoye, acting executive secretary/CEO of LSETF said, “We are glad to work with Honeywell Group to build a talent pool of globally competitive professionals, while actualising one of the most important mandates of the LSETF; which is to improve the skills and employability of the young people in the State. Both the LSETF and Honeywell Group are committed to ensuring that young people are equipped to support the growing start-up ecosystem in Nigeria in addition to positioning themselves for a growing global freelance market. I hope more organisations will emulate Honeywell Group and partner with us on our various programmes.” Interested applicants can apply for their preferred course and training partner at http://lagosinnovates.ng/section/program/ talent-development-program The application portal closes on July 12, 2019.

Monday 24 June 2019

BUSINESS DAY

MARKETS INTELLIGENCE

Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

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Economics

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GTBank, Access Bank, Stanbic IBTC, UBA deliver Stories by BALA AUGIE

anks are grappling with a low yield environment as evidenced in dwindling revenue, but most of them recorded profit growth, thanks to a reduction in impairments of financial asset, income from fees and commission income. Amid these challenges, some lenders have utilized the resources of their owners in generating higher profit, which means there has been an increase in return on average equity (ROAE). The higher the ratio the better, because it means a firm is profitable and efficient. Access Bank and Guaranty Trust Bank exhibit stronger ROAE than peers. For instance, GTBank’s ROAE of 32.15 percent- higher than 16.15 percent industry averageis higher than the 29.17 percent recorded during the previous year. An ROAE of 32.50 implies N0.325 returned on every $1 invested, so the higher the returns the better. The marriage between Access Bank and Diamond Bank was a boon for the Access Bank as ROAE moved to 30.85 percent in March 2019 from 17.58 percent as at March 2018. The lender recorded the fastest ROAE expansion among peers, driving the 2019 figure above the industry average. Zenith BanK and Stanbic IBTC Holdings Plc have consistently distinguished themselves among the midsized banks as it continues to remain efficient. Its ROAE of 30.47 percent, although lower than 43.43 recorded in the corresponding period of last year,

is above the industry average of 16.13 percent. United Bank for Africa (UBA)’s ROAE moved to 21.92 percent in March 2019 from 18.40 percent the previous year; an ROAE of 0.2192 percent implies N0.2192 returned on every N1. Interestingly, First Bank Holdings’ 11.76 percent ROAE is below industry average, but the ratio

increased from 9.72 percent recorded the previous year as the lender surmounted brought on by the sudden drop in crude oil price that stoked poor asset quality. While Fidelity Bank (a midsized lender) saw ROAE increased to 12.44 percent in March 2019 from 10 percent previous year, the ratio is below the industry average. It must be noted that ROE can

be misleading because each of the firms has a different cost of equity and debt levels, which is the more debt a firm has, the higher the ROE is pumped up in the short term, at the expense of long term interest payment burden. Cost of equity or Ke is the minimum rate of returns owners expect for taking a risk in a company. Nigerians banks could see profit pressured, and margin squeezed if the Central Bank of Nigeria (CBN) decides to prevent them from having access to near risk-free rate called yield on short term government securities. Yields have been a major driver of earnings in the last 4 years as deteriorating assets quality due to a sudden drop in oil price discouraged lenders from extending credit to the private sector. Net credit to the government surged 64 percent in the first four months of the year, vs 9.60 percent for the private sector. During the Monetary Committee Meeting, Governor of the central bank, Godwin Emefiele, said the MPC wants the lender of the last resort to provide a mechanism for limiting the ability of banks to put customer money into government securities. Emfiele’s argued that credit to the private sector should improve since Non Performing Loans (NPLs) are down to below 10 percent compared to 17 percent a year ago. But analysts say it is easier said than done because the apex bank will continue to aggressively participate in Open Market Operations (OMO) in order to mob up excess liquidity in the system and maintain foreign exchange stability.

Cement makers in a Game of Thrones as competition heightens

ersei Lannister, Queen of the seven Kingdoms in G.R.R Matins award-winning novel- A Song of Ice and Fire- told Lord Eddard Stark, head of House Stark and hand of the King that “when you play the Game of Thrones You Win or Die” Just as power families in Martins book locked horns in a battle over who sat the Iron Throne, cement makers in Nigeria are aggressively intensifying strategies with a view to increasing their share of the market and taking advantage of sub-Saharan African infrastructure, spending and

housing demand. Lafarge Africa threw the first blood when it divested from its South Africa operations, a strategic decision that will help extinguish debt, bolster working capital, and underpin profitability. The company said proceeds of the proposed sale (US$317m) will be used in paying off Lafarge Africa’s shareholder loan of $293 million. It also expects the sale to culminate in a reduction in annual interest expense by N9.9 billion. The development will enable Lafarge Africa to consider additional investments in cement production

capacity while also enabling the company to redirect its efforts towards improving its market share in Nigeria. Lafarge Africa’s Cement volumes were up +5 percent in the first quarter, while March sales were the highest in three years. After 3 years of operating underperformance, the company has finally surmounted the tempest of turbulence as it posted profit after tax of N3.14 billion in March 2019 from a loss of N2 billion it recorded in the corresponding period of 2018 despite a 2.64 percent reduction in sales. Operating profit otherwise known

as EBITDA, increased by 34.72 percent to N8.24 billion in March 2019 from N6.25 billion the previous year. Cost of sales reduced by 3.73 percent to N60.34 billion in the period under review as against N62.64 billion the previous year while total operating expenses reduced by 12.88 percent to N9.80 billion in the period under review. Dangote, controlled by Africa’s richest man, Aliko Dangote, said it is looking to raise $500million (R6.29bn) from a Eurobond sale and

P.E

SHORT TAKES N15.21 trillion The total value of credit allocated by Nigerian banking sector to private sector in the first quarter of 2019 stood at N15.21 trillion. Oil & gas and manufacturing sectors got credit allocation of N3.49 trillion and N2.23 trillion to record the highest credit allocation within the period.

13.5% The Monetary Policy Committee of the Central Bank of Nigeria retained Monetary Policy Rate (MPR) at 13.5% in May 2019. The cash reserve ratio (CRR) and liquidity ratio were equally maintained at 22.5% and 30% respectively. 3.9% Investment growth in emerging market and development economies (EMDEs) is projected to slow to 3.9 percent in 2019, from 4.2 percent in 2018, but expected to rebound in 2020 and 2021 triggered by faster growth in commodity exporters and easier financing conditions in major central banks

Continues on page 45

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

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

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Monday 24 June 2019

BUSINESS DAY

MARKETS INTELLIGENCE Rising inflation could send T-bills higher in the next auction Ifeanyi John

fter 18 consecutive months of decline in inflation, which brought about lower treasury yields in the Nigerian market, market experts now fear that the sudden uptick in inflation in the last three months may cause treasury yields to reverse its downwards trend, further escalating the cost of federal government borrowing. Recall in January 2017, at the peak of the inflation crisis, treasury yields rose as high as 18 percent. However, since then, inflation has decreased by almost 7 percentage points sending treasury yields crashing to as low as 12.0 percent in the most recent treasury yield auction held last week. Treasuries have to com-

pete with inflation, which measures the pace of rising prices in the country. Although T-Bills is a risk-free debt security, it is only interesting to investors if the return on T-bills exceed inflation rate. Typically, rising inflation will lead to higher rate of treasury yields in order to protect the inflation premium on the Bills. Obinna Uzuoma, a Lagos based economist told BusinessDay that “Investors are reading the inflation report and wondering if treasury yields need to rise to compensate for the marginal increase in inflation.” “Although it is unlikely that treasury yields will suddenly to the levels of 16 percent that we saw before the elections, it is hard argue that there is no case for a marginal increase in treasury yields to compensate for the increase in inflation.” The movement in inflation in the last three months

has not been surprising to all economists as the International Monetary Fund had earlier in the year forecasted that Nigeria’s inflation in 2019 may likely hit 14.7 percent. If IMF’s forecast turns out to be correct, then the likelihood of treasury yields moving beyond 16 percent is very high. The last time Nigeria’s inflation rate was 14 percent was 15 months ago. The CBN has worked earnestly to reduce inflation to the single digits, however, they have failed achieve this objective since 2015 as food inflation continues to be stubbornly high whereas core inflation is now below 10 percent. Uzuoma concluded that “the direction of treasury bills today is heavily dependent on inflationary pressures in the economy with the monetary policy rate wielding very low influence on treasury yields.”

Cement makers in a Game of Thrones as ... Continued from Page 46

will also issue N300bn in local-currency bonds to refinance debt and boost expansion. That’s before a proposed London initial public offering in the next two years, which people familiar with the matter have said could raise about $1 billion. The company has extensive operations in 10 other African countries with a total capacity of 15 million metric tonnes annually. In Nigeria, the country is the market leader with an estimated 61.30 percent of the share of the installed total capacity of 71.56 percent of total sale of the first quarter 2018 of companies under our coverage. Cement Company of Norhern Nigeria (CCNN), the only cement manufacturer in the north-west region, had entered a merger with Kalambaina Cement with a capacity of 1.50 million metric tonnes annually– owned by BUA, the majority shareholders in CCNN. That brought the total capacity of the company to 2.0m/ta. Nigerian cement industry has been at a prang of a sluggish economy as delay in the passage of the budget, weak government revenue brought on by a sudden drop in crude oil price, continues to undermine growth. Ni g e r i a’s e c o n o m i c

growth slowed in the first quarter after the oil sector, the country’s biggest foreign-exchange earner, contracted. Gross domestic product expanded by 2.01 percent

in the three months through March from a year earlier, according to the National Bureau of Statistics (NBS). That compares with 2.4 percent expansion in the fourth quarter.

Nigeria’s 3 largest companies lose N756bn in market capitalisation in one month Ifeanyi John

s if things could not get worse for Nigerian investors, the three largest companies on the Nigerian Stock Exchange (NSE) have lost a total of N756 billion (the equivalent of the market cap of all tier 2 and 3 banks excluding Stanbic IBTC). The three largest companies on the NSE which are the only members of the elite trillion-naira market cap club are Dangote Cement, MTN Nigeria and Nestle Nigeria. These 3 companies account for 52.09 percent of the total market capitalization and together they have a market of around N6.85 trillion which is N756 billion less than their position of N7.60 trillion one month ago. The newest member on the NSE and Nigeria’s largest telecommunications provider, MTN Nigeria, ac-

counted for the biggest loss among the three juggernauts as their investors took a hit of N386.73 billion in the space of just one month. MTNN which was initially a high flyer after its listing saw a deep sell off after announcement that the EFCC was investigating a possible share price manipulation. The share price spiraled from a high N149 and closed at N130 at market close on Friday. Dangote Cement, Nigeria’s largest manufacturer, also suffered a sizeable loss in tune of N357.85 billion since the 23rd of May showing it is not so rosy at the top for Nigeria’s biggest companies. Analyst opine that the selloff is caused by the low probability of Dangote being able to match the same dividend payments declared for 2018. Nigeria’s largest beverage company, Nestle Nigeria, contributed a meager 2 percent to the total loss of the

three giants. The company recorded a loss of N11.65 billion as the price fell from N1.365 to N1,350 in one month amidst general market sell off. Dangote Cement, MTN Nigeria and Nestle Nigeria had an average month-todate decline of 8.02 percent. The performance recorded for Dangote Cement, MTNN and Nestle was 10.24 percent, 12.75 percent and 1.08 percent respectively. As a result, the broad market is down 1,626 index points which represents a 5.17 percent decline in the same time period. Investors who are patiently waiting for the bearish market sentiment to end could see an opportunity as the half-year earnings season is a month away. These biggest companies have been forecasted to continue the stellar performance and enforce their strong fundamentals regardless of the opinions of the opinions of investors selling off.

Monday 24 June 2019

BUSINESS DAY

news Passenger stranded as airlines cancel, divert flight over PH runway shutdown IFEOMA OKEKE

assengers travelling from various parts of Nigeria to Port Harcourt International Airport have been stranded since the temporal shutdown of the runway on Saturday. The runway was shut down temporarilyonSaturdayat3.42pm after Air Peace aircraft skidded off the runway over heavy down pour, resulting to low visibility at the airside. Toyin Olajide, chief operating officer of the airline, who confirmed the incident, said Air

Peace Flight P47291 Abuja-Port Harcourt had a runway excursion upon landing at the Port Harcourt International Airport on June 22 due to heavy downpour. BusinessDay’s investigations show that passengers who were at the airport awaiting their flight before the incident had to book hotels to wait until the airside was open for operations. However, some went back to their respective places, some others who had urgent duties took night buses, while others who had no option stayed back at the airport hoping therunwaymightsoonbeopened for operations.

… domestic airlines lose over N93.6m

Further checks show that out of seven airlines operating into thePortHarcourtairport,onlyArik and Dana made alternate plans for its passengers by giving them option to fly into or from Owerri airport. As a result, Arik was able to divert four of its flights, while Danadivertedjusttwoofitsflights. However, as at the time of writing this report on Sunday, a Notice to Airmen (NOTAM) was issued by the Nigerian Airspace Management Agency (NAMA) on the reopening of the airport by 6pm. Beforethen,HenriettaYakuku,

generalmanager,corporateaffairs, FederalAirportsAuthorityofNigeria (FAAN), told BusinessDay that apart from Lufthansa and Cronos that operate international flights at the airport, at least 16 flights operated by Air Peace, Dana Air, Max Air, Arik Air and Aero Contractors,takeoffattheairportevery 24 hours. This implies that for take-off andlanding,domesticairlinesoperate nothing less than 32 flights in andoutofPortHarcourteveryday. With Arik and Dana being able to successfully divert six flights, 26

flights scheduled to land or take offatPortHarcourtdidnotoperate within 24 hours. An aircraft can take an average of 120 passengers at an average cost of N30,000 for a seat. This implies that airlines lost at least N93.6 million between Saturday and Sunday evening the runway was shut. Banji Ola, corporate communications manager, Arik Air, told BuisnessDay that the airline was able to make alternate plans for its passengers to land and take off in Owerri with four of its flights been diverted. Kingsley Ezenwa, corporate communications manager, Dana

Enelamah, Onyema chart way for inclusive, sustainable growth at RMBN HOPE MOSES-ASHIKE

ormer Minister of Industry, Trade and Investment, Okechukwu Enelamah, and Oscar Onyema, CEO, Nigerian Stock Exchange (NSE), have positioned to chart way for inclusive and sustainable growth at the Rand Merchant Bank (RMB) Nigeria conference. Nigeria, a key regional player in West Africa, with a population of approximately 200 million, accounts for about 47 percent of West Africa’s population and about 65 percent of the West Africa economy. Despite Nigeria’s dominance in the region and population size, the real GDP growth for 2018 was only 1.9 percent and the first quarter 2019 GDP came in at 2.0 percent. While refreshingly, the growth was driven by the non-oil sector, the extent of growth is still sub optimal. With an abundance of resources, Nigeria is Africa’s biggest oil exporter, has the largest natural gas reserves on the continent, vast natural resources, arable land, and a young entrepreneurial population. After a decade of steady growth, market reforms, and increased political stability—as demonstrated by the recently held national elections in 2019, for the sixth consecutive time since its return to democracy in 1999, the country seems to be performing below its potential economically. The opportunity to change course and usher the country into inclusive and sustainable growth does indeed exist if the right operating environment and policies are instituted. The conference scheduled to hold in Lagos on Tuesday will engage industry participants in a dialogue on the catalysts needed to stimulate inclusive real-sector growth and accelerate economic development. Other speakers include Eme Essien, CEO of International Finance Corporation Nigeria, Olukayode Pitan, managing director of Bank of Industry, Biola Alabi, CEO of Biola Alabi Media, Raj Gupta, managing director of African Industries Group, Christian Wessels, managing director of Daystar Power, and others.

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Air, said Dana Air was able to divert just two of its flights because some of its passengers refused to go through Owerri as an option. “Our remaining flights have been rescheduled and some others have been delayed into the night. We have asked some passengerstocomebacklaterand we have been communicating with them on the developments via emails and text messages,” Ezenwa said. As at the time this report was written, Henrietta Yakubu said theairplanehadbeensuccessfully removed but the runway was being cleared because of the mud at the airport.

Monday 24 June 2019

BUSINESS DAY

INSIGHT How Oxford university shaped BREXIT Simon Kuper return the place where Jeremy Hunt and Boris Johnson began their climb SIMON KUPER, FT

ou turn the pages of yellowing student newspapers from 30 years ago, and there they are, recognisably the same faces that dominate today’s British news. Boris Johnson running for Union president, Michael Gove winning debating contests, Jeremy Hunt holding together the faction-ridden Oxford University Conservative Association (OUCA). Six of the seven men who survived the first round of the Tory leadership contest earlier this month studied at Oxford. The final two remaining candidates, Johnson and Hunt, were contemporaries along with Gove in the late 1980s. The UK is thus about to install its 11th Oxonian prime minister since the war. (Three postwar PMs didn’t attend university, and Gordon Brown went to Edinburgh.) This beats even the grip of the Ecole Nationale d’Administration on the French presidency (four of the past six presidents have been énarques), let alone Harvard’s on the White House. When I arrived in Oxford aged 18 in October 1988, it was still a very British and quite amateurish university, shot through with dilettantism, sexual harassment and sherry. Gove, Hunt and the much less political David Cameron had graduated that summer, and Johnson in 1987, but from my messy desk at the student newspaper Cherwell I covered a new generation of wannabe politicians. You couldn’t miss Jacob ReesMogg, seemingly the only undergraduate who always wore a suit, or the early Europhobe Dan Hannan. Both became ideological fathers of Brexit. I’m still covering them today. This isn’t a jolly boys’ story about the japes we all had together. I didn’t know any of the Oxford Tories personally, because we were separated by the great Oxford class divide: I was middle class, from a London comprehensive (after years abroad), and they were mostly upper-class public schoolboys. But the night Brexit happened, I sensed it was rooted in 1980s Oxford. I wrote a column about this in July 2016, then gradually came to see that the roots went even deeper than I had realised. Any understanding of the British ruling class — and the next prime minister — requires returning to that place and time. Being president of the Oxford Union was an opportunity to mix with influential figures – it was ‘the first step to being prime minister’, said Michael Heseltine. At Cherwell, we were always writing about the Oxford Union. The debating society, off a courtyard behind the Cornmarket shopping street, was a kind of teenage House of Commons. Its officers wore white tie, speakers black tie, and everyone called each other “honourable member”. You won debates not by boring the audience with detail, but with jokes and ad hominem jibes. Almost all aspiring Tory politicians passed through the Union. Theresa May never won the presi-

Being president of the Oxford Union was an opportunity to mix with influential figures – it was ‘the first step to being prime minister’, said Michael Heseltine. Here, Union president Boris Johnson with Greek culture minister Melina Mercouri in 1986.

dency — disadvantaged by her gender and with no rhetorical gifts — but in 1979 her future husband Philip did. The Mays had been introduced at an Oxford Conservative disco by another Union president, Benazir Bhutto, future prime minister of Pakistan. In May’s day, the Union was a small circle of debating obsessives. But then it hit financial trouble and began recruiting among the broader student population. By 1988, about 60 per cent of Oxford’s undergraduates had paid the £60 joining fee. I never joined but I sometimes got press tickets to debates, and I still remember a young Benjamin Netanyahu trouncing hecklers, and, on the 50th anniversary of Dunkirk, the former prime minister and ex-Union president Ted Heath evoking Oxford on the eve of the second world war, when German invasion loomed. Another lure was the Union bar, which — almost miraculously in 1980s Britain — stayed open till 2.30am, until the deferential local police finally intervened. Most Oxford students opposed Margaret Thatcher by the late 1980s, but the Union’s biggest political grouping was the Tories, split between Thatcherites and “wets”, who would exchange arcane factional insults. The biggest political issues in mid1980s Oxford, recalls Tim Hames, then a Union politician and member of OUCA, were Britain’s deployment of nuclear weapons, apartheid (many Tories weren’t entirely anti) and the miners’ strike. Europe rarely came up then. The European Commission had given Thatcher the British rebate she had demanded, and she was working with the Commission’s president, Jacques Delors, to create a European single market. The Single European Act was passed in 1986. Most Union politicians weren’t very interested in policy anyway. Anyone wanting to make policy that affected students’ lives got involved in the separate Oxford University Student Union or their college’s junior common room (JCR). That kind of politics mostly attracted aspiring Labourites. Dave Miliband chaired the student union’s www.businessday.ng

accommodation committee, while Yvette Cooper, Eddie Balls and Ed Miliband were JCR presidents. By contrast, the Union favoured debating skills and ambition without a cause. Every eight-week term, the Union elected a president, secretary, treasurer and librarian. The “hacks”, as student politicians were known, would traipse around the colleges soliciting votes from ordinary students. As the future Spectator columnist Toby Young wrote in the Union’s house magazine in 1985: “It doesn’t matter how unpopular you are with the establishment, how stupid you are, how small your College is or how pretentious your old school: if only you’ve got the sheer will you can succeed.” Johnson’s Oxford days are now usually mentioned in connection with his membership of the hard-drinking, posh and sometimes destructive Bullingdon Club, but in fact he was a vessel of focused ambition. Arriving in Oxford from Eton in 1983, he

had three aims, writes Sonia Purnell in Just Boris: to get a First-class degree, find a wife and become Union president. That post was “the first step to being prime minister”, said the 1980s Tory politician Michael Heseltine. At speakers’ dinners, a 20-year-old Union president would find himself or herself sitting next to cabinet ministers and other useful contacts. Most students arrived in Oxford barely knowing the Union existed, but Johnson possessed the savvy of his class: he had run Eton’s debating society, and his father Stanley had come to Oxford in 1959 intending to become Union president. Stanley had failed but Boris was a star. Simon Veksner, who followed Johnson from their house at Eton to the Union, tells me: “Boris’s charisma even then was off the charts, you couldn’t measure it: so funny, warm, charming, self-deprecating. You put on a funny act, based on The Beano and PG Wodehouse. It works, and then that is who you are.” Johnson also came equipped with the peculiarly intimate network that an upper-class boarding school confers. Ordinary schoolchildren spend eight hours a day with their classmates but boarders live together, and often have inner-class family connections going back generations. Johnson arrived in Oxford knowing dozens of people, whereas some state-school kids knew precisely nobody. He didn’t let his degree — Classics — interfere with his Union ambitions. In 1980s Oxford, studying was almost optional. A common workload for arts students was one essay a week, often penned during an overnight panic, then typically read aloud to one’s tutor. When I reread my old essays while revising for finals, they were so pathetic that I wanted to write to my tutors to apologise. One thing you

