BusinessDay 26 Aug 2019 by BusinessDay

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news you can trust I **Monday 26 AUGUST 2019 I vol. 19, no 379 L-R: Babatunde Fashola, minister of works & housing; Babajide Sanwo-Olu, governor, Lagos State, and Obafemi Hamzat, deputy governor, Lagos State, shortly after the minister facilitated a session on, “Personal Perspectives on Leadership,” at the 2019 Lagos State Executive Council and Body of Permanent Secretaries Retreat with the theme, “Delivering the Lagos of our Dreams” at the Eko Hotel and Suites, Lagos.

₦3,604,703.45 -2.06 pc

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Market I&E FX Window CBN Official Rate Currency Futures

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363.14 306.95

-1.88 13.27

NGUS NOV 27 2019 363.97

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NGUS FEB 26 2020 364.42

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NGUS SEP 30 2020 365.47

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These private sector firms take long-term view on economy

…overlook policy flip-flops to invest billions

Nigeria faces dilemma of I lowering rates or getting dollars

ODINAKA ANUDU

n the heat of foreign exchange crisis in Nigeria in 2016, Beloxxi Industries, a biscuit maker, shocked market watchers by closing an $80 mil-

Continues on page 46

Inside

See story on p. 4

Buhari and the mockery of stewardship

Editorial, P. 16

Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

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news Is Nigeria heading for a debt overhang? DAVID IBIDAPO & IFEANYI JOHN

Bola Ajomale (5th r), managing director, NASD plc, with staff, SEC representatives, and delegates of Capital Market Authority Kenya on their visit to NASD office in Lagos.

Nigeria faces dilemma of lowering rates or getting dollars LOLADE AKINMURELE

igeria finds itself again at a familiar juncture, where it must choose whether to prioritise the health of its economy by lowering interest rates or cave in to the wishes of foreign portfolio investors by leaving rates elevated. That’s after the Central Bank’s renewed push to drive rates lower has been met with resistance by foreign portfolio investors, who are demanding higher yields to compensate for lower oil prices and a weakening naira. Investors are keen to see what the CBN’s next move will be with some N300 bil-

lion of OMO maturities due this week. Does the apex bank stick to offering lower rates and risk subdued demand from investors like last week’s OMO auction or does it come to the market with a higher offer that’ll be enticing enough to attract interest? At last week’s monthly auction of FGN bonds, the Debt Management Office (DMO), the agency in charge of raising debt for the Federal Government, sought to collect N145 billion, raised N15 billion (US$50 million) and attracted a total bid of N95 billion for the five-, 10- and 30-year benchmarks. Sales at the auction w e re t h e l ow e s t s i n c e

December 2018. The DMO later said it raised a further N44 billion from sales on a non-competitive basis. The outcome for the DMO was a disappointment, according to Gregory Kronsten, head of fixed income research at Lagosbased FBN Quest. “ T h e D M O ha d t h e thankless task of trying to hold the line on rates in an unfavourable market environment,” Kronsten said in a note to clients August 23. “Bond rates had fallen too far and too fast, as some foreign portfolio investors (FPIs) made their exit,” Kronsten added. The discount rate on o f f e r at t h e b o n d au c-

tion was around 13 percent, down some 200 basis points from 15 percent at the last auction. While foreign demand has waned on the back of lower yields, local investors are also looking away. The banks, who are one of the heavy buyers of local debt, are pre-occupied with extending credit to small businesses to meet a CBN directive to increase their loan-to-deposit ratio to 60 percent by the end of September. That has shaved some demand off the market, according to Egie Akpata, a director at financial advisory firm, Union Capital Markets. “Rates have to go up to

uharinomics has failed to impress economists around the country as the traditional methods aimed at improving economic growth, like borrowing money to fund budget deficits, have not been able to spur growth of the Nigerian economy. In the years under President Muhammadu Buhari’s government, Nigeria has doubled its domestic and external borrowing in order to fund its ever-growing fiscal budget. This has doubled the total debt levels since 2015 while economic growth in that period has halved. In the last five years, Nigeria’s total debt stock increased by N12.88 trillion to settle at N24.94 trillion, surging 107 percent, with about 71 percent of the increase coming from its budget deficit of N9.16 trillion and the remaining 29 percent off-budget spending across the period. This, therefore, establishes Nigeria’s budget deficits as the major incentive for more borrowings during the Buhari-led administration. Also, total expenditure during the same period expanded by some N4.96 trillion to N23.29 trillion with total ac-