David Cameron at the Oxford Union Valentine Ball in 1987. After Oxford, Cameron went straight to the Conservative party’s research department – where he would later encounter his future chancellor, George Osborne https://www.facebook.com/businessdayng

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learnt at Oxford (even if you weren’t in the Union) was how to speak without much knowledge. Underprepared students would spend much of a tutorial talking their way around the holes in their essay. Cherwell praised Simon Stevens (a Union president in 1987) as “Oxford’s most talented off-the-cuff tutorial faker”: “Recently Simes read out almost half of an essay to his tutor before his partner revealed that he was ‘reading’ from a blank piece of paper.” Stevens is now chief executive of the National Health Service, appointed in 2013 under health secretary Jeremy Hunt, his Oxford contemporary. Johnson just missed his First. His tutor Jonathan Barnes recalls, “If you’re intelligent enough, you can rub along in philosophy on a couple of hours a week. Boris rubbed along on no hours a week, and it wasn’t quite good enough.” Johnson’s sister Rachel said that it later fell to her to “break the terrible news” to Boris that their brother Jo had got a First. (Rachel, Jo and Boris’s first wife Allegra Mostyn-Owen all edited the Oxford magazine Isis.) David Cameron at the Oxford Union Valentine Ball in 1987. After Oxford, Cameron went straight to the Conservative party’s research department – where he would later encounter his future chancellor, George Osborne. In 1984 Johnson ran for Union president against the grammar schoolboy Neil Sherlock. The election dramatised the Oxford class struggle: upper class versus middle class. (Working-class students were rare.) In the vernacular of some public schoolboys, state-school pupils were “stains”, below even the “Tugs” from minor private schools. Sherlock, later a partner at KPMG and PwC, and special adviser to the Liberal Democrat deputy prime minister Nick Clegg in 2012/13, recalls: “Boris mark one was a very conventional Tory, clearly on the right, and had what I would term an Old Etonian entitlement view: ‘I should get the top job because I’m standing for the top job.’ He didn’t have a good sense of what he was going to do with it.” Mostyn-Owen invited Sherlock for tea and tried to charm him into not standing against “my Boris”. Undeterred, Sherlock campaigned on a platform of “meritocrat versus toff, competence versus incompetence”. Johnson mobilised his public-school networks but lost. Sherlock came away underwhelmed by his opponent: “The rhetoric, the personality, the wit were rather randomly deployed, beyond getting a laugh.” Sherlock expected OUCA’s president Nick Robinson to become the political star, and Johnson to succeed in journalism. Instead, Robinson now presents BBC radio’s Today programme. Johnson learnt from his defeat. A year later he was elected president, this time disguising his Toryism by allying himself with Oxford’s Social Democrats. His second campaign was more competent: the American graduate student Frank Luntz, now a senior Republican pollster, conducted polls for him. And Johnson worked his charm beyond his base. Michael Gove, a Scottish fresher in 1985, told Johnson’s biogra-

Monday 24 June 2019

BUSINESS DAY

INSIGHT - and Britain’s next prime minister pher Andrew Gimson: “The first time I saw him was in the Union bar . . . He seemed like a kindly, Oxford character, but he was really there like a great basking shark waiting for freshers to swim towards him.” Gove told Gimson: “I was Boris’s stooge. I became a votary of the Boris cult.” In an essay for The Oxford Myth (1988), a book edited by his sister Rachel, Johnson advised aspiring student politicians to assemble “a disciplined and deluded collection of stooges” to get out the vote. “Lonely girls from the women’s colleges” who “back their largely male candidates with a porky decisiveness” were particularly useful, he wrote. “For these young women, machine politics offers human friction and warmth.” Reading this, you realise why almost all Union presidents who become Tory politicians are men. (Thatcher’s domain was OUCA, where she was president in 1946.) Johnson added: “The tragedy of the stooge is that . . . he wants so much to believe that his relationship with the candidate is special that he shuts out the truth. The terrible art of the candidate is to coddle the self-deception of the stooge.” Tory MPs now backing Johnson’s candidacy for leader may find the essay interesting. Gove, who wore a kilt in debates, was such a gifted speaker that he could even make a compelling case to a student audience against free choice in sexual behaviour. He was unusually ideological by Union standards, a Thatcherite meritocrat. As Union president in 1988, he wrote a paean to elitism in the Union’s house magazine: “I cannot overemphasise what elitism is not. It is not about back-slapping cliques, reactionary chic or Old Etonian egos. It is a spirit of unashamed glamour, excitement and competition . . . We are all here, part of an elite. It is our duty to bear that in mind.” Meanwhile, Jeremy Hunt, an OUCA president in 1987, made much less noise. Hames sums up: “The Boris appeal was Boris. Michael was interested in ideology and ideas. Jeremy was more a small-c managerial conservative.” Hunt wasn’t charismatic or eloquent, and had no obvious political passions, but he was the archetypal head boy (a role he’d held at Charterhouse). An admiral’s son, distant relative of the Queen, tall and courteous, he usually rose above Tory factionalism. After Cherwell reported that a “libertarian faction” was trying to “take over” OUCA, and that one committee member was a “Moonie” (a member of the Unification Church cult), Hunt wrote a letter to the editor: “OUCA remains a moderate association controlled by neither libertarians nor any other faction within the Conservative party, and exists to represent the views of all Conservative students at Oxford.” The Moonie, he added, had been expelled. Amid all this Oxford politicking, there was one notable absentee: David Cameron. He got his First, and amused himself in posh dining clubs, but felt no need to do anything so vulgar as burnish his CV with student politics. After all, he too was distantly related to the Queen, his father chaired the establishment club White’s, and his cousin Ferdinand Mount headed Thatcher’s Policy Unit. Cameron went straight from Oxford to the Conservative Party’s research department, where he later encountered his successor in the

Bullingdon and future chancellor, George Osborne. Rees-Mogg arrived at Oxford at the same time as me in 1988. Almost immediately, Cherwell nominated him (as it had Gove before) for the traditional title of “Pushy Fresher”. The paper printed a photograph of him speechifying in his suit, above the caption, “What more need we say?” Studying the picture, you realise: Rees-Mogg hasn’t changed. Like Johnson and Gove, he even has the same hairstyle today. They were almost fully formed at 18. School had given them the confidence, articulacy and know-how to bestride Oxford. They also already knew what they wanted to be when they grew up. If most students back then had had to guess who would be ruling Britain in 2019, they would probably have named Johnson, Gove and ReesMogg. The last became president of OUCA in 1991, with Cherwell citing his “campaign for world domination and social adequacy”. However, he proved just too peculiar to be elected Union president and lost to Damian Hinds, who is now the education secretary. The Oxford Tories were climbing the greasy pole before most students had even located it. The majority arrived at university uncertain, terribly

the High Street. With hindsight, some see this as the start of the campaign for Brexit. Toby Young had written in 1985 that it was lucky the Union existed — “that in an environment as full of ruthless, sociopathic people as Oxford, there should be an institution that sucks them all in, contains all their wilful energy and grants them power only over each other”. He hoped that one day its officers could be similarly contained within the House of Commons. But the Commons couldn’t contain them. These people spent years agitating for Brexit. In 2016 they secured their referendum. Johnson sniffed the chance to become prime minister, and — in Union jargon — decided at the last minute to back the motion. Gove is a true believer in Brexit, but his decision to campaign for it — undermining Cameron — was partly an outflow of the Oxford class struggle. As education secretary under Cameron, he had thought they were friends, but when Cameron suddenly moved him to chief whip in 2014, Gove was devastated. He felt that Cameron and his coterie of Old Etonians (a stronger network for Cameron than Oxford) had treated him “like staff”, one person in his circle told me. He wanted

Magdalene College, Oxford

dressed, trying to find themselves, often wrestling with imposter syndrome. Only at Oxford did they acquire the qualities that Johnson et al already had: a ruling-class accent, rhetorical skills and the ability to feel confident in any establishment setting. In 1988, British politics changed. The previously pro-European Thatcher suddenly turned Eurosceptic. She had realised that her beloved single market would be accompanied by closer political integration. In her “Bruges speech” in September 1988, she warned against “a European super-state exercising a new dominance from Brussels”. That idea spooked the Oxford Tories. They revered Britain’s medieval parliament filled with witty English banter, whereas Brussels offered ugly modernism and jargon-ridden Globish. Ruling Britain was their class’s prerogative. It was none of Brussels’ business. In 1990, the future OUCA president Dan Hannan founded the Oxford Campaign for an Independent Britain at the Queen’s Lane Coffee House on www.businessday.ng

revenge. Timothy Garton Ash, professor of European Studies at Oxford, describes the referendum as “a Union debate with the addition of modern campaigning techniques”. He says, “One of the great things about British public life is that it’s irradiated by a gentle sense of humour — but ‘chaque qualité a ses défauts’ [‘every quality has its downsides’].” In a cross-class alliance with Nigel Farage and the tabloids, the Oxford Tories triumphed. Politicians from 1980s Oxford dominated both the Remain and Leave camps, but they were divided by the subject of their degrees. Oxford’s “prime minister’s degree” is PPE: politics, philosophy, economics. It has often been associated with the Brexiters. Ivan Rogers, for instance, a grammar schoolboy in 1980s Oxford and the UK’s permanent representative to the EU until he resigned in 2017, discerned “a very British establishment sort of revolution. No plan and little planning, oodles of PPE tutorial-level plausible bullshit, supreme self-confidence that we understand others’ real interests better https://www.facebook.com/businessdayng

than they do . . . ” Yet in fact in 2016 the PPEists were almost all Remainers: Cameron, Hunt, Stewart, Philip Hammond, Matt Hancock, Sam Gyimah, Hinds, Nick Boles, the Milibands, Balls, Cooper and Peter Mandelson. They had presumably chosen the degree in search of the cuttingedge knowledge needed to run a modern country. (Fatefully, the one great PPEist Leaver was the media proprietor Rupert Murdoch, who in 1950s Oxford had been business manager of Cherwell and a Labour Club member.) By contrast, most Brexiters had studied backward-looking subjects: Classics for Johnson, History for Rees-Mogg and Hannan, and English Literature (which mostly meant the canon) for Gove. They were nostalgics. Hence Johnson’s hagiography of Churchill and Rees-Mogg’s muchmocked recent paean The Victorians, while Gove as education secretary strove to make sure pupils learnt 19th-century literature and Britain’s “island story”. After the Oxford Brexiters won the debate, Cameron resigned, and they switched to another familiar format: the in-house leadership election. As one former Union president remarked, the ensuing contest could be described entirely in Union slang: “Boris knifed Dave. Michael knifed Boris. Theresa and Michael stole Boris’s slate. Boris self-binned.” May became prime minister, and entrusted the Brexiters with executing Brexit. She gave them the key jobs in cabinet. But they were debaters, not policymakers. They couldn’t debate Brussels into submission, because the EU’s negotiators followed rules. So poorly briefed were the Brexiters that in December 2017 they accepted the principle of a “backstop” plan to keep the Irish border open, before spending the next 18 months fighting it. Now the Tories have another leadership election. Second time around, just as at Oxford, Johnson is running a competent and centrist campaign, talking up his liberal reign as mayor of London. Like Sherlock in 1984, Hunt is targeting Johnson’s lack of “seriousness”. Then as now, Gove stands in his hero’s shadow. He needn’t worry: in the Oxford tradition, there may be another election coming along soon. In the small, insular world of the British establishment, every so often a clique of people can exert an extraordinary influence. There is a curious parallel between the 1980s Oxford Tories and the 1930s Cambridge spies. The charming, blond, dishevelled Etonian sybarite Guy Burgess, Kim Philby, Donald Maclean, Anthony Blunt and John Cairncross also emerged from an intimate, all-male, public-school network. Four of them were at Trinity College, with Maclean next door at Trinity Hall. Confident enough to formulate a revolutionary worldview despite being ill-informed, they embraced a utopian cause: Soviet communism. It promised a far-off paradise that they never expected to live in themselves. Working towards it was great fun. There is a similar element of play in Tory Brexit. Caroline Lucas, the Green @Businessdayng

MP, chastised Rees-Mogg last year: “This is not a parlour game or debating society. These are real people with real lives.” Well, that’s what she thinks. The Cambridge Five were given roles of responsibility because they possessed elite CVs and came across as archetypal British gentlemen (partly through displays of eccentricity in hairstyles, drink and dress). They pursued their utopia for decades, ignoring all evidence that contradicted it and looking down on the rest of the establishment for its unimaginative thinking. When the spies were finally exposed, British trust in the establishment suffered a lasting dent. Admittedly, the comparison between the Cambridge and Oxford sets isn’t entirely fair: though both betrayed Britain’s interests to the benefit of Moscow, the Brexiters didn’t mean to. It’s an odd feeling to return to a town that you have barely seen in 25 years but where you know every street. Oxford looks almost unchanged, yet the time-traveller from the 1980s experiences a series of small shocks: there are Chinese tourists! Students sit in coffee shops working on laptops! The food is decent! Wandering around my old college, I marvelled at the Chinese and German names at the bottom of staircases. There are far more applicants to places nowadays, lazy alcoholic tutors are dying out, and rubbing along on “no hours a week” is no longer tolerated. But the Union, weekly tutorials and therefore the outsize role of rhetoric survive. Is there some soulsearching at the university over the triumph of the Oxford Brexiters? “I think there should be,” replies Garton Ash. He exempts the tutorial system from blame: “Having an hour a week with an expert on the field cross-examining you — that doesn’t seem to me to lead to glibness.” But he adds, “Public schools and the culture around them provide a training in superficial articulacy: essay writing, public speaking, carrying it off. The Oxford Union reinforces that, even among those who didn’t go to public school. Compare and contrast the German elite. For me, Gove is the ultimate example.” Garton Ash says Oxford as an academic institution no longer encourages this style. Kalypso Nicolaïdis, professor of international relations, says: “If a student is capable of producing two well-written essays a week, with wellstructured arguments, they can kind of get away with not knowing much about the subjects. This may sound superficial, but communicating is useful in life. Sometimes you need to convince people succinctly, especially if you go into politics.” But, she adds, “it’s not what Oxford is about. I believe most colleagues would agree that our commitment is to convey knowledge as deeply as possible. Whether as a student you want to take advantage of this is up to you.” I deplore what my contemporaries are doing to Britain. But given that I too learnt at Oxford how to write and speak for a living without much knowledge, I can hardly talk.

Monday 24 June 2019

BUSINESS DAY

news Moving Nigeria from Poverty to... Continued from page 1

largest oil producer, even as

population grew unabated. Although oil prices have somewhat recovered, average incomes are still tipped to fall this year and in the subsequent years through 2022, according to the IMF. That means Nigerians will get even poorer with time despite the meteoric rise in poverty rate. In 2018, the Brookings Institution published a report that said Nigeria had beat India to become the poverty capital of the world, despite being less than a quarter of India’s population. Nigeria wrested the crown from India by having a little short of 100 million people living below the poverty line. To put the numbers in context, that’s only 10 percent short of the population of Ethiopia, Africa’s secondmost populous country, and is equal to the population of South Africa (the 6th most populous in Africa) and Kenya (7th) combined. It also means if Nigeria’s poor people came together to form a nation, it would be the fourth most populous nation in Africa. The large number of Nigeria’s poor people and the threat of a socio-economic implosion make poverty reduction a key target for Nigerian policymakers, who have their work cut out, as they must seek to achieve economic growth of around 7 percent.

Some can argue that a socio-economic implosion is already happening, given the rising crime rate and kidnapping in the country. This makes it all the more imperative for Nigeria to act quickly by borrowing a leaf from the playbook of countries that have succeeded in reducing poverty and averting a socio-economic crisis. There’s no scarcity of country case studies pointing the way for how Nigeria can curtail rampant poverty. The common thread in all those case studies is that economic growth is the most powerful instrument for reducing povertyandimprovingthequalityoflifeindevelopingcountries. Growth can generate virtuous circles of prosperity and opportunity. Strong growth and employment opportunities improve incentives for parents to invest in their children’s education by sending them to school. This may lead to the emergence of a strong and growing group of entrepreneurs, which should generate pressure for improved governance. Strong economic growth therefore advances human development, which, in turn, promotes economic growth. It is why a successful strategy of poverty reduction must have at its core measures to promote rapid and sustained economic growth. Asian countries provide overwhelming evidence of that. Take China, which has con-

Can Buhari walk the talk on poverty... Continued from page 1

cord successful poverty reduction outcomes in the medium to longerterm horizon. Putting poverty reduction at the heart of the government’s policy agenda is the right thing. Nowhere is this more urgent that in Nigeria, where currently more than half of the population lives in extreme poverty (defined

as living on less than USD 1,90 a day). It is also in line with Goal 1 of the Sustainable Development Goals (SDGs) to ‘eradicate extreme poverty for all people everywhere’. A quick look at the numbers and Nigeria’s current development trajectory reveals that Buhari’s promise is overly ambitious not to say entirely unrealistic. About 108 million Nigerians live in extreme poverty, sixteen million more than in 2015 when Buhari was elected president for the first time and 37 million more than in 2003. On the

country’s current trajectory, close to 130 million Nigerians are expected to live in extreme poverty in the next decade, according to the International Futures system (IFs), an integrated modelling platform housed at the University of Denver. This is 22 million more than today. This implies that Nigeria is not on track to meet Goal 1 of the SDGs by 2030,. So, how exactly will Buhari’s government radically reverse this trend? Can Nigeria indeed do what China, India and Indonesia did by dramatically reducing poverty in a time span as short as 10 years as the President suggests? According to Buhari, his administration is mapping out policies to ensure that Nigeria grows by 2.7 per cent in 2019. The most recent growth projection from the International Monetary Fund for Nigeria this year is about 2.1 per cent. Even if Buhari’s highly optimistic projection holds, this will roughly keep Nigeria on

NNPC’s oil explorations: A wild goose... Continued from page 1

championed by President Muhammadu Buhari.