frica is becoming a leader in the next phase of global Liquefied Natural Gas (LNG) megaprojects as Greenfield investment in 2019 is expected to reach nearly $103 billion. This development leaves nothing to cheer to Nigeria despite having largest natural gas in the continent of around 202 Trillion cubic feet (TCF) of proven gas reserves plus about 600 TCF unproven gas reserves. According to Rystad Energy, a Norway-based independent energy research and business intelligence institution, Mozambique’s Area 1 and Area 4 projects are making Africa the dominant LNG investment destination this year, with the continent seeing nearly one-third of total Greenfield investment. A Greenfield investment

refers to a type of Foreign Direct Investment (FDI) where a company establishes operations in a foreign country, building its operations such as new production facilities, from the scratch to the echelon. Data from Rystad Energy showed Greenfield CAPEX for Mozambique’s Area 1 project is estimated at $15.6 billion, putting the project in the same league as the major LNG developments in the United States, Russia, and Australia. Rystad noted that if ExxonMobil’s Area 4 reaches FID this year, it will represent another $14.7 billion in Greenfield expenditure in Africa, bringing the yearly total to 28 percent of the global tally for approved investments in newly sanctioned LNG projects. Mozambique’s Area 1 is the largest LNG project that www.businessday.ng

has been sanctioned in Africa to date and will also kickstart the wave of sanctioning activity of other, bigger LNG projects this year. In West Africa, BP and partner Kosmos Energy will decide on the development of the Tortue field off the coast of Senegal and Mauritania, which received a final investment decision for phase one of its LNG export project last December. But while other countries are growing in leaps and bounds, Nigeria which was once ranked the fourth largest LNG exporter in 2016, according to the World LNG Report, has delayed in taking FIDs on various LNG projects in the country and this is eroding the country’s share in the global market. Ayodele Oni, energy partner at Bloomfield Law practice, said the major challenge facing the NLNG sector is its

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ANALYSIS Average growth rate slowed significantly to 0.94 percent levels between 2015 and 2018 despite high debt and expenditure levels. The spike in debt levels has seen analysts and international bodies raise concerns on the need to curb borrowings which have not translated into economic growth so far however leading the country to a state of debt overhang. This is a situation where the nation’s debt exceeds its future capacity to repay, hence creating possibility for stagnation in growth and degradation of living standards. The lack of funds or will to spend on key areas that will improve the economy such as health care, education and infrastructure is a problem that the President should be thinking about. While one could have

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With 3 fraud dents in one month, Nigerian tech needs a vacuum cleaner FRANK ELEANYA

he words “fraud”, “Nigerian” and “tech” have been used in the same sentence or Continues on page 46 story on three separate occasions in one week. Inthe space of a week, the tech ecosystem has seen a fraudster “Forbes CEO” arrested, Jumia fraud incident blamed on Nigerian problematic fiscal regime staff, and 80 Nigerians indicted and its unspecific laws which for fraud in Los Angeles, US. will always distract deepIt is arguably the first time pocket investors from com- since the northward moveing into the country. ment of the ecosystem that it “There was a specific is receiving significant attenNLNG law which the govtion for anything other than ernment wanted to change at some point despite the leading funding rounds and fact that it was a fringe period innovation in Africa. After news broke earlier where the government is not expected to modify that law,” this month of how Obinwanne Okeke, popularly Oni said by phone. He said competition is known as Invictus Obi, was growing across Africa and arrested by the US Federal other countries are step- Bureau of Investigation (FBI) ping up activities in their gas over alleged $12 million fraud, sector, but Nigeria that has Berlin-based Africa-focused enjoyed the benefit from the e-commerce giant Jumia had oil and gas sector for a long on Wednesday, August 21, 2019 admitted that it is facing time seems relaxed. “Nigeria has more gas class-action lawsuits in the than oil, so we should lever- United States as a member age on our gas resources and of its staff engaged in fraud continue to put structures worth $17.5million and the in place to encourage deep- company’s financial report pocket investors to invest in revealed that its loss grew by 59.2 percent in one year. Continues on page 46 “The problem is that many

Nigeria missing as Africa leads in Greenfield investments in LNG projects DIPO OLADEHINDE

tual budget deficit accounting for 39 percent against 23 percent four years prior to 2015. However, higher spending during the period did not see GDP growth outperform levels prior to 2015. The year 2011 to 2014 recorded an average growth in Nigeria’s GDP at 5.62 percent, according to data from the World Bank.