“Our next level is to ensure exploration effort in all our frontier Basins of Lake Chad, Gongola, Anambra, Sokoto, Dahomey, and Bida Basins,

as well as Benue Trough are intensified to usher in more prospects in Nigeria,” Buhari said in February at the inauguration of oil drilling at the border village between Gombe and Bauchi States. Some stakeholders in the petroleum sector believe that www.businessday.ng

tributed over 70 percent of the poverty reduced across the world, according to the United Nations, making itself a country with the most people lifted out of poverty globally. According to the $1.9 poverty line, from 1981 to 2015, China lifted 850 million people out of poverty, with the percentage of people living in extreme poverty falling from 88 percent to 0.7 percent. Since the start of far-reaching economic reforms in the late 1970s, growth has fuelled a remarkable increase in percapita income. China’s per capita income has increased fivefold between 1990 and 2000, from $200 to $1,000. Between 2000 and 2010, per capita income also rose by the same rate, from $1,000

to $5,000, moving China into the ranks of middle-income countries, a target Nigeria’s Vice President Yemi Osinbajo says he has set for Nigeria. Beijing’s success was delivered by reforms that were a combination of a rapidly expanding labour market, driven by a protracted period of economic growth, and a series of government transfers such as an urban subsidy, and the introduction of a rural pension. The whole reform programme is often referred to in brief as the “open door policy”. True to the name of the reform programme, China pursued trade liberalisation and opened up to foreign direct investment. It also improved its human capital, opened up to foreign trade

and investment, and created a better investment climate for the private sector. The Chinese government also worked hard to reduce the inequality of health and education outcomes. The Chinese government shifted its policy in recent years to encourage urban migration, fund education, health, and transportation infrastructure for poor areas and poor households. China’s poverty reduction also involved reforming land laws and allowing farmers, who formed the bulk of its poor people, to keep more of their profits. InNovember2013,theWorld Bank and China launched a knowledgehubtospreadknowledge of China’s successes in

L-R: Ibukun Awosika, non-executive director; Fola Akande, company secretary/chief counsel; Atedo Peterside, chairman, and Oyeyimika Adeboye, MD, all of Cadbury Nigeria plc, at the 54th annual general meeting of the company in Lagos.

reducing poverty both at home and in other countries. It is a virtual platform with seminars and studies held in various places. “Demand is growing among other developing countries to learn from this (China) remarkable progress,” former World Bank Group president Jim Yong-kim said at the time. Today, the knowledge hub has helped other Asian countries reduce poverty. One such example is India. If Nigeria were to embrace the idea of using economic growth as a tool to get 100 million people, about half of the country’s population, out of poverty, 10 economists polled in a BusinessDay survey say the government must aim to at least double GDP per capita. The economists also said the government’s target of 2.7 percent growth in 2019 is too little an ambition for Nigeria if it will pull large swaths of its people from poverty. If Africa’s largest economy were to expand 3.5 percent annually, it would take another 100 years to double GDP per capita and make a considerable dent on the lives of the poor. This is why economists say the country should be growing at between 6-7 percent to stand a chance of improving the living standards of its people. Nigeria’s reliance on government spending in form of social intervention programmes is hardly the way to

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its current economic growth trajectory. Relative to the size of Nigeria’s poverty challenge, this will still be underwhelming achievement to say the least, and to be sure, will not lift 100 million Nigerians out of poverty in the next ten years. China’s and India’s phenomenal successes in poverty reduction were anchored in much higher economic growth sustained over years if not decades. Between 2002 and 2012, China lifted about 325 million people out of extreme poverty; and between 2004 and 2014, India reduced its number of extremely poor people by 200 million. Which is why unsurprisingly, India surrendered the unenviable lead to Nigeria as home to the largest number of poor people in the world. During their respective povertyreducing decades, both China and India grew at an average annual growth rate of 11.5 and 8.4 per cent respectively. And even Indonesia’s economy expanded at an average annual rate of 3.5 per cent between 1998 and 2008, which allowed the country to free over 80 million people from the most

abject form of poverty. Nigeria’s economy, on the other hand, is not growing fast enoughtomakesuchsignificant strides in poverty reduction. Further, evidence from around thedevelopingworldshowsthat economic growth is a necessary but insufficient condition to sustainably reduce poverty. The nature of the growth matters, and so does income inequality which is high in Nigeria and has typicallyexcludedthepoorfrom reaping benefits from growth. Nigeria’s income inequality is also higher than China, India or Indonesia’s when those countries made major strides in rolling back poverty. Another key obstacle to poverty reduction is Nigeria’s extraordinary fast population growth which has been outpacing economic growth. Unlike President Buhari suggestion in his speech, Nigeria’s population dynamics differ greatly from China or India’s. Over the past twenty years, Nigeria’s population has grown by close to 70 per cent, from about 116 million people in 1998 to more than 195 million people today. By 2030, more than 260 million people

are expected to live in Nigeria, of which close to two thirds are likely to live in towns and cities. At present, Nigeria’s population is growing almost four times as fast as that of China in 2002 and about twice as fast as India’s in 2004. Buhari’s administration needs to set more realistic targets if it does not want to set itself and Nigeria up for failure. A target as ambitious as lifting 100 million people out of poverty over the next 10 years would require radical policy shifts on multiple fronts which do not seem likely or realistic given recent records. Radical policy shifts can significantly increase Nigeria’s chances to reduce poverty significantly. Among these is a need to stimulate the economy, including via aggressive infrastructure investments (both public and private), labourintensive manufacturing and agro-processing. Managing population growth via family planning initiatives and improved access to contraceptives and female secondary education will help. Just as important, better governance will enhance

the ability of the government to effectively formulate and implement sound policies. President Buhari is right that leadership and a sense of purpose matter. However, visions need to be underpinned by thoughtfully integrated long-term planning. Else, failed implementation remains a distinct risk. Targets should be ambitious whilst being realistic. Just as historical examples from elsewhere need to be interpreted in context. There is much that the Buhari administration can do to reduce the burden of extreme poverty for Nigerians. Taking planning to the next level would be a good start. • Dr. Julia Bello-Schünemann is Senior Associate, Good Governance Africa (GGA-Nigeria). She holds a Phd in International Relations from the Universidad Complutense, Madrid and has held senior research positions at the Institute for Securities Studies (ISS) in Pretoria and FRIDE in Madrid. Her expertise includes policy forecasting (using the International Futures model) and conflict analysis.

the country is sitting on a huge natural resource like hydrocarbon which NNPC can explore by law, especially as the future of oil goes bleak and the country seeks to grow reserves and daily production. Other stakeholders have questioned why the government keeps spending money it doesn’t have instead of

creating a favourable investment climate to attract investors who can easily explore or invest in cleaner source of energy which will reduce the country’s risk to crude oil. A geologist who said he was part of the team that explored the Sokoto Basin years ago described the whole exercise as a wild goose chase. According to

him, the frontier basins are too shallow and not matured. Ademola Henry, team leader at the Facility for Oil Sector Transformation(FOSTER),said by every economic consideration, NNPC’s oil exploration is purely a political exploration as no economic consideration will allow loss-making companies like NNPC to focus on oil.

“Nigeria is not maximising its present oil wells, so why would NNPC spend money on oil exploration when they can simply create an investment environmentthatwillallowInternational OilCompanies(IOC)toperform such task?” Henry asked.

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Monday 24 June 2019

BUSINESS DAY

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FCTA launches Kassuwa.com to boost SMEs James Kwen, Abuja

s part of measures to boost Small, Micro and Medium Enterprises (SMEs) in the Nigeria Capital City, the Federal Capital Territory Administration (FCTA) has launched an online marketing platform, Kassuwa.com. At the launch of the platform in Wuse Market, Abuja

the FCTA Permanent Secretary, Chinyeaka Ohaa said the initiative through the Abuja Enterprises Agency (AEA), the Abuja Investments Company Ltd (AICL) and the Abuja Markets Management Limited (AMML) was aimed at providing the enabling environment for SMEs to thrive. Ohaa stated that the Kassuwa.com platform would make operators in the infor-

mal sector more competitive and position them to take full advantage of various palliative and empowerment programmes of President Muhammadu Buhari’s administration, in line with his recently announced policy of pulling 100 million Nigerians out of poverty over the next 10 years. In his remarks, Managing Director of Abuja Markets Management Limited

(AMML), Abubakar Faruk noted that before now, most traders did not have online presence because players in the industry have not taken upon themselves to focus on the small business owners. Faruk pointed out that the Kassuwa.com platform is unique in e-commerce environment because of the large scope of products available and the unbeatable prices.

UNICELF condemns use of Children as human bombs in the North East Cynthia Egboboh, Abuja

he United Children’s Fund (UNICEF) has condemned the use of children as human bombs and in any combat or noncombat roles in the conflict in North-East Nigeria. Peter Hawkins, UNICEF Country Representative in a statement lamented the use of three children - two girls and a boy (ages unknown) to detonate explosives that killed 30 people and injured 40 others at a community football viewing centre in Konduga, Borno recently. Hawkins noted that this incident brings the number of children who have been reported as having been used as human bombs to five, since January 2019 adding that in 2018, 48 children including 38 girls were used in suicide attacks. “UNICEF appeals to all those involved in this terrible conflict to protect children at all times and to keep them out of harm’s way. It is unacceptable that children should be used this way. “We again call on all parties to the conflict in north-east Nigeria to immediately cease all attacks against civilians, to stop using children in this conflict, and to abide by their obligations under international humanitarian law.” “Since 2012, non-state armed groups in northeast Nigeria have recruited and used children as combatants and non-combatants, raped and forced girls to marry, and committed other grave violations against children. Some of the girls become pregnant in captivity and give birth without any medical care or attention”, he added

L-R: Ebenezer Onyeagwu, GMD/CEO, Zenith Bank plc; Olabode Agusto, founder, Agusto & Co, and Henry Oroh, managing director, Zenith Bank Ghana, at the Financial Market Dealers Association quarterly meeting hosted by Zenith Bank, where Agusto was the Keynote Speaker.

FCTA moves to rid Abuja abattoirs of unholy acts James Kwen, Abuja

he Federal Capital Territory Administration (FCTA ) has insisted that it will leave no stone unturned in the effort to get rid of unholy acts said be perpetrated in Abuja abattoirs. Chinyeak Ohaa FCTA Permanent Secretary gave this indication while on an inspection of the Karu Abattoir said to be a self Haven for drug addicts, prostitutes and perpetrators of other

crimes Ohaa who disclosed that there was a recent publication in the media, that described Karu Abattoir as a place where evil is permissible stressed that the FCT Administration was not going to accept acts of drug abuse and other crimes in any Abattoir in the nation’s Capital. “The issue of drugs and prostitution, the administration will take further action on that, base on the report available to us, we

are going to work with security agencies and make sure that we rid this place of all kind of crimes” he said. On his part, Magaji Kata, Chairman of Karu Abattoir said there was no crime inside in the slaughter house, but some dealers of illicit drugs and substances with the support of some military personnel operate around the area, attracting some addicts from other parts of Abuja as well as neighbouring states.

History as Idris gets reappointed as AGF James Kwen, Abuja

h e A c c o u n t a n tGeneral of the Federation, Ahmed Idris has made history as the first Nigerian to be appointed as the AccountantGeneral of the Federation for two terms in office. This followed a letter signed by the Secretary to the Government of the Federation, Boss Mustapha, conveying the approval of President Muhammadu Buhari for the re-appointment of Mr. Ahmed Idris, for the second and final tenure of

four years as the Accountant –General of the Federation. According to the Secretary to the Government of the Federation, Idris’reappointment is “in accordance with Section 171 of the 1999 Constitution of the Federal Republic of Nigeria (as amended), and will take effect from June 25th 2019.” Recall that Idris was first appointed on June 25th 2015 and he has been instrumental to the successful turnaround in the nation’s public finance machinery. Idris re-appointment may not be unconnected to his

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successful implementation of a number of far-reaching reforms in the Public Finance Management (PFM). Under his watch, the Nigerian Public Finance Management arena has undergone quite a number of reform initiatives; such as the Treasury Single Account, (TSA) which has garnered national and international acclaim; the Integrated Personnel Payroll Information System(IPPIS) which has saved the nation billions of naira as well as cut down on ghost workers syndrome.

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Moving Nigeria from Poverty to... Continued from page 50

go in growing GDP per capita. The entire government budget for the three levels of government (federal, state and local government) is less than 10 percent of GDP, clearly showing the limitations of government-sponsored welfare programmes in growing GDP per capita and reducing poverty. The economists took turns to share how Nigeria can achieve 7 percent GDP growth. “To grow GDP 6-8 percent per annum – required for reducing poverty and unemployment – demands investment; in fact, about 26-28 percent of GDP needs to be invested per year to grow 6-6 percent, meaning we need total investment of about N35 trillion-N40 trillion a year,” said Andrew S. Nevin, chief economist at global consulting firm, PricewaterhouseCoopers (PwC). “We currently do not have enough domestic savings for this – we only have about half the investment required, which means we need foreign investment – both FDI and FPI, as PwC has discussed extensively over the past few years,” Nevin said. “However, I think we have more domestic capital than we think given that Nigeria has about N170 trillion in dead capital predominantly in real estate,” he said. Dead capital refers to assets that cannot be easily transferred, where title is uncertain and so cannot be converted to their most valuable social and economic use. They cannot be used as collateral and so prevents investment in

other businesses. Learning from China would mean the Nigerian government unlocks this enormous capital to boost economic growth. N170 trillion is larger than Nigeria’s 2018 GDP and is nearly the size of South Africa and Ghana combined. This gives ample insight into how impactful unlocking these trapped assets could be for Nigeria. For Charles Robertson, chief economist at Renaissance Capital, Nigeria can get real per capita GDP growth up to 4-6 percent – which implies headline GDP growth of 7-9 percent – by a doubling of the oil price or industrialisation. The risks of relying on oil, as Nigeria learnt when it slipped into recession in 2016 when prices fell, makes the latter suggestion by Robertson more tenable. To achieve industrialisation, Roberston says Nigeria must raise adult literacy from 60 percent to 80 percent which can happen from 2024 onwards. “An adult literacy campaign could accelerate this, copying what the super poor war-torn state of South Korea did in the 1950s,” Robertson said. Nigeria must also treble electricity consumption and double the investment rate to GDP from 13 percent to 26 percent. “To double the investment rate, embrace reforms such as removing the fuel subsidy, boosting domestic savings and encouraging foreign direct investment. The government must also bring down interest rates which will probably require a smaller deficit and higher taxes,” Robertson added.

We have invested $220m in Nigeria- Startimes CEO Innocent Odoh, Abuja

he Chief Execut i ve O f f i c e r o f Startimes Nigeria, David Zhang has said Startimes has invested a total of 220 million USD in Nigeria, as a way deepening Nigeria-China relationship. Zhang disclosed this at the 2019 China Film Festival in Abuja, adding that the company along with it investment has equally developed a network of nearly 3,000 distributors in the country, as well as developed around 4 million subscribers. “We are actively involved in corporate social responsibility and have paid a total of 25 million USD in tax, recruited more @Businessdayng

than 1,000 local staff, 97 percent of whom are Nigerians, and indirectly employed tens of thousands of people in various fields such as marketing, technology, accountant, logistics and customer services,” Zhang said. According to Zhang, the contributions of Startimes to the popularization of digital TV and economic development in Nigeria cannot be overemphasized as its project “Access to Satellite TV for 10,000 African Villages” is one of the cooperation initiatives for China and Africa, which was proposed by Chinese President Xi Jinping at the Johannesburg Summit of the Forum for China Africa Cooperation (FOCAC)in 2015.

Tuesday 25 June 2019

BUSINESS DAY

Government Enterprise & Empowerment Program

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African Bankers’ Awards: BOI wins Financial Inclusion Award for driving FG’s GEEP programme

he Federal Government’s Enterprise and Empowerment Programme (GEEP) which is executed through the Bank of Industry has been recognized as the most impactful Financial Inclusion program in Africa. The Bank of Industry was given the award at the African Bankers’ Awards ceremony which held in Malabo, Equatorial Guinea on June 14th, 2019, for its role in implementing GEEP, which includes the popular TraderMoni programme. The awards event featured financial institutions and projects from all 54 countries in Africa, as well as the international community; other award categories and winners at the event include: Investment Bank of the Year (ABSA Capital), Best Retail Bank in Africa (Ecobank ETI), Innovation in Banking (KCB – Kenya), Regional Bank of the year (East Africa – KCB, Kenya; West Africa – Orabank; North Africa – Banque de l’Habitat (Tunisia); Southern Africa – Mauritius Commercial Bank; Central Africa – BGFI, Gabon), Central Bank Governor of the Year (Tarek Amer, Central Bank Governor– Egypt) among others. In the BOI delegation for the award ceremony included: Mr. Olukayode Pitan – MD/CEO, Bank of Industry and other senior officials of the bank and the project. GEEP, commenced in 2016, has empowered over 2 million micro-enterprises with collateral-free, interestfree loans to grow their businesses, making it the largest government-led microcredit program globally. The vast majority of these microenterprises are petty traders, merchants, enterprising youth, and agricultural workers in over 1600 clusters and markets across all 36 states of Nigeria, and the federal capital. GEEP consists of three financial products: 1. MarketMoni - a

6-month interest-free collateral-free credit starting from N50,000 to 100,000 for small businesses under the auspices of their cooperative societies or associations. Over 350,000 traders have benefitted from MarketMoni. 2. FarmerMoni loans start at N250,000 and are tailored to suit the peculiarities of the different planting seasons and farming requirements. About 5,000 farmers have benefitted till date. The program also includes a guaranteed off-taker which is sourced by the program. Examples of off-takers include: Dangote, Nigerian Breweries, Flour Mills. People who commit contractually to purchasing of all produce for the purpose of local manufacturing. 3. TraderMoni, GEEP’s third product, provides loans starting from 10,000 to petty traders and artisans who do not have the business structure or inventory size for the other GEEP loan products. Over 1.7 million petty traders have benefitted from TraderMoni since its inception. GEEP’s achievement – and continued mission – remains to provide access to finance, and sustainable financial inclusion, and to do this at scale. Over 52% of GEEP beneficiaries are female. For most GEEP recipients, this would be their first use of formalized financial services (bank accounts, mobile wallets, agency banking). GEEP is designed to do last mile delivery of credit to this target group bearing in mind that: 1. Majority have not used financial services before 2. There is the inconvenience of going to the bank 3. There is a natural aversion to technology until proven useful Based on this, BOI’s Micro Enterprises Division designed GEEP to deliver last mile credit delivery using an aggregation model that works with market cooperatives as the acquiring structure, and agent networks with tech-

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nological tools. This group of GEEP agents is equipped with proprietary application that enables full registration and capture of data e.g biodata, information on the market, nature of trader, pictures of trader and trade point, GPS coordinate of the trade point, association membership, and 43 other data points that enable credit assessment. Every day, this group of agents go into the markets to onboard beneficiaries. Data on every captured beneficiary is delivered to Bank of Industry real time to enable verification, appraisals and credit assessment. This is done by a call center staffed with over 120 agents and a number of

officials. Qualified applicants then get disbursements into their bank accounts or mobile wallets generated for them from the registration data. Every loan disbursed is booked automatically on a core banking system that is plugged to all commercial banks in the country, enabling beneficiaries to walk into any bank in the country and make repayments periodically over a 6-month period or to purchase scratch vouchers locally and pay via USSD. Upon completion of loan repayments, a subsequent loan offer is made via phone to the beneficiaries. The beneficiaries BVN is tied to all

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their financial instruments, and it serves as a collateral for the loan. Financial habits formed over a 6- to 9-month loan period do persist, thereby enabling beneficiaries to build a financial history and develop a savings culture and a track record to access several other financial services. GEEP continues to push the boundary in delivering financial products and services to wider parts of society, particularly to the most disadvantaged and low-income segments, ultimately contributing to financial inclusion, development and growth. Over 1.5 million of the 2million GEEP beneficiaries

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are first-time beneficiaries of credit from a formal financial lender. Also, working with over 4,000 agents and 15,000 cooperatives in more than 1,600 markets across the 36 states and the FCT, the program has seen the detailed enumeration of over 7 million MSMEs and their owners. Furthermore, GEEP removes the first critical barrier to financial inclusion, which is the barrier of engagement. It gives beneficiaries a strong reason to want to try. They can only get the GEEP loans by opening a bank account or operating a mobile wallet. They can only repay via the bank or vouchers, no cash. They can only access the next one on their mobile phones. Over half of GEEP’s 2 million beneficiaries are first-time operators of bank accounts or mobile wallets. GEEP is beyond a social good. It is a matter of economic security. It is a more direct effort of the current administration, through the office of the Vice President, to break the multi-decade jinx of economic growth without shared prosperity. MSMEs (predominantly informal microenterprises) contribute 76% of Nigeria’s GDP and 60% of labour. Yet 85% of these enterprises cite “access to finance” in their top three challenges, as only 0.4% of banking loans in 2017 were lent to this microenterprise segment. GEEP’s beneficiaries are of this segment oftenneglected by traditional banks unwilling or unable to handle scale and informality. They are the Nigerians for whom ₦10,000 to ₦300,000 represents a complete turnaround in their businesses and livelihoods. And with the power of biometrics, a BVN as digital collateral, mobile data capture, mobile wallets, and a 4000-strong agent network, GEEP is able to properly target, document, profile, and deliver credit to over 2 million people in this demographic. The programme aims to reach 10 million people by 2023.

Monday 24 June 2019

BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

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Wednesday 24 June 2019

BUSINESS DAY

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Monday 23 June 2019

BUSINESS DAY

news Edo partners World Bank, Dangote Foundation to support female entrepreneurs

do State governor, Godwin Obaseki, says the state government is collaborating with the World Bank, Dangote Foundation and other development agencies to provide special support for female entrepreneurs to expand their businesses in the state. Governor Obaseki disclosed this when he met with the executives of the Benin Chambers of Commerce, Industry, Mines and Agriculture (BENCCIMA) at the Edo Production Centre, in Benin City. The governor noted that a

… plans rehabilitation centre for victims of drug abuse team had been constituted to identify and assess the areas of support for businesses owned by women across the 192 wards in the state, adding that the initiative would be finalised within a week to allow for its implementation across the 18 local councils of the state. “The enumeration of women in business would be done from ward-to-ward to know the type of businesses they do and where they are located because we have found out that women contribute much to the economy of this state,” he said.

He stated that the initiative would assist women in expanding and linking their businesses to the necessary infrastructure and financing to go to scale, noting, “We want to come up with ways to support these female entrepreneurs in terms of infrastructure, connecting roads to the communities where they farm and do their businesses.” Meanwhile, the state government also disclosed plans to set up a rehabilitation centre for victims of drug abuse. David Osifo, the commissioner for health and chairman,

Edo State Drug Control Committee (ESDCC), disclosed this at a press briefing as part of activities lined up to commemorate the International Day Against Drug Abuse and Illicit Drugs Trafficking, in Benin City. Osifo said the Centre would be established by the state government in collaboration with the University of Benin Teaching Hospital (UBTH) and the Federal Neuro-Psychiatric Hospital, Uselu, an arrangement that would enable victims of drug abuse access adequate treatment and rehabilitation.

He noted, “There is an unmet need for drug abuse treatment in Nigeria. According to the Drug Use Survey, nearly 40 per cent of high-risk users wanted treatment but were unable to get it. The Edo State Drug Control Committee developed a proposal to set up the Centre taking into cognisance the peculiar needs of psychiatric patients who roam the streets as a result of drug abuse. “Once the centre is open, we will take victims of drug abuse from the streets and give them adequate treatment.” Edo has the second highest

Sanwo-Olu’s wife pledges to work with doctors on health initiatives

ife of Lagos State governor, Ibijoke Sanwo-Olu, has expressed her readiness to collaborate with medical practitioners to play up health initiatives in various fields to the ultimate benefit of the people. Sanwo-Olu, who is also a medical doctor, spoke at Lagos House in Alausa, Ikeja, when she received leadership and members of Lagos State chapter of Medical Women Association on courtesy visit. Recalling the various medical mission programmes held across the state during the electioneering period, especially on cervical and breast cancer screening, the wife of the governor said she would be willing to further collaborate with the association in implementing more health initiatives to allow more people to benefit. According to Sanwo-Olu, “In the area of health screening, that is one thing that we really capitalise on especially in the Medical Women Association. We did a lot during the campaign period too on cervical and breast cancer screening and let me use this opportunity to assure you that we would be willing to further partner to ensure that more people benefit in this regard.” Besides, she urged more female doctors to join the association and lend their voice to issues in the medical field, apart from working in the hospitals. “All we know to do is to work work work and keep patients all the time then forget ourselves, and then we grumble all the time that our presence are not being recognised wherever we are. So, I want to encourage more medical women to be up and doing. Apart from just working inside the hospitals, we should be a voice out there in terms of advocacy on medical field,” she said. She also commended members of the association for their laudable work and sacrifice to humanity, just as she urged them to continue with the selfless service to the people. Earlier, leader of the delegation, Dr Bakare congratulated the first lady and her husband for successfully taking over the mantle of leadership in the state, while also expressing the readiness of the association to work with the new government to deliver on their health initiatives in the state.