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in Nigeria were happy to own the ‘Jumia is Nigerian’ narrative when some of us were trying to say #JumiaIsNotAfrican,” Rebecca Enonchong, founder and CEO, AppsTech and a long-time critic of Jumia, tweeted on Wednesday. “Jumia top management has blamed Nigerians for the fraud while this practice is widespread in the group. The whole company is a European scam.” According to a report by the Wall Street Journal, Jumia said it discovered two instances were independent sales agents and sellers worked with employees to profit from what sellers pay to use the online platform and commissions that sales agents earn. Jumia said it fired several employees and sales agents and removed sellers on the platform who were involved in the scheme. Jumia currently has a market cap of about $800 million with annualised forward revenues of about $175 million. During a brief call with a group of analysts, Jumia’s cofounder and co-CEO, Sacha Poignonnec, said the issues were isolated and would have little impact on the company’s merchandise metrics and financial statements.

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NEWS Dangote Cement in Tanzania now runs on gas turbines

…as coy sells 4.7m tons across African plants in 6 months SEGUN ADAMS

anagement of Dangote Cement has revealed that its pan-African sales increased by 2.7 percent to nearly 4.7 million tons for the six months ended June 30, 2019. To the delight of its investors, the company also revealed that its Tanzania plants now run on gas turbines, just as sales volumes from its Senegal plants are more than 100 percent of its rated capacity. All in all, these surely are good signs of better days ahead for the company’s investors. It would be recalled that the company paid a whopping N272.6 billion as dividends to its shareholders last financial year, translating to N16 per 50 kobo share, an increase of 52.4 percent against total dividend of N178.9 billion or N10.50 per share paid by the company for 2017 financial year. Aliko Dangote, chairman of the company, had recently said its cement terminals in Lagos State and Onne, Rivers State, would be concluded before the end of 2019, as a way of further improving its market share. He promised that the terminals, which were delayed

by equipment suppliers, would rake in about $700 million in foreign exchange through cement exportation to sub-Saharan Africa. He said the company would be opening export facilities within the terminals to export clinker and cement to its existing facilities both in Cameroun and other African countries. “Later in 2019, we will open export facilities in Lagos and Port Harcourt that will enable us export clinker initially to our grinding facility in Cameroun and then to new grinding plans we are building in West Africa… Not only will these generate useful foreign currency for Dangote Cement to support other expansion projects outside of Nigeria, they will also help to increase the output of our Nigerian plants,” Dangote said. He further revealed that the company would be exporting cement through the terminals to Ghana, Cameroun, Sierra Leone and Congo, among others and as such make Nigeria the biggest exporter of cement in sub-Saharan Africa. Noting that the project would improve job creation and increase prosperity of the country, he said the company’s capacity would also increase on the completion of the terminals.

Nigeria faces low-energy future amid abundance of natural gas …experts highlight issues needing urgent attention STEPHEN ONYEKWELU

igeria is forecast to be more populous than the United States by 2045, but Africa’s most populous nation faces a low-energy future despite being home to the world’s 9th largest natural gas resource and experts point to some choke-points. The pricing of gas is a major issue in Nigeria and central to electricity generation, availability, and retail prices. About one half of the current generation mix in Nigeria is thermal and this proportion is set to go up with a limitation on utilisation of hydro capacity. Further exploitation of hydro resources is difficult due to capital barriers, even though the Federal Government has plans that are still at a conceptual stage to develop a large hydro facility at Mambilla. Gas is the logical choice for power

generation in Nigeria, both in terms of availability and capital requirements. The power sector consumes up to 70 percent of the domestic natural gas supply in Nigeria but the persistent liquidity crisis in the sector has negatively affected the country’s gas pricing framework. As a result, electricity generation and per-capita consumption suffer. According to the World Bank’s data, per-capita electricity consumption in Nigeria is 145 kilowatts per hour (KWh) compared to other neighbouring West African countries, such as Ghana and Ivory Coast, which are not endowed with such resources, with per-capita electricity consumption of 351 KWh and 275 KWh, respectively. The Central Bank of Nigeria’s annual reports show that substantial supply gap for electricity generation still exists in Nigeria.