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prevalence rate of drug abuse in the South-South region at 15.5 percent, after Delta State with a prevalence rate of 18 percent, he said. The committee is also working to reduce drug abuse by promoting drug abuse prevention, social inclusion and protection as well as building the knowledge for justice and healthy living. “We will be involved in advocacy visits to schools, religious and traditional places and want parents to teach their children the consequences of drug abuse,” he said.

Monday 23 June 2019

BUSINESS DAY

NEWS USNC says committed to strengthen Nigeria’s capital market framework Iheanyi Nwachukwu

S-Nigeria Council for Food Security, Trade and Investment (USNC) says it is committed to the strengthen of the regulatory framework governing Nigeria’s capital markets, in attracting foreign investment, creating new jobs and stimulating economic growth. Also, the Council urged the Securities and Exchange Commission (SEC) and Oando plc to resolve the ongoing dispute amicably via transparency, due process and full respect for the rule of law. The Council in a statement notes that its members are committed to strengthening the commercial relations between the United States and Nigeria and recognise the importance strong capital markets play in attracting foreign investment, creating new jobs and stimulating economic growth. “The US-Nigeria Council for Food Security, Trade and Investment notes the alleged infractions of securities regulations by Oando plc. Oando plc, as a founding member of the Council and as an active

and valued participant in the Council’s activities, plays an important role in promoting business and direct investment in Nigeria. “ The Council and its members are committed to strengthening the commercial relations between the United States and Nigeria and recognize the importance that strong capital markets play in attracting foreign investment, creating new jobs and stimulating economic growth. “As part of this, it is critical that the regulatory framework governing Nigeria’s capital markets remain robust, with due process and fair and equitable treatment for all parties,” it says. It adds, “The Council has confidence in the regulatory authorities and the Nigerian judicial system, and advocates for this matter to be resolved with transparency, due process and full respect for the rule of law. “The Council will continue its mission to promote opportunities in Nigeria to US investors and advance commercial partnerships that contribute to economic growth in Nigeria.”

L-R: Jean-Louis Ekra, immediate past president of Afreximbank; Benedict Oramah, president, Afreximbank, and Boss Mustapha, Secretary to the Government of the Federation (SGF)/chair of the 2019 annual meeting of Afreximbank, during the bank’s summit in Moscow, Russia, yesterday

Stakeholders advocate holistic, systemic approach for addressing infrastructure gap HOPE MOSES-ASHIKE

takeholders in the banking and finance sector as well as other private sectors of the economy, last week, called for systemic and holistic approach in solving the infrastructure problem in Nigeria. They made this call in Lagos at the 2019 annual lecture on the theme: ‘Infrastructure Development and Growth in Nigeria: Prospects and Challenges,’ organised by the Chartered Institute of Nigeria (CIBN). They opine that if the government fails to deal with infrastructure problem proactively, businesses will collapse. The stakeholders included Melvin Ayogu, Fellow, Mapungubwe Institute of Strategic reflection, South Africa, Andrew Alli, group CEO/partner, South Bridge Group, Wale Babalakin, chairman, Bi-Courtney group/pro-chancellor, UNILAG, Aisha Dahir-Umar, acting director-general, National Pension Commission, who sent a representative, Bola Onadele Koko, managing director/CEO, FMDQ OTC, Securities Exchange, who also sent a representative, Humphrey Gelseb, high commissioner of the Republic of Namibia to Nigeria, and Uche Olowu, president/chairman of council, CIBN, among others. In his presentation, Ayogu, who was the guest speaker, said infrastructure deficit translates into service delivery challenges. However, they also present opportunities for investors to revisit the tradi-

tionally public-sector niche market in basic infrastructure and rethink, based on emerging possibilities unleashed by the forces of technological advancement, demographic changes and culture, the set of feasible modes of engagement. According to Ayogu, the way government has acted in the electricity sector does not augur well for shared participation in the infrastructure sphere, although there is probably enough blame to go around as should be the case in any regime of crony capitalism. “If we want a solution to

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our problems which are rooted in socio-political economy, then we must become engaged – be the man in the mirror,” Ayogu said. Olowu said the discussion around the infrastructure was very important because this was one of the institute’s public policy advocacy programmes, where it intervenes in critical issues that affect the national economy. Infrastructure he said is the very backbone for which to drive the economic growth. “We realise that the deficit is huge and needs to be addressed if we have to achieve the growth,” Olowu said.

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BUSINESS DAY

Monday 24 June 2019

NEWS ‘Buhari’s anti-graft war will bear fruits with Weak income, absence of institutionalised prosecution of key APC members due for charges’ structure, behind Nigeria’s low saving mobilisation TEMITAYO AYETOTO

senior advocate of Nigeria, Femi Falana, says the war against corruption by President Muhammadu Buhari will only bear fruits when his administration leads with the example of prosecuting corrupt members of the ruling party already due for prosecution. The government, Falana said, has expressed interest in ridding the country of graft but has largely failed to walk its talk. “There are many members of the APC who should stand trial but the government is under pressure nottoprosecutethem.Itisonlywhen the Nigerian people are involved that we can insist that all those who have looted our funds must be prosecuted,” Falana said, speaking at a corruption dialogue convened by ActionAid Nigeria, Centre for Communication and Social Impact

and UKaid from the British People in Kano. The goal of the fight will be ultimately realised when the governmentmakeswealthcreationitspillar focus and guarantees welfare programmes under right to minimum wageandrighttoeducation,hesaid. The Up-Right-for-Nigeria campaign themed “Enhancing Citizen’s Effective Participation in the Fight against Corruption” touched on the need for states and Attorney Generals to back the fight because there are limits to which anti-graft commissions can go. They are controlled by the FG, underfunded and sometimes directed by the government on who to investigate or not. One of the limitations is that in investigating offences such as stealing, fraud or forgery, commonatstatelevel,theEFCChas to seek the permission of Attorney Generals’ before prosecution.

On the part of Ene Obi, ActionAid Nigeria country director, corruption distortscompetitionandtrade,reduces investmentsandslowsdevelopment.It widenseconomicandsocialinequalities, heightens injustice, discontent, exclusionandpolarisation. Thesocialcostofcorruption,Obi explained, is directly and indirectly linked to ruins in the country’s educational system, healthcare facilities, inequality gap, worsened level of insecurityandconflicts,pushedback foreign investment opportunities and government’s failure at basic amenities provisions. “We have seen the reality of poverty at the different levels including rural and urban communities. And we are without any doubt that corruption being one of the major causes of these deprivations, when dealt with decisively will liberate many Nigerians from the strongholds of poverty,” Obi said.

SYNLAB Nigeria wins NHEA Award for 6th consecutive time

YNLAB Nigeria, a leading innovative medical diagnostics centre, has won the prestigious Nigerian Healthcare Excellence Awards (NHEA) for the sixth consecutive time. SYNLAB was awarded the Private Laboratory Services Provider of the year 2019 Award by a panel of judges after due consideration of the high standards and in-

novation the diagnostics service provider has brought to Nigeria. Formally known as PathCare, SYNLAB has brought international expertise, world-class healthcare, new specialised services and matchless medical diagnostic to Nigerians. SYNLAB Group, which is Europe’s number one medical diagnostics provider, operates in more than 40 countries across four continents and

holds leading positions in the countries where it operates. As part of its contribution to the development of preventive healthcare in Nigeria, SYNLAB recently introduced three innovative genetic tests, which are available at its Victoria Island facility. The tests are MyPGx, SportGen and NutriHealth they were introduced with a view of enhancing the practice of preventive healthcare in the country.

Israel Odubola & Segun Adams

ince Gross National Savings (GNS) plunged from 23 percent in 2009, Nigeria has been at a loss on ways to increase its domestic capital mobilisation and assist debtridden government in financing its much needed development projects. GNS, which is the difference between gross national disposable income and final consumption expenditure, when benchmarked against Gross Domestic Product, slightly increased to 11.8 percent in 2018, according to Central Bank of Nigeria Statistical Bulletin. The uptick hardly calls for cheer as Nigeria grossly lags emerging peers in aggregating domestic savings. Analysts say data sourced from World Bank, which show South Africa’s GNS at 20 percent, China (47%), India (30%) and Brazil (16%) reflects the woes of the Nigerian economy characterised by high poverty levels, declining income per head and high unemployment rate. “The major reason why savings ratio is low in Nigeria is because per capita income is low,” Johnson Chukwu, CEO, Cowry Asset Management Limited, says. Chukwu positions that with “44 percent of Nigerians in abject poverty, living on less than $1.9 a day” households in Nigeria are

struggling to meet the basic essentials of life, leaving them with little to save. Nigeria’s per capita income has been declining steadily since it rose to $2,563 in 2014. Latest figure from World Bank shows $2,412 per head compared with South Africa’s $7,525, China’s $7,329 and Brazil‘s $10,889. Ayo Teriba, CEO, Economic Associates, explains that the nation’s high unemployment rate compounds its savings mobilisation dilemma, as there is a high rate of dis-saving in the economy with a large fraction of the population living without income. “You cannot expect a high savings rate in a high poverty and unemployment environment,” Teriba says. GNS comprises personal, business and government savings. When savings rate is low in an economy, it results in lower funds for investment purpose, which constrains expansion of businesses and ultimately slows down overall growth. It also reflects limited access on the part of government and corporates to access funds to execute key projects. This matters for Africa’s biggest economy, which has a huge infrastructure gap requiring at a minimum of $3 trillion in bridging the deficit in the next three decades. Nigeria’s low savings rate can also be attributed to the absence of institutionalised means of sav-

ing. In many developing countries, people are mandated to save for retirement, mortgage, insurance policies, education and the likes, all of which supports domestic savings. Wale Okunrinboye, head of research at Sigma Pensions, asserts that the improvement in the Nigeria’s Pension Funds from 2003, where it was zero to over N9 trillion in Q1 2019, is testament that government policy in making certain savings scheme compulsory can yield better results. Okunrinboye also points out that Nigeria’s large informal sector remains largely excluded from the country’s formal banking system and does not save effectively. “People save in wooden boxes, under the pillow and all. The result is that their savings do not grow. They still have the same amount after a long period of time,” he states. Total savings in Nigeria increased to N15.1 trillion in 2018, indicating 16 percent uptick over N12.9 billion in the previous year. Breakdown shows that savings and time deposit with commercial banks accounted for 98 percent of national savings in Nigeria. Timesavings with Merchant Bank stood at N244.9 billion last year. Analysts hinge the improvement in saving rate on restructuring savings structure in Nigeria and creating friendly schemes that would enable low-income people to part a portion of their income for future needs.

EXPLAINER

What you need to know about the new Nigerian passport IFEOMA OKEKE

t is no longer news that the new Nigerian passport will be rolled out tomorrow. Having migrated from the Machine Readable Passport in 2017, the Nigeria Immigration Service found it expedient to review the document and its administrative processes to further conformtoglobalbestpractices. This effort culminated into a comprehensivepassportreform that saw the introduction of new enhanced passport booklet and a passport with the 10-year validity. While applicants are already eager to get the new international passports, there may be no need for the rush as the old passports will run concurrently with the new ones until the old passports are gradually phased out. This means, until five years’ time, the old passport, which has five-year validity should still be in use. While the roll out of the new passport may not be a total solution to the recurring booklet scarcity, until production of the booklets are done in Nigeria, adequate provisions have however been made for over 25,000 applicants who have already paid for the old passports, which are currently being produced concurrently with the new passports. Approved fees for the new passports are as follow: 32 page

five-year standard passport will be sold for N25,000 or $130 (for overseas applicant), 64 page five-year standard passport for N35,000 or $150 (for overseas applicant) and 64 page 10 year standard passport at 70,000 or $230 (for overseas applicant). These fees however exclude bank charges. The 64-page 10-year passport will be restricted to adults (18 years and above). This is because as children grow, they experience major changes in their appearance. While applicants may prefer to go for the 64-page 10-year passport because it is cost-effective and may ease them the stress of coming back after five years to apply, it may also be needless for frequent travellers for go with this option. This is because some frequent travellers have their 64-page five-year passport filled up in one or two years. So, it may just be a waste of money going for this category of passport. The 64-page 10-year passport may be the best bet for adults without the above ‘challenge’. An important requirement added for the procurement of the enhanced e-passport is the National Identity Number (NIN). To facilitate the ease of doing business for the NIN, the service has integrated its system with the National Identity Management Commission (NIMC). www.businessday.ng

L-R: Osagie Ize-Iyamu, chieftain of Edo State People’s Democratic Party (PDP), his wife, Idia Ize-Iyamu; Peter Obi, former Anambra State governor and vice presidential candidate of the PDP in the 2019 general elections, and Godwin Obaseki, Edo State governor, at the birthday thanksgiving service in honour of Ize-Iyamu and his wife, in Benin City, at the weekend.

NCC plans internet industry code to address cyber crime IDRIS UMAR MOMOH, Benin

he Nigerian Communications Commission (NCC) says it has concluded plans to establish an internet industry code of practice for internet service providers in Nigeria. Ismail Adedigba, the commission’s deputy director, consumer affairs bureau, disclosed this at the 106th edition of consumer outreach programme organised by the commission in Benin City, the Edo State capital, with the theme, “mitigating effects of cyber crimes: the roles of

telecom consumers.” According to Adedigba, the internet code is a regulatory intervention expected to secure the country’s cyber space against imminent threats from cyber attackers as well as addressing issues such as online child protection, privacy and data protection, among others. He noted that the liberalisation of the telecoms industry had led to an unprecedented increase in the usage of internet-based solutions and services. He explained that, while the regulatory intervention and other initiatives were ongoing to sanitise

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the internet space, telecoms consumers must also play their role to ensure that the right things were being done to sanitise the industry. The NCC deputy director said the awareness campaign was geared towards sensitising telecoms consumers on the rising wave of cyber crime in its various forms, the dangers it posed and the role telecoms consumers were expected to play in reducing the impacts of cyber crimes on them. In his opening remarks, Felicia Onwuegbuchulam, director, Consumer Affairs Bureau, said the various initiatives of the com@Businessdayng

mission had helped to guarantee improved services and value for money spent on telecoms services for the consumers. Onwuegbuchulam, also represented by Ismail Adedigba, who noted that the telecoms consumer were the ultimate beneficiaries of the initiative, posited that the theme of the outreach was to highlight the threats of cyber crime to all users of telecoms services and to sensitise the consumers on the role they need to play in order to be protected from the prying eyes of cyber criminals and hackers.

Monday 24 June 2019

BUSINESS DAY

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BUSINESS DAY

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Monday 23 June 2019

BUSINESS DAY

NEWS

Russia puts Africa investment in 2018 at $20bn HOPE MOSES-ASHIKE

he 2019 Annual Meetings of the African Export-Import Bank (Afreximbank)opened in Moscow on Thursday with Sergey Lavrov, Minister of Foreign Affairs of the Russian Federation, saying Russia’s investment in Africa had increased over the years to reach $20 billion in 2018. Declaring open the Annual Meetings, Lavrov said Russia had made investments in such sectors as mining, energy and railway, highlighting a nuclear power plant and industrial park developed by Russia in Egypt. “We are moving toward broadening our relationship, especially in our cooperation on security and peace making,” he said, describing Africa as Russia’s important partner in the global struggle for truth and fairness. LavrovsaidRussiawascommitted to promoting Africa with a view to providing African solutions to African problems, and urged the international

community to provide its support by helping to incentivise and develop programmes that help African businesses. Gabriel Aduda, permanent Secretary in the Office of the Secretary to the Government of Nigeria,speakingonbehalfofthe chairman of the Annual General MeetingofShareholdersofAfreximbank, commended Russia for hosting the Annual Meetings. In his comments, Benedict Oramah, president of Afreximbank, said 2019 marked a major point for the bank as it looked to the future of Africa’s trade and finance and sought to build bridges with global powers. “As we gather in this historic city of Moscow, we will explore how we can shape the future of tradeandhowwecantransform our continent,” Oramah said, saying, “Our collective endeavours will impact the economic future and wellbeing of Africans for generations to come.” More than 1,000 African and international trade development experts, representatives ofgovernment,businessleaders

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and other trade industry players officials are taking part in the Annual Meetings, which is also serving as a platform for African andRussianbusinessestomeet, strengthen and grow partnerships in order to foster business relations. More than 50 speakers from Africa and beyond are scheduled to speak and address participants during the three days of the conference, which ends onJune22.Theywilldebateand share insights on such topics as, Promoting South-South trade asanengineformultilateralism; prospects for multilateralism in an era of protectionism; and how Africa can make finance work for economic transformation. Highlights of the event will include the seminar and meeting of the Advisory Group on Trade Finance and Export Development in Africa which will run until Friday; the official opening of the Annual General Meeting of Shareholders in the afternoon on 21 June; and Annual General Meeting of Shareholders on 22 June.

BENCCIMA lauds Obaseki on ease of doing business reforms

enin Chamber of Commerce, Industry, Mines and Agriculture (BENCCIMA) has commended Edo State governor, Godwin Obaseki, on infrastructural development across the state and the reforms in ease of doing. President of BENCCIMA, Helen Odemwingie, gave the commendation during a meeting with the governor at the Edo ProductionCentreinBeninCity, the state capital. She noted that the massive rehabilitation and reconstruction of roads across the state by the Obaseki-led administration

hadimprovedaccesstobusiness premises and eased transportation of goods within and outside the state. Odemwingie said the elimination of stringent conditions and multiple taxations on businesses and ease in the acquisition of land for agriculture with the ban on the activities of Community Development Associations(CDAs)werelaudable achievements recorded by the present administration. BENCCIMA is also working assiduously to support the state government in driving economic growth and job creation through its farmers’ market, as

well as the formation of clusters for business operators in the oil palm value chain for easy loan acquisition, she said. Thepresidentofthechamber urged for support from the state governmentforaproposedbook fair as well as the 2019 Edo Trade Fair scheduled to hold from November 29 to December 12. She assured of the chamber’s continued support to the state government and described the Production Centre initiative as a landmark achievement by the Obaseki-led administration, adding that the step would boost commerce and other economic activities in the state.

Panadol identifies with consumers, launches Toughies

n celebrating its consumers’ who are resilience to always stand out in the face of challenges, Panadol is set to launch the Panadol toughies in Nigeria today. The campaign is an initiative that seeks to distinguish individuals who are always determined to help others not minding the challenges. Explaining the rationale behind the campaign, Shehryar Rao, head of marketing,

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consumer healthcare - Nigeria, said, “In line with Panadol’s proposition of championing hope over pains, we are associating with amazing individuals who go the extra mile for others, never bothering about the pain in order to make others happy. This set of amazing people will go all out just for the happiness and wellbeing of others, even as they are selfless and tireless in the pursuit of their day-to-

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day activities, exhibiting a lot of strength”. He said, “Most times, these individuals go unappreciated because it is easier to take such gestures for granted.” To identify Toughies for the campaign, consumers will follow @Panadolnigeria on Facebook and Instagram, share their compelling stories of individuals who fit the criteria and tag their followers to do same.

Monday 24 June 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

MEHUL SRIVASTAVA, DEMETRI SEVASTOPULO AND MONAVAR KHALAJ

ashington will impose fresh sanctions on Tehran as early as Monday, one of Donald Trump’s senior aides said, warning Iran not to mistake US “prudence for weakness”. Three days after Mr Trump aborted a mission to strike Iran in retaliation for its shooting down of an American surveillance drone, John Bolton, White House national security adviser, warned Iran against complacency. “Neither Iran nor any other hostile actor should mistake US prudence and discretion for weakness,” he said in Jerusalem on Sunday after meeting Israel’s Prime Minister Benjamin Netanyahu. “No one has granted them a hunting licence in the Middle East.” Mr Trump ordered strikes on Iranian targets on Thursday but later said he aborted the mission because of estimates that 150 Iranians could die. The reversal was backed by the Pentagon but opposed by Mr Bolton and Mike Pompeo, secretary of state. In overruling his more hawkish advisers, Mr Trump has signaled that he will continue for the time being with his “maximum pressure” campaign of sanctions that are designed to persuade Tehran to come to the negotiating table. In an interview with NBC News, Mr Trump said on Sunday he was willing to enter into negotiations with Iran with “no pre-conditions”, but he added he would continue to put economic pressure on the Islamic republic until it decided it wanted to negotiate. “Look, you can’t have nuclear weapons. And if you want to talk about it, good,” Mr Trump said. “Otherwise you can live in a shattered economy for a long time to come.”

US prepares to impose new sanctions on Iran

John Bolton warns Tehran not to confuse American ‘prudence for weakness’ In separate comments on Saturday, Mr Trump said he wanted to “Make Iran Great Again” as he appeared to hold out the same economic promise that he has made to North Korea to abandon its nuclear programme. Mike Mullen, former chairman of the US joint chiefs of staff, said on Sunday he worried that events could “spin out of control”. Asked whether Mr Bolton was pushing Mr Trump into a conflict with Iran, he said: “It appears that we are certainly headed in that direction. Certainly, John Bolton has that reputation”. “My biggest concern is the president is running out of room, running out of options and, while rhetoric goes back and forth on how close we came to hitting Iran just the other day, that this thing could spin out of control,” Mr Mullen told ABC News. “And the last thing in the world we need right now is a war with Iran.” Speaking ahead of his meeting with Mr Bolton, Mr Netanyahu said it was clear the Obama administration’s move to waive sanctions following the 2015 nuclear deal had emboldened Tehran. “Those who argue that Iran’s aggression began after the recent actions are not living on the same planet,” Mr Netanyahu said. The reversal on strikes underlined how Mr Trump is grappling with the conflicting desire to be tough on adversaries and his reluctance to drag the US into endless wars. In the

British quantum computing experts leave for Silicon Valley

group of Britain’s best-known quantum computing scientists have quietly moved to Silicon Valley to found a start-up called PsiQ that believes it can produce a commercial quantum computer within five years. The departure of some of the UK’s leading experts in a potentially revolutionary new field of technology will raise fresh concerns over the country’s ability to develop industrial champions in the sector. The news comes just weeks after the successes of the British start-up scene were extolled at London Tech Week, where prime minister Theresa May pledged £150m specifically to help develop commercial applications for quantum computing. The scientists’ move to Silicon Valley was driven partly by a need to raise capital. “The story is that the best of Britain is going to the United States to scale up,” said Hermann Hauser, co-founder of UK-based chip designer Arm, which is now owned by Japan’s SoftBank, and an

Iran’s President Hassan Rouhani repeated the claim on Sunday that the US drone had entered Iranian airspace — which the US denies — saying the act “had started a new tension” in the Middle East. “This very sensitive region and the security of the Persian Gulf and the Gulf of Oman are of great importance to many countries,” Mr Rouhani said, adding that he “expected international bodies to proportionately respond to this US invasion”. The UN Security Council will convene on Monday to discuss Iran following a US request.

Iran’s president said most of the problems in the Middle East and the world were rooted in “dictatorship and bullying of some countries, especially the US, which tramples upon international regulations and move in the path of unilateralism.” A commander of Iran’s Revolutionary Guard on Sunday warned that rising tension risked sparked a wider Middle East conflict. “The fate of the nations are tied together in the region,” said Major General Gholam Ali Rashid. “Either [nations] move towards stability or the region becomes involved in instability and war.”

Market questions is the FT’s guide to the week ahead RICHARD HENDERSON

early investor in PsiQ. “They rightly concluded that they couldn’t access the capital in Europe so moved to the Valley,” he added. So far PsiQ has received investment from Playground Global, a venture firm started by Android founder Andy Rubin. PsiQ, which has 50 employees according to LinkedIn, was co-founded by Jeremy O’Brien, a physicist at the University of Bristol and Terry Rudolph, a professor at Imperial College London. Several PhD graduates of the two UK labs have followed the researchers to Palo Alto, where the start-up has set up shop close to Stanford University. Chief operating officer Stu Aaron was previously a partner at premier Silicon Valley investment firm Khosla Ventures and has worked for at least five start-ups based in California. The company is now bolstering its engineering expertise to start building a working machine, Mr O’Brien said. “The majority of our staff come from the wider industry — systems engineering, the semiconductor industry, photonics and so on,” he said. www.businessday.ng

interview with NBC, the US president said he did not want to go to war with Iran, but warned Tehran that war would mean “obliteration like you’ve never seen before”. US media reported that the US launched a cyber attack on Iran on Thursday aimed at disabling the computer systems controlling rocket and missile launchers. Even some of those who accuse Iran of engaging in provocative acts — such as recent attacks on two tankers — blame the decision by Mr Trump to withdraw from the 2015 nuclear deal for the rising tension.

Is the dollar’s star power waning?

New start-up aims to create commercial quantum computer within 5 years MADHUMITA MURGIA

US national security adviser John Bolton and Israeli prime minister Benjamin Netanyahu hold a press conference in Jerusalem on Sunday © AFP

s the dollar’s star power waning? The US dollar has been enjoying its status as the world’s highest-yielding major currency, as interest rates have hit 2.5 per cent after four rises last year. This has encouraged investors to sell their euros and yen to buy the greenback. But this week’s meeting of G20 leaders in Osaka, together with the US Federal Reserve’s dovish pivot at its June meeting, could conspire against the dollar. Interest rates markets are pricing in two to three cuts in the US this year, while Citi economists say a half percentage point cut in July is now “inevitable”, according to market pricing. “It seems to us as if the ‘dovish’ Fed and Trump/Xi trade optimism narratives are both being rolled into a single ball of dollar negativity,” said Stephen Gallo, a strategist at BMO Capital Markets in London. Following the Fed meeting the dollar sold off, pushing the euro

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to trade above $1.13 and the yen at ¥107.65, its strongest level in more than a year. So far this month, in fact, the dollar has lost ground against all other G10 currencies, bar the Australian dollar. It also appears that the US dollar has lost some of its appeal as a haven, to gold. Since the Fed meeting, the price of the yellow metal has climbed to $1,406 per troy ounce, its highest level since August 2013. A move through $1400/oz is “a good indicator that the market thinks a broader dollar bear trend is developing”, said Chris Turner, global head of strategy at ING Bank in London. Eva Szalay Will AGMs blast Japan’s stocks out of their slumber? Arguably the biggest week of the year is in store for the Japanese stock market as the three peak days for annual shareholder meetings arrive on Tuesday, Wednesday and Thursday. But if the explosives are primed, will they be strong enough to blast the Japanese equity market out of its slump? This year’s AGM season is due to witness unprecedented levels of investor-on-management clashes, @Businessdayng

with a record 54 companies facing shareholder proposals. These span the mischievous (Mizuho to surrender its status as a primary dealer of Japanese government bonds) to the potentially game-changing (Kyokuto Boeki, a trading house, to disclose its cost of capital and cross-shareholdings). A record spree of buyback announcements has preceded the AGMs, suggesting managements already know the sort of grilling they will get. The highlights will be Nomura and Nissan, where embattled chief executives could suffer a massive collapse of support, and Lixil, the building materials group, which is giving the market its first choice between competing slates of new board directors. However, the real importance of these AGMs is what their outcome and voting patterns tell foreign investors, who have now been net sellers of Japanese stocks for six consecutive weeks. The big risk-on move that has swept up the US and China in June has completely missed Japan. If the AGMs clearly demonstrate that there is upside to getting feisty with Japanese managements, that may change. Leo Lewis

Monday 24 June 2019

BUSINESS DAY

NATIONAL NEWS

Ethiopia hit by assassinations and ‘coup’ attempt

Attacks underline fragile nature of Abiy’s national government DAVID PILLING

he chief of staff of Ethiopia’s army and two senior regional political figures have been shot dead in what the prime minister’s office called a co-ordinated attack, underlining the fragile nature of the country’s government. A “hit squad” led by regional security chief General Asaminew Tsige burst into a government meeting in Bahir Dar, capital of the Amhara region, on Saturday evening, killing both the region’s president and his adviser, according to a statement from the office of Abiy Ahmed, the country’s reform-minded prime minister. In a separate incident in the capital Addis Ababa, Seare Mekonnen, chief of staff of the national security forces, was killed in his home by his bodyguard. A retired general was also killed. The statement from Mr Abiy’s office described the incident as “an orchestrated coup attempt” on the executive leadership of Amhara, a province of 31m people north of Addis, and said that many, but not all, of the plotters had been arrested. Gen Asaminew is still at large, according to reports. “There is an ongoing operation to arrest the remaining [perpetrators],” the statement said. “The situation in the Amhara region is

currently under full control.” Ethiopia, a nation of 105m people in the Horn of Africa, has been one of the fastest-growing economies on the continent, racking up more than a decade of near-double digit growth. Investors, particularly from China, Turkey and the Gulf states, have continued to back the country in spite of political instability born of its fractured ethnic make-up. Since he was selected as prime minister in April last year Mr Abiy has loosened the grip of state security, freeing thousands of political prisoners, unbanning political parties and allowing much greater freedom of the press. While his sweeping changes have made him popular, they have also unleashed a wave of unrest and regional ultranationalism that had been suppressed by the security forces under the previous government. Ethiopia is divided into nine ethnically based provinces, each with strong identities that had been encouraged by the Ethiopian People’s Revolutionary Democratic Front, the four-party coalition that has run the country since 1991. Amhara, home to the famous rock-hewn churches of Lalibela, has traditionally been a political and cultural centre but has been relatively sidelined in recent decades while neighbouring Tigray has become more powerful.

Jihadi threat spreading across west Africa, Togo leader warns Faure Gnassingbé says ‘devastating’ impact if extremists are not contained JOHN AGLIONBY AND NEIL MUNSHI

slamist extremists will have a “devastating” impact in west Africa’s coastal states unless their spread from Burkina Faso and Mali can be prevented, Togo’s president has warned. Faure Gnassingbé told the Financial Times that jihadis based in Burkina Faso were starting to make incursions into Togo and neighbouring Ghana. “They’re not organised to hit us but they are inside [our countries],” he said in an interview in London. “If the conflict is not resolved in one country it will spread down to the coastal countries, Togo, Ghana, Cote d’Ivoire. That’s inevitable.” The threat of violence has been underlined by recent massacres in central Mali between Dogon hunters and Fulani herders, which have stoked fears of jihadis exploiting communal tensions and linking up with ethnic militias. On Monday, more than three dozen mostly Dogon villagers were reportedly killed in two towns. That followed an attack on another Dogon village the week before that killed 38 people and a March attack on two Fulani villages in which 150 people died. Burkina’s borders with Togo, Ghana, Côte d’Ivoire and Benin are extremely porous. Last month a Beninoise tour guide was killed during the kidnapping of two French tourists in a national park near the Burkina border. French troops rescued the pair

in Burkina in an operation in which two of their soldiers were killed. France signed an expanded security co-operation agreement with Burkina in December to address the increase in violence. Last month there were a string of attacks on Christians in Burkina, which the country’s president Roch Marc Christian Kaboré said were a sign of jihadis switching tactics in order to inflame religious tensions, according to local media. Mr Gnassingbé said that if the “menace” were to spread south, the impact would be severe in small countries such as Togo, whose 8m population is less than half that of Mali and Niger. “That’s why the impact, if it were to start, would be devastating for our countries,” he said. Defeating the threat was not easy because “no one knows how to deal with it,” Mr Gnassingbé said. It would involve addressing “development issues”, he added, but stressed that “the immediate response has to be military”. During his time in London, Mr Gnassingbé asked the British government for help to train his military to combat the militants. France intervened in the Sahel, where it was once the main colonial power, to defeat an Islamist insurgency in northern Mali in 2012. It has retained a presence in the region with 4,500 troops, drones and fighter jets principally operating in Mali, across a territory the size of Europe. www.businessday.ng

Turkey’s opposition wins rerun of Istanbul election Second defeat a crushing blow for Erdogan as Imamoglu massively increases majority LAURA PITEL, AYLA JEAN YACKLEY AND FUNJA GULER

political gamble by Turkey’s president Recep Tayyip Erdogan backfired spectacularly on Sunday as the opposition won a resounding victory in the repeat of an Istanbul mayoral election according to early results. Ekrem Imamoglu, the opposition challenger in a race for control of Turkey’s biggest and most important city, had won the contest in a previous vote but was stripped of his narrow victory after claims of fraud by Mr Erdogan’s ruling party. On Sunday, preliminary results showed that the 49-year-old former district major not only won the rerun of the vote but massively increased his majority. “This amounts to everyone together opening a new page for Istanbul,” Mr Imamoglu said after the result became clear. “Today 16 million Istanbul residents have renewed our faith in democracy and our trust in justice,” he added. He described

the result as a new chapter not only for Istanbul but for everyone in Turkey. “It’s a new start,” he said The second defeat will come as a crushing blow for Mr Erdogan, who has for years warned his party faithful that losing Istanbul means losing Turkey. Mr Imamoglu won close to 54 per cent of the vote, compared to 45 per cent for Binali Yildirim, the former prime minister who stood for the ruling party, according to initial results published by the state-run Anadolu news agency. In a televised speech, Mr Yildirim said that his opponent was in the lead and appeared to concede defeat. “My opponent Ekrem Imamoglu is ahead. I congratulate him and wish him success,” Mr Yildirim said. “An election means democracy. This election once again proves that democracy works extremely well and flawlessly in Turkey. The final results will be announced later. I hope these results will be fortuitous for Istanbul.” Mr Imamoglu increased his lead in the city of 10.5m voters from less than 14,000 votes in the

initial vote to more than 700,000. Those figures were based on almost 98 per cent of ballot boxes, Anadolu said. The former district mayor ran an upbeat campaign that highlighted the injustice that he says he and his supporters suffered when he was stripped of his original victory. He promised to deliver better services to Istanbul’s 16m residents, and to cut corruption and waste. Mr Erdogan’s party sought to echo Mr Imamoglu by striking a more positive tone than in its previous campaign, which was dominated by warnings about the threat of terrorism. It focused much of its energy on intensive door-to-door campaigning, trying to win over those who stayed at home in the first vote and seeking to persuade members of the country’s Kurdish minority to back them. The Turkish president, who built his own political career on the back of winning Istanbul mayorship in 1994, must now add an insurgent opposition to the wealth of challenges that he is facing, including a struggling an economy and high tensions with the US.

BIS warns on Facebook risk to finance after Libra plan unveiled Central banking body fears big tech groups pose threat to stability NICHOLAS MEGAW

ig tech groups such as Facebook could “rapidly establish a dominant position” in global finance and pose a potential threat to competition, financial stability and social welfare, according to the Bank for International Settlements. The BIS, the central bank for central banks, said regulators worldwide may need to “revamp” rules to deal with the structural changes being brought about by entrants that control “key digital platforms” such as ecommerce sites and social networks. The warnings, in an extract from BIS’s upcoming annual review published on Sunday, highlight regulator unease after Facebook last week outlined its desire to upend the financial system through the launch of Libra, a “global digital currency”. Facebook has touted Libra as a way to improve financial inclusion

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for the 1.7bn people without access to bank accounts, while Amazon — which lends to companies that sell on its marketplace — has said it wants to fill the gap left by banks that are increasingly unwilling to lend to small businesses. The report acknowledged those potential benefits, suggesting that tech groups’ superior customer data could lead to more efficient decision-making and lower barriers to the provision of financial services. However, it also cautioned that misuse of that data could have “adverse economic and welfare effects”. Companies could, for example, exclude high-risk groups from socially desirable insurance markets, or price discriminate by working out the maximum rate a borrower would be willing to pay for a loan. Hyun Song Shin, BIS economic adviser and head of research, said: “The aim should be to respond to big tech’s entry into financial services so as to benefit from the @Businessdayng

gains while limiting the risks. “Public policy needs to build on a more comprehensive approach that draws on financial regulation, competition policy and data privacy regulation.” Regulators responded immediately to news of Libra’s launch, with the Bank of England governor, Mark Carney, telling a meeting of central bankers in Portugal that if Facebook was successful in attracting users “it would instantly become systemic and will have to be subject to the highest standards of regulation”. The G7 nations, central banks and International Monetar y Fund are planning to work together on a high-level forum that will examine the risks of such currencies and try to work out how to ensure they have sufficient controls against money laundering. The BIS report said that such co-ordination between national and international authorities would be “crucial”.

Monday 24 June 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

BoE’s new policy sets its course for a digital future Increasing access to central bank deposits can help foster competition CHLOE CORNISH

igital banking has made its way to the old lady of Threadneedle Street. At his annual Mansion House speech, Bank of England governor Mark Carney announced the 300-yearold institution would allow financial technology companies to deposit funds overnight, opening up the inner sanctum of the monetary system to financial upstarts. Mr Carney’s drive to modernise payments should be lauded. The post-crisis consolidation of commercial banks has stymied digital outfits. By offering fintech companies access to the BoE’s vaults, the governor may inject much-needed competition into the sector. What must follow is proactive regulation to ensure that new payment systems come under the same scrutiny as their older rivals. Commercial banks have traditionally had exclusive access to deposits at the UK’s central bank, offering them a competitive advantage through cheap banking services. The BoE, which can create sterling from thin air, is the safest creditor imaginable. Another potential advantage for consumers is they could be paid the central bank’s often favourable interest rate directly — rather than relying on traditional banks to pass on rate rises. For Libra, Facebook’s proposed digital currency, Mr Carney’s act may be a double-edged sword. On the one hand, it would give any sterling funds which the token is backed by access to a safe account with interest and without banking charges. On the other, it also empowers rival digital banks which come with less political baggage than Facebook and which are not

reliant on dubious blockchain technologies. Mr Carney has previously expressed a desire to work beyond the confines of the traditional banking system. Compared to experimental approaches such as Central Bank Digital Currencies, increased access to overnight deposits is a carefully measured but valuable shift. Opening up the BoE’s balance sheet to tech companies is part of a broader exercise in modernisation. The Bank is also exploring how to support the transition to a greener economy, improving access to funding for SMEs and dealing with the rapid decline of cash. The policy changes are unlikely to spell the end for deposit-taking commercial banks. Based on the experience of existing online-only banks, while fintech is a rapidly growing industry, it is unlikely to supplant traditional banking outside of relatively young, affluent, early adopters. But it may lead commercial banks to rethink what they offer. Some may be forced to become primarily investment vehicles in order to compete with safer digital rivals with central bank interest rates. Implementation of the policy will require a deft hand. Digital challengers will have to demonstrate why they should not have to follow the regulation imposed on lending banks if they want access to the BoE’s vaults deposits without a banking licence. The central bank wants to ensure a level playing field rather than opening loopholes. Mr Carney wants to avoid repeating what happened in social media, where regulators are trying to catch up with the technology. New technologies including Libra should have rules in place before being rolled out to the public.

Doing ‘whatever it takes’ to sustain the eurozone Mario Draghi’s successor at the ECB will need to handle the next existential crisis WOLFGANG MÜNCHAU

ario Draghi last week surprised a lot of people, including US president Donald Trump, when he hinted at further monetary easing. But the comment I considered more important was the European Central Bank president’s call for a common eurozone budget as an additional economic shock absorber. This is two demands folded into one: for a eurozone budget and a cyclical component. European finance ministers have reluctantly agreed to a tiny version of the former, but not the latter. The budget currently under consideration amounts to 0.01 per cent of the eurozone’s gross domestic product. Most member states, except Spain, want the budget to be purely structural — to help countries with economic reforms. The majority categorically rejects any economic stabilisation function. Obviously, you cannot stabilise an economy with 0.01 per cent of anything. So when Mr Draghi calls for a fiscal stabilisation instrument, this is a very, very big deal. European central bankers have privately favoured such a tool for some time, but wisely stayed out of this political debate. As a parting

gift, Mr Draghi has finally chosen to speak truth to power. They will ignore him, of course. But he is right. Without such a budget, the ECB will find it much harder to do “whatever it takes” — the phrase he used in 2012 about saving the eurozone. This intervention is an inconvenient demand on EU leaders in countries where the entire eurozone debate is reduced to fingerwagging about fiscal discipline, and where politicians and economists conflate the reasonable demand for a eurozone budget with an unreasonable demand for cross-country transfer payments. An additional element of the debate in Germany is a universal condemnation of the ECB’s monetary policies. EU leaders do not wish to touch fiscal stabilisation because it opens up all sorts of unpleasant followon discussions. A large budget will eventually require a eurozone bond — a safe asset. National government debt would then lose its cherished sovereign status and be reclassified as subsovereign. The ECB would rely less on national bonds for monetary policy operations, and more on eurozone debt. It would make it easier for member states to default, and possibly

harder to raise new debt. A fiscal stabilisation facility would turn everything we have known about the eurozone upsidedown: its stability rules, legal procedures and, most important of all, ideological beliefs about what monetary and fiscal policies should do and how they should interact. History has taught us that EU leaders never act unless a crisis is upon them — and even then their actions are usually insufficient. The one forecast I am willing to make is that the eurozone’s next existential crisis will fall into the eight-year period of office of Mr Draghi’s successor. I have no idea who this will be. I am not even sure this is the most important question for the eurozone right now. Mr Draghi’s great achievement was to have saved the eurozone. But it would be a logical fallacy to make a bailout mindset part of the job description. The question EU leaders should be asking is not whether Mr Draghi’s successor should be a short man from the north or a tall woman from the east. They should instead focus on what they can contribute to make it possible for the next ECB president to act as Mr Draghi did in 2012.

A long economic recovery is not necessarily a better one Recessions are a natural part of capitalism, not something to be avoided at all costs RANA FOROOHAR

t the beginning of July, the US’s current economic expansion will officially become its longest one since 1854, the year National Bureau of Economic Research data on business cycles started. Unemployment is at a 49-year low. Asset prices are near record highs. And the US Federal Reserve signalled yet again last week that it was leaning towards lowering rates due to “uncertainties” in the economic outlook and muted inflation. That intuitively makes sense when you consider how rocky geopolitics are at the moment, and how bifurcated this recovery has been, mostly favouring large multinational companies and individuals with lots of assets. But it is also rather stunning

how quickly the Fed has gone from tightening monetary policy to preparing to ease it, and concerning that the central bank will be working from a historically low rate base as it attempts to navigate the next recession, whenever it comes. Even more disturbing, this oddly long economic cycle is not singular. A Deutsche Bank research paper looked at 34 US economic expansions over the past 165 years and found that the past four business cycles have been longer than average. In fact they account for four of the six longest cycles. Since 1982, longer cycles have become the new normal. Why is this? Optimists would say that less frequent recessions are a result of positive structural shifts and better policy choices that have made the US economy less prone to downturns. A January www.businessday.ng

Goldman Sachs research paper points to better inventory and supply chain management (much of it the result of technological improvements) and the declining share of the US economy that is linked to more cyclical sectors, thanks partly to offshoring of manufacturing. At the same time, the growth of the US shale industry has reduced the risk and impact of oil price shocks, once a major recession trigger. Other explanations of the lengthening economic cycle highlight the ways the world economy has evolved. Technological advances and globalisation, particularly China’s reintegration into the market system and higher levels of cross-border trade, have increased productivity and growth while dampening inflation. Meanwhile, the end of the

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Bretton Woods exchange rate system gave US central bankers more freedom to extend economic cycles, because they no longer had to worry about maintaining a fixed relationship between gold and the dollar. The result was fewer recessions but also a rise in both public and private debt, as governments worldwide were able to fund more deficit spending, and companies took advantage of low rates set by central bankers who could be less focused on price stability, once Paul Volcker tamed inflation in the 1980s. Debt has papered over myriad problems in the US economy in recent years, from rising inequality to stagnant wages. It also helps mediate squabbles between various political interest groups. Both Republicans and Democrats have largely embraced a “markets @Businessdayng

know best” approach since the 1980s because it allowed them to avoid making unpopular choices about dividing up the national wealth pie. Why choose between guns and butter when you could simply deregulate markets, unleash the financial sector, and hope rising asset prices would let you turn the other way? All this begs the question of whether longer really is better when it comes to business cycles. Recessions are a natural and normal part of capitalism, not something to be avoided at all costs. Indeed, the Deutsche Bank economists argue that productivity would be higher and American entrepreneurial zeal stronger if the US business cycle had not been artificially prolonged by monetary policy.