Total installed capacity for electricity generation has stagnated at 12,232 megawatts (MW) for close to a decade. The average generation capacity of electricity has been oscillating within the range of 2,623.1 MW/hr and 4,000 MW/hr against the estimated demand of 10,000MW per day. The key dilemma in Nigeria is that while lower gas prices are needed to encourage gas demand and support local industries and power generation, cost-reflective prices are needed to stimulate investment in gas infrastructure and assure supply sustainability. “I believe that a marketreflective pricing framework should come to full effect in Nigeria to incentivise investors into the gas sector,” Victor Okoronkwo, GMD of Aiteo E&P Company Ltd, told BusinessDay in a recent interview. “I also

advocate that pricing for natural gas should reflect the increasing demand for the resource in Nigeria and capital requirement to actualise that.” Full monetisation of Nigeria’s abundant natural gas through gas exports on the one hand and domestic gas utilisation in gas-topower, gas-based industries such as fertiliser, methanol, other petrochemicals as well as transportation initiatives on another hand will further propel the country’s economic diversification agenda. To reach this, experts say there are chasms the country has to deal with to make the gas value chain both profitable and sustainable. Some of these include solving the immediate liquidity issues in the sector, the non-cost reflective electricity tariff, payment securitisation, infrastructure deficits across the value chain and foreign exchange volatility.

AbdulRazaq sends anti-poverty bill to Kwara Assembly ... aged, poor, traders, youths targeted SIKIRAT SHEHU

wara State Governor AbdulRahman AbdulRazaq has forwarded to the Kwara State House Assembly a bill to institutionalise his various initiatives to drive economic growth, counter poverty, and ensure equitable distribution of resources. The bill, when passed, will establish the Kwara State Social Investment Programme (KWSSIP) that would be charged with the responsibility of tackling poverty, ensuring equitable distribution of resources and economic growth. “Mr Governor’s plan is to ensure that his various interventions to tackle poverty and make living a lot more meaningful for our people are formalised and institutionalised. It is a social security plan that benefits everyone, regardless of their affiliations,” Rafiu Ajakaye, chief press secretary to the governor, said in a statement last week. The statement said such programmes would outlive the administration and guide against people, especially the aged, falling into destitution or depending on any individual politicians to access whatever support the state could offer them.

Modelled after the Federal Government’s Social Investment Programmes, the statement said KWSSIP would comprise Kwara State Conditional Cash Transfer (KWCCIT) to support those within the lowest poverty bracket by improving nutrition and increasing household consumption; Kwara State Poverty Reduction Programme (KWSPRP) to assist Kwarans to acquire and develop lifelong skills; Kwara State Government Entrepreneur and Empowerment Programme (KWSGEEP) shall lend money to petty traders, artisans, farmers, enterprising youths, men and women, and HomeGrown School Feeding Programme (HGSF). “The HGSF will ensure school feeding of schoolchildren in order to increase school enrolment, reduce malnutrition, empower community women, and support small farmers in the state,” the statement said. This comes a few days after AbdulRazaq visited the Agricultural and Rural Management Training Institute (ARMTI) at Jamba-Oja in Ifelodun Local Government Area of the state where he said the thrust of his administration was to lift the people from poverty line using heavy investment in agriculture and human capital development.

L-R: Emeka Ofor; Andrew Young, former United State ambassador to the United Nations; Vice President Yemi Osinbajo; Haword Jetter, former US ambassador to Nigeria, and Ken Nnamani, former Senate president, during Young’s visit at the Presidential Villa in Abuja, weekend.

It takes me 2 minutes to steal vehicle brain - suspect confesses JOSHUA BASSEY

he operatives of the Lagos State Rapid Squad (RRS) arrested two suspects that specialise in vandalising and stealing vehicle brain boxes. The suspects Sodiq Musa, 28, and Saidu Atiku, 34, were arrested on Awolowo Way, Ikeja, with three Toyota vehicle brain boxes, while Ridwan Adamu escaped with the fourth box. One of the suspects, Musa, claimed he studied political science from one of the Nigerian universities and moved to Lagos in 2017 after his graduation, in search of greener pasture. “I worked in Lagos as a barbeque man in various hotels and events before I met Ridwan

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who introduced me to brain box theft and taught me all the antics and styles. “We use ‘magic stone’ that is, vehicle spark plug to break vehicle windows without attracting attention. It takes two minutes to loose a Toyota Hiace bus brain box and it takes four minutes to lose a Toyota Hilux box. “The spark plug reduces the noise and effects quick break of any vehicle window, and we tie the plug in a handkerchief in a situation where we have multiple vehicles to work on,” Musa said. Musa in his confessional statement to the RRS operatives, Sodiq said that Saidu was a security guard who worked

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for a company located in Ikeja where they were arrested and had earlier in the day called Ridwan who is the leader of the team to come feast on vehicles belonging to their company but parked outside the company’s premises. On getting the information, Ridwan and Sodiq set to action and got to the venue around 1am. They broke into two Toyota Hiace and two Toyota Hilux buses belonging to the company and removed the vehicles’ brain boxes before another security nearby raised alarm. This led to their arrest. Musa was caught with three boxes while Ridwan fled with one. Sodiq was taken to RRS headquarters, where he con@Businessdayng

fessed the involvement of Saidu. He disclosed that he invited them for the operation and was reported to have slept beside the vehicles, which they vandalised. “We specialised in stealing Toyota brain boxes because they fetch good money in the market. The demand for them is higher than any other brand. For example, we sold a Toyota Hiace brain box for N40,000 while that of Toyota Hilux goes for N20,000. “Ridwan connects with the buyers of the brain boxes who he claimed are from the popular spare part market in Lagos. We always meet the buyers outside the market where we exchange our loots for cash.

Monday 26 August 2019

BUSINESS DAY

Finally, FAAN shuts Enugu airport IFEOMA OKEKE

he Federal Airports Authority of Nigeria (FAAN) has finally shut Akanu Ibiam International Airport Enugu. The Airport was shut 2300 hours (12 midnight Friday). However, a concession was given to Ethiopian Airline flight to land on Saturday because it was a pre-scheduled international flight before the decision to shut the airport. The airline had argued that the cost of conveying passengers from Port Harcourt International Airport to Enugu by road and providing accommodation for them would be too heavy on the airline, and therefore should be allowed to drop the passengers at Enugu since the flight was scheduled before announcement to shut down the airport.

FAAN had on Saturday, August 17 announced its intention to close down the runway of Akanu Ibiam International Airport on Saturday, August 24, to effect maintenance that would enhance safety operations. Henrietta Yakubu, general manager, Corporate Affairs of FAAN, dropped the hint in a press statement in Lagos, saying, “This move is aimed at resolving the existing Safety/ Security concerns to flight operations.” She stressed that the date of the re-opening would be communicated in due course. Despite a passionate letter written to President Muhammadu Buhari by governors of South East states to intervene in and pressure FAAN to postpone the shutdown pending when alternative arrangements were made, the Federal Government went ahead with the shutdown.

Airtel partners Views Channel

irtel Nigeria has announced its partnership with Views Channel, a subsidiary of Maxima Media Group, to produce premium content that targets Millennials and Generation Z. It is common knowledge that Airtel Nigeria is at the forefront of creative output compared with others and produces memorable and story-driven adverts to stimulate the minds of the populace and establish its role in the sector as creative and content-driven. A quote from Ibiyinka Dada, digital media manager, Airtel Nigeria, sums up the goals of Airtel Nigeria in the partnership: “We decided to partner with Views Channel because they have innovative and groundbreaking content which runs in line with the goals of Airtel Nigeria. We have decided to take the leap with the channel to reach out to Millennials and Generation Z via pop culture valid content and series.” Content from Views Channel, including but not limited to The Condo, Allisson’s Stand, Down on Twitter and Lyrical Play, will be

sponsored by Airtel. These shows define the goals of Views Channel as an innovative platform that speaks the language of the Millennial and Generation Z, no matter their tribe or tongue. Airtel wishes to reach out to Millennials and Generation z through this platform primarily and establish its dominance as “the smartphone network,” seeing as Mobile and Web content consumption is synonymous with Millennials and Gen-Zeds. Oluwafemi Ogundoro, managing director of Maxima Media Group, had this to say about the partnership: “We are very excited about this partnership, having one of the most innovative companies in Africa behind us. It says a lot about what our brand stands for and means we are aware as a society of the need for Millennials and Generation z to have content curated directly for their needs. Airtel coming on board provides a strong base of support for this goal; although we’ve had other notable brands support Views Channel, this sponsorship deal is on a larger scale and we are so proudtoannounceittotheworld.”