Monday 24 June 2019

BUSINESS DAY

ANALYSIS

FT US-China trade war gives Vietnam a winning streak Exports surge as Vietnamese manufacturers and suppliers see business boom JOHN REED AND VALENTINA ROMEI

guyen Huu Phuc, who runs a small textile marketing company in Ho Chi Minh City, recalls how “very upset” he was when Donald Trump pulled the US out of the Trans-Pacific Partnership trade agreement in 2017. But two years later Mr Phuc is thanking the US president. His group’s garment-making division plans to double its staff to more than 1,000 by the end of this year because of surging demand for its shirts, trousers, sleepwear and other products. He says he has Mr Trump to thank for it — the US-China trade war is benefiting Vietnam more than any other country in Asia as more manufacturers, buyers and investors shift their supply chains away from China. “The trade war between Donald

to link up global suppliers to buyers. US and European retailers stepping up their buying in Vietnam include Home Depot, Target, Zara and OBI, Mr Khiem said, and the range of products they are buying include bags, apparel, footwear, steel and aluminium. For Vietnamese companies such as Minh Phu Seafood, Vietnam’s largest shrimp producer, the “trade war between China and the US will create many chances for us to expand our business,” said Le Van Quang, its founder and chief executive. While the company’s Chinese competitors used to import raw product from Vietnam and India to process it locally and export it to the US, they have stopped doing so since the Trump tariffs eroded their margins, he said. US imports of fish from Vietnam rose by more than 40 per cent in the first four months of this year, according to USITC data,

Vietnam’s textiles sector is enjoying an uplift as buyers and investors shift their supply chains away from China © Reuters

Trump and Xi Jinping’s two countries can make things better for Vietnam — and not only Vietnam but Taiwan, Korea, Myanmar, Laos, Cambodia and Bangladesh, who are also good at textiles,” Mr Phuc said. “That is why we are investing a lot.” US imports from Vietnam surged by nearly 40 per cent in the first four months of this year compared to the same period last year, according to a Financial Times analysis of data from the United States International Trade Commission. This was the largest rise among the 40 biggest importers to the US. Over the same period, US imports from China fell by 13 per cent, the second-largest contraction since 2009. The shift is lifting sales at Vietnamese manufacturers and suppliers not only in textiles, but a range of other sectors ranging from seafood to semiconductors; sectors in which the US has levied tariffs on their Chinese counterparts have made the biggest gains. In the first four months of this year, US imports of mobile phones from Vietnam more than doubled year-on-year, while imports from China contracted by 27 per cent, according to data from the USITC. Over the same period, US computer imports from Vietnam rose by 79 per cent, against a 13 per cent drop in Chinese imports. “Nowadays I see a lot of buyers from China and from the rest of the world looking for alternative sources from Vietnam and other countries like Cambodia,” said Vu Ngoc Khiem, country manager in Vietnam for Global Sources, a company that aims

while imports from China fell. Vietnam is benefiting in particular because it sells many of the products hit by the tariffs. “Vietnam is an outlier, and the reason for that is that it happens to sell a lot of the same goods that would be subject to tariffs in China,” said Yasuyuki Sawada, chief economist at the Asian Development Bank. The ADB has estimated that Vietnam stands to gain up to a cumulative 2 per cent of GDP over three years if the US-China trade dispute escalates further. The trade war has accelerated a longstanding trend in which some companies — Chinese, US and others — set up factories in Vietnam to escape rising wages, labour shortages and tighter environmental regulations elsewhere. Foreign direct investment in Vietnam reached a record $18bn last year, up nearly 20 percentage points to 58 per cent of GDP — topping most other southeast Asian countries. “More overseas customers are searching for Vietnam — the demand is better,” said Quach Kien Lan, director of Greenyarn, a Vietnamese fabric producer that is experiencing rising orders because of the increase in US textile tariffs on China. However, Vietnamese manufacturers and policymakers do not see the trade war as an unalloyed win. Hanoi is already in Mr Trump’s crosshairs as its trade surplus rises; it was up 43 per cent in the first four months of this year, behind only China, Mexico, Japan and Germany. Last month, Vietnam only narrowly avoided being labelled a currency manipulator by the US Treasury. www.businessday.ng

Russia vote set to divide Council of Europe

Human rights body is preparing to bring Moscow in from the cold after five years of estrangement MICHAEL PEEL, HENRY FOY AND LAURA PITEL

he late Russian president Boris Yeltsin once said his country’s entry into the Council of Europe would help create a “new, greater Europe, free from dividing lines” and “united by common democratic principles”. More than two decades on, such lofty rhetoric around the institution charged with guarding a continent’s fundamental freedoms is in danger of being drowned out by a political battle that has exposed faultlines in east-west relations and the wider international multilateral order. In Strasbourg on Monday, MPs from Ukraine and a handful of other countries are expected to mount a final effort to try and stop the 47-member body agreeing to end Russia’s five years of estrangement from the organisation that was sparked by its 2014 annexation of Crimea. Opponents say the plan to bring Moscow back in from the cold risks compromising the very ideals that brought the council into being as a post-second world war bulwark against atrocities and arbitrary state power. “This would be the unilateral surrender of the Council of Europe to Russian demands,” says Dmytro Kuleba, Ukraine’s ambassador to the council, who fears the body’s parliamentary assembly will on Monday rubber-stamp a decision, taken in May by foreign ministers, to allow Moscow’s return. “What’s happening now, to help Russia, will actually undermine human rights and the protection of the rule of law across Europe,” says Mr Kuleba. That characterisation — contested by Moscow and other council members — is an indication that the skirmishes at the institution’s fortress-like headquarters in Strasbourg will continue whichever way the MPs’ vote goes. The dispute is a sign of the troubles engulfing an institution that has played a big role in checking state power in the seven decades since it was lauded by Winston Churchill as a way to bring human rights abuses to the “judgment of the civilised world”. The council’s woes — from funding pressures, to heavy caseloads and the enforcement of judgments — have been further aggravated by a rise in assertive nationalism in parts of Europe. At an event in Helsinki in May to mark the council’s 70th anniversary, Sauli Niinistö, president of Fin-

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land, which then held the body’s rotating presidency, warned that the institution was “going through its biggest political, economic and institutional crisis”. The council has long laboured in a relative obscurity that belies its importance. Its mandate is to uphold the civil liberties, democracy and rule of law commitments enshrined in the European Convention on Human Rights and enforced by the European Court of Human Rights. It is a remit that covers 820m people. Together the two Strasbourg-based bodies are a major part of the architecture of modern Europe. “It’s really important particularly now — as we see the rise of these far-right populists — that we maintain the strength of institutions like the Council of Europe,” says Philip Leach, head of the European Human Rights Advocacy Centre at Middlesex University. The centre has won several cases at the European Court of Human Rights, including a 2017 action involving almost €3m in compensation from Russian authorities for victims and relatives in the 2004 Beslan school siege, which left 334 people dead. “It is under threat and we need to see the bigger picture of the value it has given and continues to give,” adds Mr Leach. The court has long acted as a constraint on governments in both autocratic and democratic states. It has powers to stay official actions such as the return of migrants by EU states to Libya, make findings of fact against authorities and order them to pay compensation to activists or others they are found to have wronged. High-profile cases have included the judgment that long delayed the UK deportation of the radical Islamic preacher Abu Qatada to Jordan, to the 2014 ruling that Russia must pay €1.9bn damages to shareholders of the defunct Yukos oil company. The Yukos case is one of several reasons that Moscow’s relationship with the council has become so turbulent. In November the court further irritated the Kremlin by ruling that repeated arrests of Russian opposition leader Alexei Navalny were politically motivated. Senior council officials warn of the risks of a further rupture with Moscow. Thorbjorn Jagland, secretary-general — whose successor is due to be chosen on Wednesday — said in April that Moscow’s forced or voluntary departure would create a “new dividing line” on the continent and rival Brexit in its capacity to “really shake up Europe”. @Businessdayng

The Russia spat began in 2014 after the council’s parliamentary assembly suspended Moscow’s voting rights for two years as punishment for the Crimea occupation. The Kremlin responded by refusing to send delegates even after the sanction expired. Then, in 2017, it halted its scheduled €32.6m contribution to the council’s annual €316m budget, paving the way for Moscow to be expelled this year for non-payment. Foreign ministers have now brokered a deal that would end the threat of expulsion for nonpayment. If agreed on Monday, it would allow Russian delegates to rejoin the parliamentary assembly for the vote two days later on the next secretary-general. One European ambassador to Moscow told the Financial Times that both sides were confident the deal would pass, but that officials would be haggling over the small print up to the last minute. “It seems we found a way to make it stick,” the diplomat says. The official reaction to the proposed deal has been muted in Moscow. Nationalist politicians have criticised Russia’s treatment in the council and condemned membership as a waste of money. Supporters, both in Russia and outside, counter that the council is a crucial line of communication between the Kremlin and European capitals. “It will not be easy to sell this outcome to everyone,” says Andrey Kortunov, director-general of the Russian International Affairs Council, a state-backed think-tank. “Some will say this is appeasement and rewards Russia for bad behaviour . . . here in Moscow there are people who will say: ‘Now we have to pay this money and they will just criticise us.’” Critics of the deal accuse Moscow of in effect blackmailing the council and its fellow members into submission, reflecting an unhealthy financial dependence on Russia and four big western European countries for well over half its budget. They point to deeper problems in Moscow’s relationship with the Strasbourg institutions, notably a 2015 decision by Russia to give its constitutional court the power to overrule judgments handed down by the European human rights court. In 2017, the Russian court said the compensation award to the Yukos shareholders was unconstitutional. The Council of Europe called the ruling a “matter of concern”, but says the case is now the subject of talks between Moscow and fellow member states.

BD Money

Monday 24 June 2019

BUSINESS DAY

PERSONAL FINANCE

investing

COVER

REAL ESTATE

Creating wealth through the growth power of compounding

How investors can take position in fast-growing sectors of the economy

What investors should know as Airtel lists on Nigerian Stock Exchange

Why you need to add real estate to your investment portfolio

How would you pick: N10 million today or N1 that doubles every day for the next 30 days?

Investors, both foreign and local, aiming to earn a good return on investment can look at the fastgrowing sectors of the economy to achieve their goals.

In less than two weeks from today, it is expected that the Nigerian subsidiary of Airtel Africa, Airtel Nigeria, will list its shares through a book building process on the Nigerian Stock Exchange (NSE), paving the way for interested and qualified investors to buy into the company.

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We all, to some extent, recognize the potential financial benefits we could get from real estate investing. It goes without saying that there are many benefits of investing in real estate that outweigh the costs, and you as an investor stand to enjoy a steady flow of income to secure financial freedom for the long haul.

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Monday 24 June 2019

BUSINESS DAY

Personal Finance

Creating wealth through the growth power of compounding Here is how compounding works: Suppose you keep N10,000 in a savings account that pays 5% interest annually, after the first year you receive N500 as interest and your balance grows to N10,500. If in the following year the money is left untouched, the balance would grow by another 5% on both the initial N10,000 paid and the interest of N500 received at the end of the first year. As a result, the account balance would increase to N11,025 as the principal gains N500 and the interest gains N50. Should the process be allowed to continue uninterrupted, after 15 years, the account would grow to N20,789.28. You might wonder why in the example above it takes 15 years to double the principal. The true strength of compounding lies in the longevity of the period of investment which makes it very useful for saving towards retirement and long-term goals. Another factor that is important is the rate of interest which determines how fast the principal grows. Like you would find out shortly, a penny today can become so much more when compounding is applied to high yielding investment assets. In cases where return i.e interest is high, then wealth can be grown exponentially even over a shorter span. Apart from savings towards retirement, childâ&#x20AC;&#x2122;s education or even the acquisition of an asset, you can apply the principle of compounding to your stock investment by reinvesting your dividend. N10 million today or N1 that doubles every day for the next 30 days? If you get N1 doubling every day for 30 days, you would earn N1.07 billion at the end of the last period! Even though you started with very little capital, at an attractive rate you could realise multiple folds through the consistent saving of principal and interest.

SEGUN ADAMS How would you pick: N10 million today or N1 that doubles every day for the next 30 days? his question reveals more than the beauty of mathematics and how urgent you might need cash; it shows a smart way of growing your wealth by leveraging compounding. Compounding is a method of growing an asset by ploughing back returns realised from capital gains, interest or dividend in order to generate more returns over time. In order words, compounding allows you to grow your wealth exponentially through gains realised from the initial principal and subsequent earnings actualized from each period of investing.

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

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@Businessdayng

Monday 24 June 2019

BUSINESS DAY

Investing How investors can take position in fastgrowing sectors of the economy HOPE MOSES-ASHIKE

nvestors, both foreign and local, aiming to earn a good return on investment can look at the fastgrowing sectors of the economy to achieve their goals. Such sectors include information and communication with about 1.26 percent Weighted Real GDP Growth Rate in the first quarter (Q1) of 2019, agriculture with about 0.69 percent, transportation and storage 0.40 percent, and trade with about 0.14 percent of weighted real GDP growth rate. According to FSDH Merchant Bank limited, policies should target slow growing sectors or sectors that are in contraction. These are electricity, gas, steam, and air conditioning supply, water supply, sewerage, waste management, and remediation, education, administrative and support services, human health, and social services, mining and quarrying, administration, financial and insurance, and public administration among others. The economy requires quick actions and fiscal stimulus to achieve growth. Actions in President Buhariâ&#x20AC;&#x2122;ssecond-term are needed in the following priority areas: petrol and electricity prices, security, road, and rail construction, solid mineral and enforcement of law and order. Meanwhile, the economy continued on the recovery path, the strongest Q1 growth since 2015. The growth rate is, however, lower than the population growth rate, thus little to celebrate. Agriculture recorded the strongest growth since Q1 2018 while real estate exited depression. Banks are engaging and exposing their customers to their various investment and saving products. In Lagos on Friday, Ernest Adejumo of Standard Chartered Bank encouraged customers to develop a culture of saving and investing for the long term. He said part of the reasons why they should invest is to earn higher returns on their investment and to expand their businesses among other reasons. The CBN has signaled that it would support growth going forward. The recovery in the economy may support job creation and credit expansion. However, complementary fiscal measures to improve the

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The current CBN policy stance favours lowinterest rates and yields in the short-term. However the trigger points for a rise in interest rates and yields in the short-term are: A possible drop in the crude oil price towards US$60/b on the account of a slowdown in the global economy www.businessday.ng

business environment are needed, FSDH said in its May 2019 report. Investorsâ&#x20AC;&#x2122; interest in quality debt securities is strong in the Nigerian financial market as of May 2019. The drop in the yields on the Nigerian Treasury Bills (NTB) has inspired issuance of Commercial Papers (CPs). FSDH Research observes huge subscriptions for the debt securities in the market in the last few months. The yields on Nigerian Treasury Bills (NTBs) may remain low and at the current levels in July. FSDH Research expects the low yields to attract more corporates to issue Commercial Papers (CPs) to meet their short-term capital requirements, therefore providing investment opportunities for investors in fixed income securities. The current high appetite for debt securities in the Nigerian capital market provides incentives for corporates to also issue corporate bonds. Investors should take advantage of the expected increase in debt issuance to position for quality debt securities. Corporates which have interest rate liabilities may consider interest rate swap to manage the risk associated with the liabilities. The monetary policies of the Central

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Bank of Nigeria (CBN) currently favour a low-interest rate regime to stimulate economic growth. However, any internal and external shock on the economy may lead to a change in the monetary policy stance. This may result in an elevated interest rate risk. The yield on the US Treasury Note trended downwards as the Fed maintained the rate at its May 2019 meeting. However, the current yields on the US Treasury Notes are higher than the coupon rates The yield on the FGN Bond trended downward as investors took positions in the Nigerian fixed income market. The yields on the NTBs trended downward from the beginning of the year. The current CBN policy stance favours low-interest rates and yields in the shortterm. However the trigger points for a rise in interest rates and yields in the shortterm are: A possible drop in the crude oil price towards US$60/b on the account of a slowdown in the global economy, A possible drop in inflation rate on the account of an increase in PMS price and electricity tariff, and a possible increase in government borrowing on account of fiscal deficit

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Monday 24 June 2019

BUSINESS DAY

Cover Story What investors should know as Airtel lists on Nigerian Stock Exchange OLUWASEGUN OLAKOYENIKAN

n less than two weeks from today, it is expected that the Nigerian subsidiary of Airtel Africa, Airtel Nigeria, will list its shares through a book building process on the Nigerian Stock Exchange (NSE), paving the way for interested and qualified investors to buy into the company. Book building is a process of price and demand discovery by which an issuing house/book runner attempts to determine at what price a public offer should be made, based on demand from qualified institutional and high net worth investors. The listing of Airtel shares is coming at a time the performance of stocks in the market remains unimpressive in spite of the remarkable profits posted by some listed firms in the first three months of the year. After Skyway Aviation Handling Company (SAHCO) listed by initial public offering (IPO), the Lagos bourse is set for Airtel IPO, a move that could attract more foreign and domestic investors to the market that has lost as much as 5 percent of its value since the beginning of this year. It is noteworthy that representation and an agreement to be a ‘‘High Net Worth Investor (HNWI)’’ or a ‘‘Qualified Institutional Investor (QII)’’ are the conditions to qualify for the Nigerian offer of Airtel shares by any prospective investor, according to the telecommunication firm. Under Rule 321 of the Securities and Exchange Commission (SEC) rules and regulation 2013 (as amended), HNWI is defined as an individual with a net worth of at least N300 million, excluding automobiles, homes, and furniture. Similarly, QIIs include banks, fund managers, pension fund administrators, insurance companies, investment/ unit trusts, multilateral and bilateral institutions, registered and/or verifiable private equity funds, registered and/or verifiable hedge funds, market makers,

Monday 24 June 2019

BUSINESS DAY

6 things to know about Facebook’s cryptocurrency, Libra OLUFIKAYO OWOEYE

ocial media giant, Facebook drew worldwide interest last week when it announced plans to introduce a cryptocurrency called Libra, part of an effort to expand into digital payments. Reports of new cryptocurrency by social media giant Facebook has been circling for most of 2019, promising to be the most widely used digital coin to date. Just last week the social media giant released a white paper on Libra, which would become operational by 2020. According to Facebook, this will allow its 2.4 billion users and anyone with a smartphone to send money quickly and inexpensively send money to each-other and transact with businesses that have a presence on the Libra blockchain. Is Facebook now moving into crypto? Yes, in 2014, the social media giant hired former PayPal President David Marcus to run its Messenger app. Marcus was an advisor to Coinbase and was subsequently asked to run Facebook’s new blockchain group. In December of 2018, Facebook announced a WhatsApp stablecoin integration in the works, with a focus on India, a market with over $69 billion in remittances. The rationale behind Libra Facebook registered Libra Networks

LLC in Geneva, Switzerland, one of the most friendly regulatory environments for cryptocurrency projects, to create a new digital currency Libra. In the white paper, the Libra Association, an independent, not-for-profit membership organization, also headquartered in Geneva announced that “Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.” It already enjoys support from 29 multinational companies including PayPal, Visa, Mastercard, eBay, Uber and Spotify among others. There are also reports that each partner invested $10million.

The new digital currency will be built on the Libra Blockchain and fully backed by the Libra reserve, a basket of fiat currencies and ‘other assets’. The project claims to be decentralized and governed by the Libra Association. What does the Libra coin do? Libra will be used for peer to peer payments, commerce online, brick-and-mortar and applications & gaming. According to the Libra White Paper, the Libra Blockchain will be open-source, allowing developers to build on it. “The world truly needs a reliable digital currency and infrastructure that together can deliver on the promise of “the internet

of money.” What this could mean for the global banking system The Libra’s value will be restricted to a few major currencies, it will be able to handle large transaction volume and 28 other big firms have indicated interest to join a consortium backing the currency. If Facebook’s 2.4bn users adopt Libra to shop and transfer money, it could become one of the world’s biggest financial entities that could herald a consumer revolution. Fears over security breaches While the dust over Cambridge Analytical is yet to settle, many suspect that Facebook would use Libra as a way to gather extensive financial data on its users. Facebook chose to not directly control the coin, but rather share the control with members of the Libra Association. According to Libra White Paper, keeping this network separate from Facebook’s platform also provides the social media giant with some regulatory cover. “While final decision-making authority rests with the association, Facebook is expected to maintain a leadership role through 2019.” Regulatory Hurdles ahead So far the United States Senate Banking Committee has set a hearing to discuss Libra’s potential impact as well as regulatory concerns. The news of Libra is likely to have positive impacts as markets are responding positively, with Bitcoin reaching new 2019 highs

Terminologies you need to know before investing in Stocks (1) staff schemes, trustees/custodians, stock broking firms, and other categories that may be determined by the Nigerian capital market regulator. Airtel seeks to raise approximately $750 million in its global offering, including any proceeds from the Nigerian offer, even as it plans to use the net proceeds from the offer principally on the reduction of debt, in particular, to achieve a targeted leverage ratio of 2.5x. On Friday, June 28, 2019, details of the offer price, offer size publication of the pricing statement and allocation of ordinary shares would be unveiled, while allotment of new ordinary share to the shareholders would take place on June 29. Crediting of ordinary shares to accounts would be done on July 3, 2019, while adwww.businessday.ng

mission of shares through an initial public offering and the commencement of unconditional dealings on the NSE are slated to hold on July 4. The company has already filed an application for the admission to the Nigerian SEC, while “an application for the ordinary shares of the company to be listed on the official list will be done pursuant to the cross-border listing requirements of The NSE,” the telco stated in its prospectus. In relation to the planned offering and listing on the NSE, Barclays Securities Nigeria Limited and Quantum Zenith Capital & Investments Limited were appointed as Nigerian joint issuing houses, while Greenwich Securities Limited and Chapel Hill Denham Advisory Limited were appointed as Nigerian

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receiving agents. The offer price for Airtel Nigeria ranges from 80 pence to 100 pence; this is equivalent from N363 to N454 per ordinary share. The price range is indicative only and may change during the course of the offer, and the offer price may be set within, above or below the price range. The company stated that the offer price will be denominated in pounds sterling and naira, while it will specifically be stated in Nigerian Naira for the purpose of the Nigerian admission. The offer price and basis of allocation would be determined by a number of factors, including the level and nature of the demand for the offer shares during the book-building process and prevailing market conditions. Furthermore, Airtel noted that the Nigerian offer will not be underwritten and there are no restrictions on the free transferability of the Nigerian offer shares.