FG to sign IPC to hasten Lagos-Ibadan rail project .. delayed payment slowed it down - Amaechi MIKE OCHONMA

igeria’s minister of transportation, Rotimi Amaechi, has lamented that the delay and slow pace of work on the Lagos-Ibadan standard gauge rail project in the past few monthswaslargelyduetofunding. The transport minister, who stated this barely 48 hours after the inauguration of new cabinet during an inspection of the rail project, said the project was slowed down because of funding. He disclosed that already the contractor had submitted various Interim Payment Certificates (IPCs) to the Ministry to process payment from the China Exim Bank but only the minister could sign the IPCs. According to Amaechi, ‘’I’ll sign IPCs on Monday when I get to the office and send it to be paid by China Exim Bank. Then on our own side, we owe

compensation payment and land acquisition. We also need approval from the cabinet on over and under land passes in Lagos which they cannot commence until they get that approval. So that place we stopped at Agege is an underpass and nothing can be done because they are waiting for approval.” Amaechi, who started the inspection from Ebute Metta Lagos to Apapa station before proceeding to Ibadan, the final destination of the project, said the project had barely progressed from where he left it on May 29, when the cabinet was dissolved. The minister, who was accompanied by Ibrahim Al-Hassan, chairman of the Nigeria Railway Corporation (NRC), and Fidet Okhiria, the managing director of NRC, said the Federal Government was also owing compensation on land acquisition that would be processed in earnest. www.businessday.ng

States’ revenue per capita at $51 too low to drive needed investments MICHAEL ANI

igerian state governments do not generate enough revenue internally and even when money from the Federation Allocation Account (FAAC) is added, they still have too little per person to make the needed investments. However, instead of looking inwards to grow revenues, state governments have over time depended more on Abuja for monthly allocations that are susceptible to oil shocks. Data compiled by BusinessDay show that in 2018, the average revenue per person across the 36 states of Nigeria and the Federal Capital Territory (FCT) stood at $50.9 (N18,511), an amount analysts say is too little to drive the investments needed for inclusive growth. The figure was arrived at by dividing the total amount of

revenue (IGR+FAAC) generated by each sates with their respective populations, using a dollar-to-naira conversion rate of 363.8 and without recourse to the debt servicing obligations of the states. In 2018, Nigerian states made total revenue of N3.74 trillion. Allocation from the federation account accounted for 68.7 percent of the figure, data from the National Bureau of Statistics (NBS) show. Usinglatestpopulationfigures for 2018 released by the United Nations’ estimates, Bayelsa turns out to be Nigeria’s richest state, thanks to its small population that helped in boosting the revenue per person in the state. The state raked in a total of N166.7 billion in revenue for its 2.4 million people, making it the state with the highest revenue per person at N70,000 ($192), using 363.8 dollar-to-naira conversion rate.

Delta State came next with a population of 5.9 million people, each having per capita revenue of N46,157 ($126.9), while Abuja followed with revenue per resident of N40,927 ($112.5), Akwa Ibom N33,491.93 ($108), Lagos N38,662.70 ($106.27), and Rivers N37,608.57 ($103.38). Those with the lowest revenue per person include Osun, Katsina, Bauchi, Kano, Oyo, and Zamfara with per capita revenue of N6,746.6 ($18.54), N8,380.89 ($23.03), N9,309.04 ($25.59), N9,425.1 ($25.91), N10,255.47 ($28.19), and N10,459.51 ($28.75), respectively. “State governments depend too much on revenue allocation from the federation account and this is making them have low capacity to generate income internally,” noted Tajudeen Ibrahim, head of research at a Lagosbased investment firm. Ibrahim said state governments should pay close atten-

tion to developing tourism, entertainment and arts in their states as these were important for attracting investments. Data show that there is a high positive correlation between foreign investments and internally generated revenues, as states that are seen as more destinations for capital importation report higher IGR. Using 2019 first quarter figures on capital importation into Nigeria, states like Lagos, Rivers and Abuja, among others that received highest FDI destination reported the largest IGR. The reason for this is not far-fetched, since state government can have more to tax on personal income of individuals resident in the state, withholding tax on individuals, capital gain tax on individuals only, stamp duties on instrument executed by individuals, pool betting, lotteries, gaming and casino taxes, road taxes, etc.