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Israel Odubola & Segun Adams

nvesting in the stock market is not rocket science. Even though there are professionals to help along the way, it pays however, for one to understand the following basic concepts associated with stock investing. Here are some of the technical words you might come across: Bulls: Bulls, Bullish, Bull-run are some of the more likely words you would come across as an investor in equities. A Bull refers to an investor who believes a share’s price would rise and as such is willing to bet on an upward trend on such stock. Similarly a bull market occurs when prices of equities rise or are expected to rise. The word “Bull” is usually associated with

optimism and willingness to bet on improving market conditions. Bears: The concept of bear in a stock market originates from the way in which a bear attacks its prey – swiping its paw downwards. The term ‘bear market’ is used when prices of stocks are falling or expected to decline. All Share Index (ASI):

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The ASI is an indicator that measures the average price movement of all stocks listed on an exchange. It is used to evaluate the general trend of a stock market, and is computed in weighted points. Year-to-date (YTD): This refers to the percentage return of a stock from the first trading day of the day to a particular trading day. It could be positive

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or negative depending on general sentiment toward the stock. Dividend: This is the sum of money companies paid to shareholders out of its profit or reserves as a compensation or reward for risk. Dividends are recommended by a company’s board of directors, subject to the approval of shareholders Bourse: Bourse is an exchange or a market for the buying and selling of securities. In this case, stocks. A stock exchange is important because it helps to bring together buyers and sellers to carry out transactions in real term. Any company willing to raise money from the public will have to list on the exchange. Basis points (bps): Bips are a unit of measure use to describe the percentage change in the value of a financial instrument. One basis point is equivalent to 0.01 percent. That is, 1 percent is 100 basis points.

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Monday 24 June 2019

BUSINESS DAY

Real Estate Why you need to add real estate to your investment portfolio

Israel Odubola

e all, to some extent, recognize the potential financial benefits we could get from real estate investing. It goes without saying that there are many benefits of investing in real estate that outweigh the costs, and you as an investor stand to enjoy a steady flow of income to secure financial freedom for the long haul. Real estate has proven to be one of two major investment spikes to wealth growth, the other being financial market. The key to investment success is spreading your investment over a range of assets and this is what smart investors do. Creating a balanced portfolio means you are spreading your money across various asset classes: stocks, bonds, and real estate. This year holds prospects for investors given the fact that the property market registered a positive growth of 0.93 percent in the first quarter of the current year, after 12-quarter contraction and the momentum is expected to be sustained as the broader economy continues to pick up. Here are some benefits associated with real estate investing when you add the asset class to your portfolio. Portfolio Diversification Have you spoken to a financial planner about investing? If yes, then you must have been told about the importance of diversification. When you diversify your portfolio, you are spreading out the risk. Real estate serves as safe tangible assets to minimize risk in your portfolio. This holds true because real estate reacts differently to economic conditions compared with equities and bonds. Risk never disappears in the capital market and there are numerous factors beyond your control that can negatively impact on your investment but real estate gives you more control of your investment because your property is a tangible asset. Value Appreciation The secret to success in real estate is investing at the right time in the right

location. If you’re aiming for both short and long-term gains in your investment portfolio, then real estate should be thrown in. One major benefit of real estate investing is the appreciation of capital assets (land) overtime. In other words, your property’s value will worth way more than 30 years now. Steady Income This is no brainer. Smart investors diversify to real estate for the steady flow of cash they earn in the form of rental income. Depending on the location, you could be earning significant income to cover your expenses, with extra income in your pocket. Urban centers tend to reap higher income because demand is high in those areas. If chosen wisely, you can secure a steady income flow for a long time, and even save for retirement. And you do not have to stop investing in one property a time; you can increase the pace and invest in multiple properties, to increase your positive cash flows. Long-term financial security One of the big rewards of diversifying your portfolio to real estate is financial security in the long haul. Owning a property gives investors a sense of secuwww.businessday.ng

“

When you diversify your portfolio, you are spreading out the risk. Real estate serves as safe tangible assets to minimize risk in your portfolio

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rity because of the property’s appreciation in value overtime. This means your property’s value will most likely increase because land and building are appreciating asset. With this, you have peace of mind that you have enough money saved to meet emergencies and future financial goals. Hedge against inflation An inflation hedge means you are investing in an asset expected to maintain or increase its value over a specified period of time. This is why inflation is considered a hedge against inflation since property value tends to increase in times of inflation. Real estate investors embrace inflation because as the cost of living increases, so also their cash flows. It is an appreciative long-term investment with inflation-adjusted rental income. By investing across different asset classes over long periods of time, you increase the likelihood of achieving your long-term investment targets. While having other asset classes in your portfolio is a smart move, but real estate has proven again and again that it is superior to other investment classes, and it is advisable you include it in your portfolio.

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Monday 24 June 2019

BUSINESS DAY

Data

Federal government eurobond Yields on Eurobonds fell week on week by c.700bps from an average of 7.07 percent when the market closed last week to 6.52 percent on renewed buying interest on Nigeria’s Sovereign Eurobonds. This week Brent gained 5 percent while United States’ Shale rallied 10 percent as worries of a disruption of supply to the middle-east heightened. The hostilities between United States and Iran worsened after the Middle Eastern state shot down United States’ drone it claimed had trespassed into the Iranian air space. Brent gained 1.24 percent to N65.25 per barrel as at 19.09 GMT+1 on Friday.

Corporate Eurobond Yields on corporate Eurobonds fell c.686bps across all tickers week-on-week with average yield falling from 7.44 percent last week to 2.34 percent. The wide fluctuation was owing to Access Bank Plc II which is set to mature today (24/06/19). www.businessday.ng

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Monday 24 June 2019

BUSINESS DAY

Commodities Other growers feel undermined in proposed cocoa price floor

cocoa price floor of $2,600 per tonne agreed by Ivory Coast and Ghana with buyers for the 2020/21 season lacks the support of other producing nations, the vice president of the World Cocoa Producers Organization said according to Reuters. Sayina Riman, who doubles as president of the Cocoa Association of Nigeria, said the decision by the two countries was taken without consulting other growers. Nigeria is the world’s fourth-biggest cocoa producer. Buyers of Ghana and Ivory Coast cocoa last week agreed to the minimum price proposed by the two governments to address a perceived imbalance between farmers’ incomes and money made by big commodities traders. The two West African nations account for nearly two-thirds of global output, yet they exert limited influence over international cocoa prices, which have stayed low in recent years due to overproduction. Riman said in a statement $2,600 per tonne was better than price swings which could sometimes go below $1,500 but that the agreed floor was still lower than where the benchmark should be based on production cost.

“We have been in talks with buyers to get a reasonable price for cocoa beans, but this is not to be done without inputs from other stakeholders in the value chain,” Riman said. Representatives from across the industry met in Ghana’s capital Accra last week to discuss a common floor price for cocoa beans produced in Ghana and Ivory Coast that would protect farmers’ livelihoods. Traders, manufacturers and processors agreed to the proposed floor price of $2,600 per tonne, but requested a technical meeting on July 3 to address details of its implementation, the Ghanaian and Ivorian agriculture ministries said. Farmgate prices in Nigeria have been declining this year. They fell to around 720,000 naira ($2,353) per tonne from 850,000 naira in January. Though prices are expected to recover following the new price floor, the outlook for output has been dampened by heavy rains. Riman said other growers were consulting and would come up with a uniform position on the development in a few days. The issue is also due to be tabled at the next meeting of the International Cocoa Organisation (ICCO) in September in Ivory Coast.

Week Ahead Week Ahead(Monday, 24th June – Friday, 28th June, 2019)

Chart of the week Insurance Sector sees best week in years

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

Cocoa: Cocoa prices grew 1.4% to $2, 499 per metric tonne in May, on strong demand for chocolate in Asia. Prices are expected to be bearish in near term due to an increase in Venezuela’s cocoa production. Fixed Income The Federal Government has offered for subscriptions another N100 billion bonds. According to a circular made available to the public, the Debt Management Office (DMO) disclosed that it has been authorised to receive applications for the bonds subscription. While the bonds will be auctioned on Wednesday, June 26, 2019, and settlement date slated for Friday, June 28. Data Release The National Bureau of Statistics to release the Federal Account Allocation Committee (FAAC) disbursement for May 2019 on Friday, June 28. Snapshot of April’s report showed that FAAC disbursed the sum of N617.57billion to the three tiers of government in April 2019 from the revenue generated in March 2019. The amount disbursed comprised of N446.65billion from the Statutory Account, N92.18billion from Valued Added Tax (VAT), N55billion as Good and Value Consideration, N10billion as Additional Funds From NNPC, N13.09billion distributed as FOREX Equalisation Fund and N652.55 million exchange gain differences. Event BusinessDay Conferences in conjunction with Real Estate Developers Association of Nigeria will hold the 3rd Annual BusinessDay Roundtable on Real Estate on Thursday, June 27 at The Dome, Central Business District, Abuja. Currency The naira depreciated 0.06% to N360.49/$ on the Investors and Exporters window at Friday’s trading. Friday’s turnover stood at US$291.3 million. Going forward, we expect naira to remain stable across all windows given Nigerian Apex Bank’s regular intervention in the market. www.businessday.ng

Stocks of Nigerian insurance companies recorded their best weekly performance in more than 6 years on the Nigerian Stock Exchange (NSE) on the back of gains recorded by Linkage Assurance and Nem Insurance, even as market’s bearish sentiment extended to the third straight week. During the week NEM and Linkage Assurance rallied by 33.33 and 37.5 percent respectively while Insurance index gained 8.34 percent.

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Monday 24 June 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 21 June 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 245,262.06 6.90 -0.72 234 12,277,737 UNITED BANK FOR AFRICA PLC 218,876.30 6.40 0.78 127 4,455,606 ZENITH BANK PLC 627,929.88 20.00 -0.25 401 29,647,644 762 46,380,987 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 251,267.05 7.00 0.72 110 1,464,342 110 1,464,342 872 47,845,329 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,646,086.70 130.00 -0.04 128 9,756,433 128 9,756,433 128 9,756,433 BUILDING MATERIALS DANGOTE CEMENT PLC 3,135,453.36 184.00 1.10 47 1,911,358 LAFARGE AFRICA PLC. 186,045.04 11.55 10.00 39 14,776,254 86 16,687,612 86 16,687,612 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 300,106.73 510.00 2.62 20 247,374 20 247,374 20 247,374 1,106 74,536,748 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 14,408.66 5.40 - 0 0 0 0 0 0 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 0 0 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 63,530.41 66.60 - 13 13,116 PRESCO PLC 50,000.00 50.00 - 12 22,526 25 35,642 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,650.00 0.55 -1.79 6 564,232 6 564,232 31 599,874 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 794.19 0.30 - 1 19,400 JOHN HOLT PLC. 182.90 0.47 - 1 192 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 46,745.19 1.15 0.88 66 7,640,799 U A C N PLC. 17,431.84 6.05 0.83 47 4,562,777 115 12,223,168 115 12,223,168 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 27,588.00 20.90 - 14 17,154 ROADS NIG PLC. 165.00 6.60 - 0 0 14 17,154 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 3,923.58 1.51 - 6 96,610 6 96,610 20 113,764 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 11,117.88 1.42 - 59 2,311,670 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 100,210.01 45.75 - 22 99,819 INTERNATIONAL BREWERIES PLC. 143,550.89 16.70 - 19 23,919 NIGERIAN BREW. PLC. 479,814.12 60.00 4.35 51 1,391,106 151 3,826,514 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 85,000.00 17.00 -0.59 80 1,310,985 DANGOTE SUGAR REFINERY PLC 148,800.00 12.40 -0.40 83 715,022 57,405.31 14.00 -1.07 59 2,458,267 FLOUR MILLS NIG. PLC. HONEYWELL FLOUR MILL PLC 8,168.10 1.03 -1.90 33 1,541,856 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 39,741.58 15.00 - 16 90,650 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 271 6,116,780 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 20,378.49 10.85 - 14 110,209 NESTLE NIGERIA PLC. 1,070,323.74 1,350.30 -3.55 122 354,675 136 464,884 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 4,753.21 3.80 1.60 15 288,724 15 288,724 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 27,793.34 7.00 - 16 41,828 UNILEVER NIGERIA PLC. 178,095.17 31.00 - 22 105,412 38 147,240 611 10,844,142 BANKING ECOBANK TRANSNATIONAL INCORPORATED 208,267.41 11.35 1.34 31 417,125 FIDELITY BANK PLC 50,126.40 1.73 -3.89 74 6,618,424 GUARANTY TRUST BANK PLC. 919,724.35 31.25 1.76 131 22,422,975 JAIZ BANK PLC 13,553.55 0.46 2.22 8 658,500 SKYE BANK PLC 10,687.83 0.77 - 0 0 STERLING BANK PLC. 69,672.81 2.42 - 41 1,742,167 UNION BANK NIG.PLC. 200,933.19 6.90 - 18 134,241 UNITY BANK PLC 8,299.43 0.71 - 6 178,198 WEMA BANK PLC. 25,844.89 0.67 3.08 64 6,322,924 373 38,494,554 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,781.84 0.69 4.55 11 247,698 AXAMANSARD INSURANCE PLC 20,370.00 1.94 - 2 1,980 CONSOLIDATED HALLMARK INSURANCE PLC 1,788.60 0.22 4.76 4 850,000 CONTINENTAL REINSURANCE PLC 19,811.94 1.91 - 0 0 CORNERSTONE INSURANCE PLC 2,945.90 0.20 - 0 0 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 2 12,130 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 2,123.80 0.29 3.45 10 2,376,627 LAW UNION AND ROCK INS. PLC. 2,148.17 0.50 8.70 7 300,000 LINKAGE ASSURANCE PLC 5,280.00 0.66 8.20 3 334,890 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 2 5,260 NEM INSURANCE PLC 14,785.41 2.80 5.66 22 653,272 NIGER INSURANCE PLC 1,547.90 0.20 - 9 1,213,898 PRESTIGE ASSURANCE PLC 2,906.58 0.54 8.00 6 8,679,100 REGENCY ASSURANCE PLC 1,333.75 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 1,834.98 0.22 -4.35 16 1,118,800 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 0 0 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 5,486.92 0.41 - 17 157,336 111 15,950,991

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MICRO-FINANCE BANKS FORTIS MICROFINANCE BANK PLC 11,799.67 2.58 - 0 0 2,972.63 1.30 - 6 152,520 NPF MICROFINANCE BANK PLC 6 152,520 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 3,780.00 0.90 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 1 500 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 1 500 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 6,820.00 3.41 -3.67 44 660,985 CUSTODIAN INVESTMENT PLC 35,585.28 6.05 - 5 56,000 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 FCMB GROUP PLC. 32,872.50 1.66 0.61 46 2,130,790 ROYAL EXCHANGE PLC. 1,131.98 0.22 - 0 0 STANBIC IBTC HOLDINGS PLC 416,278.48 40.65 -2.05 33 208,655 UNITED CAPITAL PLC 13,800.00 2.30 -0.86 45 3,402,555 173 6,458,985 664 61,057,550 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 852.75 0.24 - 1 100,000 1 100,000 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 593.50 0.60 - 1 400 1 400 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 7,575.00 5.05 - 2 3,430 GLAXO SMITHKLINE CONSUMER NIG. PLC. 11,181.45 9.35 10.00 14 174,498 MAY & BAKER NIGERIA PLC. 4,054.30 2.35 - 8 502,000 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 987.56 0.52 - 1 737 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 1 2,000 26 682,665 28 783,065 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 745.92 0.21 4.76 19 6,540,432 19 6,540,432 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 648.00 6.00 - 2 40,396 TRIPPLE GEE AND COMPANY PLC. 346.47 0.70 - 0 0 2 40,396 PROCESSING SYSTEMS CHAMS PLC 1,455.78 0.31 -8.82 31 4,461,586 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 1 3,500 32 4,465,086 53 11,045,914 BUILDING MATERIALS BERGER PAINTS PLC 1,883.85 6.50 - 12 161,454 CAP PLC 19,250.00 27.50 -1.43 11 814,878 CEMENT CO. OF NORTH.NIG. PLC 177,437.26 13.50 - 9 64,400 FIRST ALUMINIUM NIGERIA PLC 844.14 0.40 - 0 0 MEYER PLC. 313.43 0.59 - 2 8,333 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,959.74 2.47 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 34 1,049,065 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,589.14 1.47 8.89 13 292,227 13 292,227 PACKAGING/CONTAINERS BETA GLASS PLC. 36,847.94 73.70 - 2 23 GREIF NIGERIA PLC 388.02 9.10 - 1 500 3 523 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 50 1,341,815 CHEMICALS B.O.C. GASES PLC. 1,565.08 3.76 - 0 0 0 0 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 88.00 0.40 8.11 3 100,495 3 100,495 3 100,495 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,503.05 0.24 - 21 1,570,000 21 1,570,000 INTEGRATED OIL AND GAS SERVICES OANDO PLC 49,104.08 3.95 -1.25 84 1,865,039 84 1,865,039 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 61,301.19 170.00 3.34 13 25,276 CONOIL PLC 15,024.06 21.65 - 23 119,467 ETERNA PLC. 4,760.13 3.65 - 1 3,232 FORTE OIL PLC. 40,637.41 31.20 - 84 720,255 MRS OIL NIGERIA PLC. 6,354.80 20.85 - 41 205 TOTAL NIGERIA PLC. 50,928.28 150.00 - 15 10,423 177 878,858 282 4,313,897 ADVERTISING AFROMEDIA PLC 1,820.01 0.41 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 17,551.17 1.80 - 1 500 1 500 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 341.14 0.29 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 3,242.23 5.50 - 1 100 TRANS-NATIONWIDE EXPRESS PLC. 342.26 0.73 - 5 2,150 6 2,250 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,723.78 3.05 - 0 0 IKEJA HOTEL PLC 2,723.22 1.31 - 6 17,053 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 5 2,160 TRANSCORP HOTELS PLC 41,042.18 5.40 - 1 435 12 19,648 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 1 5,000 1 5,000 PRINTING/PUBLISHING ACADEMY PRESS PLC. 163.30 0.27 - 1 65,700 LEARN AFRICA PLC 1,033.74 1.34 - 3 14,746 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 2 690 UNIVERSITY PRESS PLC. 819.68 1.90 5.56 11 433,878 17 515,014 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 447.58 0.27 -6.90 13 4,687,929

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Monday 24 June 2019

BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

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Monday 24 June 2019

BUSINESS DAY

INTERVIEW

Why it’s dangerous to continue reviewing wages amidst spiraling inflation – Egbule The Executive Chairman of the National Salaries, Incomes and Wages Commission, Richard Ebgule, warns that if Nigeria keeps adjusting wages and salaries in response to the depreciation of the value of the country’s currency or the growth of inflation, the country may come to a point where many employers of labour may not be able to pay the Minimum Wage. In this interview with Innocent Odoh and Cynthia Egboboh the Chairman expresses the need for a comprehensive job evaluation in the country even as he calls on the Nigerian government to increase budgetary allocations to the Commission to enable it carry out its enormous responsibilities. Excerpts:

here have really not been a comprehensive review of wages and salaries for a long time, can you talk us through this? Actually what we have not had is a comprehensive job evaluation since 1972. The 1972/1974 activity of the Udoji Commission or the Public Service Review Commission was hint on the job evaluation as well as salary review that brought everybody in the public service together and gave what we call unified grading and salary structure, whereby, regardless of where you work, if you are at the same level your salaries and allowances will be same, in fact, it dovetailed into the private sector, that was then. But because it was one structure that cut across the entire public service, it didn’t last too long because by 1980 the universities became restless, they wanted something different, so we had the Cookie commission on universities. So the Cookie Commission for universities made a recommendation and we introduced the university salary system which broke away from the unified grading and salary structure. So universities started operating that and others joined later. Research institutes and some associated institutions went into it and then it gave rise to elongated university salary structure. Over time because the unified grading and salary structured by the public service was not being reviewed as at when due because both the federal and states civil services were operating that same structure and no review can take place unless there was an agreement among all of them through the national council on establishment. Even if the federal government was trying to review salaries, the states will find excuse not to, and so many agencies felt uncomfortable staying around the unified grading and salary structure so they pulled out and by pulling out, we had multifarious salary structures. The health sector had their own with the Nigerian Medical Association (NMA) having MSSS, HSS all these were salary structures created out of the unified grading and salary structure. And perhaps people may not remember this, the Central Bank of Nigeria (CBN) also operated the unified salary grading and salary structure just like the civil service but today, overtime, they had to pulled out too and their own came in 1982 when Onosede commission and parastatals tried to differentiate salaries for different agencies in the public service and it created one special category for the

sive job evaluation, and since 1972 as we earlier mentioned, many professional colleagues had come into the employment sphere. For example the use of computer has led to computer engineers, computer programmers, computer analysts and so on, these were not in existence in 1972, so how do you evaluate them, to place them using other criteria that was used in 1972? At best you will be guessing because if you use the same standard to evaluate them you may not give them the right position. So there is need for a comprehensive job evaluation and from the job evaluation, when we evaluate job, we price the job and it is the pricing of the job we call salary and allowances, but first of all you must evaluate the job. That is what we call equal pay for jobs with substantially equal value. Could you give us an insight into the new Minimum Wage? The commission always plays a role in arriving at any minimum wage, since 1992. The Minimum Wage in itself must be clearly stated as it is meant to protect the weakest employee in public, private sector and the economy as a whole. It protects those that may not be unionized to fight for their Richard Ebgule