L-R: Ajibola Ponle, commissioner for establishment, training and pensions, Lagos State; Hakeem Muri-Okunola, head of service; Gbenga Omotoso, commissioner for information and strategy, and Sam Egube, commissioner for economic planning and budget, during a press briefing at the closing of the four-day retreat organised for cabinet members and permanent secretaries of Lagos State government in Lagos, weekend.

Bankers urged to embrace opportunities in agric, consumer, creative sectors HOPE MOSES-ASHIKE

igerian bankers have been advised to embrace opportunities in other sectors such as agricultural, retail and consumer goods and the creative industry in order to reposition in a competitive environment. Patrick Akinwuntan, managing director, Ecobank Nigeria, said at the weekend while speaking on “Repositioning for Relevance in a Competitive Environment,” at the 2019 graduates’ induction and prize awards day organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos. “To reposition in a competitive environment, you must evaluate and understand the trends that would impact the industry now and into the future,” Akinwuntan said. He said the banking sector had undergone some changes, but the news was that it would undergo added disruption. According to Akinwuntan, yesterday, the industry had nothing like the digital apps in use but further disruption underlined by artificial intelligence, machine learning, robotics, big data analytics. “You are being inducted today as chartered bankers, but

the reality you must all face is that not all of you will work in banks and even for those who do, you may not work there your entire careers. The question is, besides banking and financial services, in what other areas of professional and industry relevance can we reposition ourselves to ensure that we sustain and grow our relevance and demand for our expertise?” he said There are vast opportunities opening up in Nigeria for you to make a difference and the doors to these opportunities are being opened up on the back of unprecedented innovations cutting across several industry segments, he said. In his remarks, Ade Shonubi, deputy governor of the Central Bank of Nigeria (CBN), was concerned that bankers had lost the credibility they were known for in the 70s, and charged the graduates to ensure that ethics and trust were restored in the industry. Uche Olowu, president and chairman of council, CIBN, said in his welcome address that the increasing competition in the digitised banking environment would no longer be between banks but with non-banking institutions. Fintech and big tech firms such as Google, Amazon, Facebook and Apple are now capturing more of the banking value chain.

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Access Bank encourages savings culture among children

ccess Bank plc, Nigeria’s largest retail bank, collaborates with MTN at the mPulse Planet to educate pre-teens and teenagers on the importance of practicing good savings culture through fun and innovative methods. The event which held at Landmark Event Centre, Lagos, saw children taking part in gamified learning on platforms such as Dreamville. ng - a community where children can learn about managing money and other financial instruments – while also providing attendees with lots of exciting attractions and activities to enhance early savings culture. Speaking at the event, Adaeze Ume, group head, consumer banking, Access Bank, explains that the bank is committed to engaging and empowering young Nigerians for the future by investing in their knowledge, improving their capabilities, and also designing specific products and services that give them access to more. “From our gamified platform Dreamville.ng, to Early Savers and SOLO products, @Businessdayng

we are committed to helping the youth imbibe a healthy savings culture from an early age. This event reflects Access Bank’s obligation to our young customers by improving financial literacy and encouraging learning in a fun way. For example, users can earn points, badges, and rewards on Dreamville.ng for positive financial behaviours, especially by managing finances and budgets, setting savings goals and achieving them,” she said. The new initiative from Access Bank leverages on digital innovation and technology towards enhancing customer experience and driving financial inclusion while building on its ‘More than Banking’ promise. Since the formalisation of its merger, Access Bank has continued to challenge the financial market by introducing new products and innovative solutions - setting new benchmarks in line with international best practices. The bank leads the industry through a perfect integration of digital transformation and timely response to changing lifestyles.