CBN, so they took off from them and went out of the unified grading and salary structure. So what I’m trying to say is, yes there had not been a comprehensive job evaluation in public service since 1972 to 1974, salary structures have been emerging and reviewed over time and with such reviews that has taken place, where we were then is not where we are today. For instance, the minimum wage in 1981 was N125, in 1991 it was N250, by 2000 it was raised to N5,500, even though some people will say it was N7500, we never had N7,500 as our minimum wage what we had was N5,500 but the federal government raised its own to N7500, so from N5,500 in 2011 it moved to N18,000 and from N18,000 it has moved to what we have today N30,000 which has been enacted. So you can see there has been reviews. Talking about reviews you must not lose sight of the fact that in 1998 that was an attempt to harmonise salaries and a lot of the public service salaries were reviewed upwards and because of the harmonization of salaries, the least paid worker that was earning N1,253.50k moved up to N5,200 per month, that was the very year for the www.businessday.ng

first time in 1999 when the Abubakar Abdulsalami regime came on board, they could not pay more than 3 months because that was the time the oil price dipped and they could not sustain it so it was reduced to N 3,500. So coming from N1, 253.50 is a comprehensive review, and it affected the states at that point when the federal was paying N3, 500, the states agree to pay N3, 000. We moved on till 2003, the Obasanjo regime in 2003 introduced what we call monetization of benefits. The monetization enabled us to pay in cash what people were being paid in kind. For instance if you were working and you are entitled to a house, you will go and live in the house nobody gives you money but they monetized it and give you money to rent your accommodation wherever you wish, and such other things were made in such a way that we had a clean wage with other things added together. All things were monetized and paid in cash, then in 2007, they consolidated both the basic salary and the allowances into what is called consolidated salary structure, so all along salary has been reviewed comprehensively in the public service, but what is left to be done is comprehenhttps://www.facebook.com/businessdayng

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rights and for this reason, at the beginning when it was introduced in 1981, a law was made that any entrepreneur who employs 50 or more persons will have to pay the Minimum Wage but it exempted seasonal employments, like agriculture, construction, maritime activities, or employment on commission basis, which are not expected to pay minimum wage. Until now when there is a comprehensive review of the minimum wage law is took place. Apart from the figure that is determined the true process of collective bargaining by the tripartite body that was set up, which include the organized employer, organized labour and government, this time we made sure it is not only the figure that was discussed but also the law itself. As I said earlier, the trajectory of the Minimum Wage has followed, I talked about N1253.50, to N5, 500, to N18, 000 now N30, 000. Ordinary in most civilized countries, Minimum Wage is paid hourly, but in our own country as in some other countries we do it monthly and the figure we arrive at will incorporate the basic salary and the allowances. In the public service, especially the federal level there are some basic allowances that must be in the figure; the basic salary, transport, accommodation, meal subsidy and utility. So when you see a figure like N5, 500, N18, 000, or N30,000 these allowances and basic salary are in it. Again, a lot of people talk about the public service as if the Minimum Wage is about the public service, it is not, it is to protect the vulnerable, and where can you find them, you can find them in the public service, you can find them in the private sector. So what the law has done that time is to reduce the threshold from 50 to 25, that if you employ above 25 you must pay and if you fail and you are caught, you are liable, but if you employ below 25 you are free to pay whatever you can afford. There should be monitoring to ensure compliance, we are enforcing that through the Salaries Commission and the Ministry of Labour. The Minimum Wage as you would say is supposed to be the base line, people can pay more, it is the threshold below which nobody should pay except you are employing less than persons in Nigeria. So, the small scale industries, some of them employ 10, 15, 20 people and because they are the engine of development, if you give them a wage bill that they cannot handle it is possible that they cannot make it up, so we protect them by ensuring those that employ below 25 pay what they can afford.

Monday 24 June 2019

BUSINESS DAY

INTERVIEW

Richard Ebgule

If a private entrepreneur employs below 25, he is free not to pay if he is involved in agriculture, construction, maritime activities, or pay on commission basis, we do not expect them to pay. It is compulsory the private sector pay the Minimum Wage, the employee and employer under that condition cannot just agree to pay less, and if they decide to pay less, it is null and void. You can’t say because I have agreed with the employee to pay less, if you fall within the category to pay the Minimum Wage you cannot agree with your employee to pay less, any attempt to do that will be an offence against the law and such a person will be punished. Can you speak to us about challenges surrounding the harmonization of salaries of the federal agencies? This is a very topical issue in the sense that people are always trying to know why people who work in the public service do not earn the same thing like it was done during the time of Udoji in 1972 and 1974, but a lot of things had happened after the time of Udoji. We tried in 1998 and we found out that there are about 35 salaries structures in the public service and we harmonised them to 5 salary structures. We harmonised the public service salaries structure, we harmonised the university salary structure, we harmonised, police salary structure, military salary structure, and top public office holder salary structure. It worked for a while, under that kind of harmonization, the basic salaries were the same, with little differential, so long as you were at the same level or equivalent, you earn the same basic salary the differential that we had were based on allowances received. But after that when we did consolidation of salaries in 2007 by Shonekan committee, something emerged, all the allowances of agencies we are taking were brought together with other basic salary and there was much difference compared to other agencies, because it was a total package. Meanwhile it was just the basic salary that people were comparing and people started

complaining that they were earning so high, but they have been earning higher all along, but what they knew was the basic salaries and the retirement allowances, such as housing , transport, meal subsidy, everybody had it. But if you were working in the health sector you will be earning shift duty allowances if you are a doctor or a nurse. These things added to their salaries blew it up. So today in the federal public service what we are operating is consolidated salaries and this consolidated salaries show clearly the differentials between one cadre of work and the others because all the payments are added together. The other part of it is comparison between the public service with some commercialized public service like the NNPC. My explanation to everybody that cares to listen is that NNPC was established in 1976, and when it came on board after the Udoji commission unified grading and salary structure was already in existence and was being used in the public sector but they did not give NNPC the unified grading and salary structure. NNPC was given its own salary package, based on relativity with the private sector. And being in oil sector exploratory or whatever, which establishment was it expected to be competing for competences with? It would be of Chevron, Shell and the others. And if it doesn’t, then those establishments in the oil sector may come and poach to their staff, so they had to pay well and they have maintained that till today, the situation has not changed. When you talk about CBN, though they started as other public institutions then they broke away when it became prominent in monitoring and supervising the banking industry, and they had their own money to pay, that is why they relate their pay to the banking sector and not relate it to the public service. So I don’t see any reason why people should complain that NNPC and CBN should be paid like this, if that is the kind of harmonization they are asking for, it is not possible. It is also important to know that having been in same school is different from the comwww.businessday.ng

petence that you have, where you work now will give you further competences depending on the demands of the job. It is the demand and evaluation of the job that determine the pay you receive. Is there directive from the Attorney General on the commencement of the minimum wage? The commencement of the Minimum Wage is a law, it commences from when it was signed into law, just as the 2019 budget has been passed by the Senate and we expect the president to sign at any time. The budget will be signed before its implementation but what is certain is that implementation will take effect from when the law takes effect. Can you talk is through the concerns that your organization has not recruited for the past 10 years, as accommodation has been seen as an impediment? Accommodation has been an albatross to the commission, efforts in the past to improve the accommodation of the commission has not yielded any fruit, there is no government that has come on board that has not received request for assistance in that regard but none has yielded fruit. This commission operates from 6 different locations, and that is very difficult in terms of administration, coordination and all that. For us we believe that for productivity to happen, you must employ people and give them assignment, we cannot just employ for employing sake, we must give them offices to work, so accommodation has been hindering our employment processes of replacement and attrition through death, resignation, retirement that happen all the time. And if we don’t replace, succession

plans will suffer because you need a lot of trained people, a complement of a hardcore trained personnel to handle the kind of things we do here. We have laid our complaints and written to the authorities seeking for assistance. But one of the things I have personally done beyond the issue of complaints was to approach the FCDA for land to build so that when the money comes, we build our own office. I think we are making headway on that. Beside, don’t forget that this commission is responsible for determining the pay of everyone in the public service, all military, paramilitary, the intelligence community, the civil service, the health sector, the tertiary education in addition to all self funding agencies. So there is enormous responsibility, all pension in the entire Nigeria public service get reviews from here, we do salary inspection from time to time to know whether agencies comply with government directive, in all, we are very busy. So, any attempt to properly house us should be in the interest of the government and the nation at large but what I have done under my watch is whatever you give us to work with, I will confine myself to it even though I will keep asking for improvement. We are doing our best with what we have. At least I have been here long enough to know what effort has been done in the past. There was a time it said that provisions has been made in the budget for us and it was written to provide for it, but in subsequent budgets they will say there is no money, and it kept repeating itself in subsequent budgets until it disappeared completely. We are not so keen on building our

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own, but there are offices for us. If the Senate thinks that the commission needs office, all they need to do is make provision for it, and that is why we are making efforts to get a land in case there is allocation for it, we can get a place to build on. I recall we made as much effort to get a good building that could accommodate the commission and all we needed was for it to be bought at a relatively cheap price but it didn’t work out due to budget constraints, but I do hope that one day, this commission will have its own building. How do you think we can resolve the issue of having an increased figure but reduced value in the salary structure? Well, this has to do with inflation, because it is inflation that takes down the value of your earning. In this commission we have a study we do quarterly, a quarterly publication, we call it the Real and Appropriate wage. We have the nominal wage which is wage we all receive that is what your real wage is in terms of purchasing power. If you were to retain the purchasing power at the point you got it what should you be earning? That is what we call appropriate wage and we do it all the time. If you are to get appropriate wage with respect to changes in inflation rate you will be surprised that you will be doing what is called indexing of salary to changes in inflation but it is a very dangerous thing to do at least for a developing economy like ours where productivity is very low and most of the things we consume are imported. At a point, people may not be able to pay, because each time there is increase you may need to review, so ability to pay is a major determinant in the issue of salaries and wages. You could see that even with the N18000 there were a lot of hue and cry by the states that they were not able to pay, whether it is as a result of mismanagement of resources or lack of interest in addressing the welfare of workers, nobody can’t say but I can tell you that if you keep adjusting wages and salaries in response to the depreciation of the value of your currency or the growth of inflation, you are likely to have a lot of challenges. For an economy like ours where unemployment is high, what you do best is employ more people and pay less rather than employ few people and pay high and put a vast majority out of work. …And your legacy? We use to have unified grading and salary structure but today we have consolidated salary structure. It is a change that has given us something different. We are now autonomous, we can train and discipline our staff, the challenges here today are better than the way they were before; our staff enjoy working here despite the challenges. Under my watch, we now have annual due promotion, training as at when due, all these are legacies and I believe we will build a prosperous and stronger National Salary and Wages Commission. Are the Corps members allowances incorporated into the reviewed wage? The Corps members are not supposed to be receiving Minimum Wage because they are more than that, but they cannot receive below the Minimum Wage. They are factored into what we have done; certainly they cannot receive below the Minimum Wage.

Company IN FOCUS

BUSINESS DAY Monday 24 June 2019 www.businessday.ng

Lafarge Africa: On the verge of a rebound Israel Odubola & Segun Adams

ides seem to be turning in favour of Lafarge Africa after management announced plans to clean its slate marred by debt, and showed significant improvement in its latest financial reports. Overview Lagos-based cement maker, Lafarge Africa Plc, commenced operations in Nigeria 58 years ago. The company is in the business of manufacturing and marketing of cement and other related products such as Ready Mix Concrete, Aggregates and Fly-Ash. Formerly known as Lafarge Cement Wapco Plc, the company changed its name following a resolution passed by shareholders at its July 2014 Annual General Meeting. The company’s change of name was effected following the acquisition of shares in Lafarge South Africa Holdings Limited, United Cement Company of Nigeria Limited, AshakaCem Plc and Atlas Plc. In 2015, Lafarge S.A France and Switzerland-based Holcim Limited entered into a merger worth £41 billion to form a combined entity, LafargeHolcim, the parent company of Lafarge Africa Plc. After the 2019 right issues, the Zurich-based parent firm now hold 84 percent stake in the cement maker through Associated International Cement Limited (23%), Lafarge Associated Nigeria Limited (5%) and Caricement BV (56%). Management Team The day-to-day affairs of the cement maker are overseen by Michel Puchercos, the company’s Managing Director and Chief Executive Officer. Puchercos, a graduate of Ecole Polytechnic, joined Lafarge as Head of Strategy and Purchasing in Orsan, and in 1998 became the Director of Cement Strategy and Information Systems, Lafarge Gypsum. He later became the Director of Cement Strategy, Lafarge Group in France, and later moved into cement operations in Kenya and Uganda while doubling as the chairman of Tanzania operations. The company’s board of directors is chaired by Mobolaji Balogun, with Adenike Ogunlesi, Adebode Adefioye, Uzan Mercie, Jean-Phillipe Benard, Rossen Papazov, Christof Hassig, Elenda Giwa-Amu, Geraldine Picaud as nonexecutive directors. Lafarge and Nigeria’s Cement Industry Nigeria’s cement industry has grown at a compound annual growth rate of 8.9 percent (vs. economy 2.0%) over the last six (6) years as growth steadily tottered from as high as 39.2 percent in 2013 to -5.4 percent in 2016, and subsequently rebounded in 2018. The sector which had grown at a more rapid pace than the broader economy before the 2016 recession, lost its steam, recording negative annual growth in both 2016 and 2017, even though the broader economy exited recession in 2017. Supporting sectors; Real Estate and Construction have recorded similar trajectory, plunging from a growth level of 14.2 and 12 percent respectively in 2013 to 2.3 and -4.7 percent respectively in 2018. The performance of the cement sector has been affected by the tepid momentum of Nigeria’s economy while the currency devaluation in 2016 has left a bitter aftertaste and increased cost for players in the sector. The cement sector expanded 2.81 percent in Q1 2019, faster than the economy (2.01 percent) but less than it had grown in quarters preceding Q4 in 2018. Volumes of sales for cement makers dipped to about 18.6 Mt/a in 2017 from 22.7Mt/a in 2016 an unsuccessful cement price hike to offset exchange rate induced cost while cement consumption per capita in Nigeria fell from 122.0kg in 2016 to 97kg in 2017, below estimates for peer countries, according to Afrinvest Research. Despite the constraints facing the Cement

industry which saw Nigeria’s housing deficit (size) and infrastructure gap (size) show opportunity for increased private and public investment in the sector to drive expansion and reduce excess capacity. Lafarge Africa is the second biggest listed cement maker in Nigeria, with a market share of 25 percent as at the end of 2018. The industrial goods company has its plants in Ewekoro, Sagamu in South West Nigeria and also has plants in Mfamosing in the South-South and Ashaka in the North Eastern part of Nigeria. Lafarge Africa currently has the second biggest installed capacity among cement makers, which measures up to 10.5 Mt/a in Nigeria while it has an additional 3.6 Mt/a in South Africa. Woes of the cement maker began in 2016 when attacks on oil and gas facilities coupled with currency devaluation, led to an upsurge in cost of energy at an average of 34.1 percent of total production cost between 2016 and 2017. In 2017, Lafarge Africa acquired Unicem and consequently absorbed the dollar denominated debt of the latter-which was its subsidiary. The debt along with foreign vendor transactions and intercompany transactions weighed on Lafarge’s performance. Management of Lafarge Africa is looking to settle its dollar denominate debt worth 293 million due July 31 and its naira short-term overdraft. 2019 Right Issues Following the resolution passed by the company’s shareholders at Extra-Ordinary General Meeting held on 25th September 2018, the company proceeded to raise N89.21 billion by a way of right issue of 7.43 billion ordinary shares at N12 per share, by issuing six new shares for every seven shares held by shareholders as at December 4 2018, being the qualification date. The offer opened December 17, 2018 and closed January 28, 2019. The right issues was 100 percent successful and a total of 1, 826 applications was received by the company for 7.43 billion new ordinary

shares. The additional shares of 7, 434, 367, 256 ordinary shares of 50 kobo each was listed on the Daily Official List of the Nigerian Stock Exchange (NSE) on March 26 2019, elevating the company’s outstanding shares from 8.67 billion units to 16.1 billion units. Financial Performance In the recession-tainted 2016, the cement maker’s N39 billion finance cost threatened bottom-line, but recorded N16.9 billion net income, thanks to tax credit worth N40 billion received within the period. A year later, the revenue jumped 36 percent to N299.1 billion underperforming production cost which surged 38 percent from N179.1 billion in 2016 to N248.4 billion in 2017. Earnings before interest and taxes, otherwise known as operating profit, plunged 36 percent on the heels on administrative expenses which nearly doubled from N23.7 billion to N41.6 billion. Finance cost, which upped 16 percent from N38.9 billion in 2016 to N43.2 billion in 2017 on the heels of a sharp rise in interest on the company’s bank overdraft, took a toll on the bottom-line, as the cement maker recorded net loss worth N34.6 billion. Lafarge Africa Plc picked up the pieces of a horrid year in 2017, to improve operating efficiency in 2018 as margin accelerated to its highest level in three years. Operating margin, the ratio of operating profit to revenue, which shows the percentage of profit a company retains after deducting production cost, increased to 8 percent in 2018, an uptick from 2 percent in 2017 and loss margin of 10 percent in 2016. Lafarge Africa grew revenue to N308.4 billion in full year 2018, 3.1 percent more than N299.2 billion posted in the previous year. The company recorded uptick in proceeds from cement, recording decline in receipts from aggregate & concrete and adxmiture from South African subsidiary. The cement maker’s finance income surged some 21 percent to N1.7 billion spurred by massive increase on interest on loan receivable.

Finance cost also increased 6.9 percent to 46 billion in 2018, making net finance cost up 7.3 percent to N44.2 billion in 2018. The company’s share of loss from joint ventures accounted for using equity method which slowed to N65.1 million from N140 million in 2017, along with zero-payment of minimum tax and tax credit worth 10.7 billion, helped cut Lafarge’s net losses significantly by 75 percent to N8.8 billion. Despite revenue contracted 2.6 percent in the first quarter of 2019, Lafarge closed the quarter in green territory with net income of N3.1 billion thanks to strong operating profit, tangible increase in finance income and tax credit worth N3 billion. This compares with N2.2 billion net losses posted in the previous comparable quarter. The cement maker’s operating profit grew substantially by 35 percent to N8.4 billion in first quarter compared to N6.2 billion posted a year earlier, elevating operating margin to 10.9 percent from 7.7 percent a year prior. Light at the end of the tunnel: Sale of South Africa Subsidiary Lafarge Africa signed an agreement with Caricement B.V, subsidiary of parent company Lafarge Holcim, to divest its 100 percent ownership stake in Lafarge South Africa Holdings Limited for a cash consideration of N114 billion ($317mn). “Our strategic decision to divest South Africa with another affiliate of LafargeHolcim group will strengthen our balance sheet. The right issue along with the divestment of our South African operations will deleverage Lafarge Africa by N246 billion, enabling it to fully repay dollar-denominated loan and shortterm naira overdraft” said Michel Puchercos, Lafarge’s chief executive. According to the company, the divestment move is expected to improve profitability, through the generation of positive cash flows, eliminate foreign indebtedness, enable the firm to expand operations in existing plants and prioritize Nigerian operations. The proposed sale of the deal is expected to close in the third quarter of the current year, subject to regulatory and shareholders’ approval. The company made this decision to deleverage its balance sheet by repaying shareholders’ loan of $293 million due July 31 2019. Strategy 2022: Building for Growth The company underpinned its stellar performance in the first quarter of 2019 to its strategy 2022 themed ‘Building for Growth’. The strategy hinges on four cardinal points – growth, simplification & performance, financial strength and vision & people. “Our Strategy 2022 in Nigeria is delivering the expected results with a strong increase in operating profit and net income. Our momentum is very positive and expected to be sustained in 2019” said Puchercos. Going forward, the company expects the execution of strategy 2022 to bolster operational and financial performance in near to mid-term. Redemption of N26.4 billion series I bond The company redeemed its 3-year N26.4 billion series I bond (due June 15 2019) at 14.25 percent coupon, from its internally generated cash flows in a bid to deleverage its balance sheet. The second 5-year N33.6billion series II bond at a fixed coupon of 14.75 percent will mature in June 2021. Market Performance Shares of the cement maker recorded its biggest daily in over two years, at the close of business last Thursday. The stock appreciated 9.95 percent to N10.5 per share, cutting its yearto-date losses to 15.6 percent. The stock which opened at N10.5 on Friday, recorded the maximum daily gain of 10 percent to N11.55 percent per share.

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