Monday 26 August 2019

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Judicial reforms: Construction of Judges’ quarters, Kano manufacturers decry new electricity tariff industrial court complex nears completion Adeola Ajakaiye, Kano

… we’ll tap Edo’s status as cradle of culture to drive tourism, Obaseki assures

s part of commitment to reposition Edo State to become the judicial hub of the nation’s South-South region, the Governor Godwin Obaseki-led administration is constructing model judges’ quarters and an industrial courthouse, which are near completion. Site engineer at the Judges’ Quarters, Abumere Ataman, said work on the construction of the quarters in Government Reservation Area (GRA), Benin City, has reached advanced stage as the condominiums would soon be ready for occupation. The site engineer said, “We started this project last year. Work is almost complete at the Judges’ duplex. What is left is laying of tiles and furniture. We are painting the gymnasium house.” Atamam said the judges’ quarters would consist of five duplexes in the Judges’ Villa, five boys’ quarters and a gymnasium house, noting that the Judges’ Villa and boys’ quarters were 70 percent complete, while the gymnasium house was 60 percent complete. “Work has progressed on the perimeter fence of the compound. We are also work-

ing on the electrical fittings, dressing of windows, while the tilers are working inside the Judges’ duplexes,” he said. At the Industrial Court Complex, the building is ready for occupation, as the workers were seen working on the landscaping of the surroundings. Recall that officials of the state government had inspected the court building months ago, and noted that the court would ensure that industrial disputes in the state and the South-South region are brought to the court instead of litigants travelling to Ondo State for such cases. Meanwhile, the state governor, Godwin Obaseki, has assured that the state government will tap the state’s strategic endowments as a cradle of culture and civilisation to drive tourism and attract investment to its art sector. The governor noted that his administration was taking positive steps to revive and promote the rich cultural heritage of Edo people. Obaseki made the pledge while delivering a speech during the second phase of Benin Art Exhibition, entitled “Art of Benin Kingdom: Complementing Igue Festival and Coronation of Oba,” organised www.businessday.ng

by the National Gallery of Art and the Federal Ministry of Information and Culture, in Benin City, the Edo State capital. The governor, who was represented by the commissioner for Arts, Culture, Tourism and Diaspora Affairs, Osaze Osemwegie-Ero, emphasised that Edo was the cradle of culture, noting that the state was blessed with a rich cultural heritage that was second to none in the world. “You can’t talk about history or culture in this nation without mentioning Benin Kingdom. A lot has been done in the last three years to develop the art, culture and tourism sector, as the Obasekiled administration has a key policy thrust to re-awaken the culture sector in Edo State,” he said. The state government places high premium on culture, which explains the repackaging of Edo Festival of Arts and Culture (EDOFEST), which was celebrated in the 18 local government areas in 2017 and 2018 in the state, he said. “We have inaugurated culture clubs in secondary schools across the state, held exhibitions and supported others to exhibit their artworks across the state,” he added.

takeholders in manufacturing sector in Northern Nigerian biggest industrial hub, Kano, have decried the new proposed electricity tariff announced by the Nigerian Electricity Regulatory Commission (NERC), which takes effect soon. According to the stakeholders, the upward review of electricity tariff by NREC, at this pointing in time when manufacturing sector is yet to be fully activated in the country, has the potential of fuelling the cost of doing business. Fact gathered from the uploaded document on NREC website seen by BusinessDay shows that the tariff review is a follow up to the Multi Year Tariff Order (MY TO) of 2015, which came into effect on February 1, 2016, and is to be reviewed every six month, but has never been review, until now. Under the new review, tariff payable by electricity consumers across the country, in the 11 Power Distribution Companies (Discos), has been hiked with effect from last month (July). An insight into the new

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tariff indicates that an average electricity consumer in Kano, which used to pay N25/kwh previously, will now pay N30, which is the cost reflective tariff for the MYTO in 2018. NREC had also computed a total sum of N97.8 billion tariff as shortfall for the Kano Electricity Distr ibution Company (KEDCO) for 2015 to 2018, while another N42 billion was recognised to take care of shortfall for only 2019. Stakeholders within the manufacturing community in Kano have denounced the new tariff increase, describing it as unjustifiable in the face of the gross electricity shortages operators of industries are being confronted with in the state. One of the manufacturers, who do not want his name printed, states the new tariff will further crippled ongoing efforts to resuscitate industrial activities in the state, which is at the moment on a downward trend. “The announcement made by NREC in respect of the implementation of an upward review of electricity tariff, at this material time when most @Businessdayng

of the industrialists are struggling to remain in operation, is a worrisome development for stakeholders in the sector. “What particularly made the hike unjustifiable was the fact that stakeholders in the manufacturing sector in the state, were never consulted before the implementation of the new tariff was pronounced. “More so, if you look at the fact that when NREC even fixed tariff at #25/ kwh, KED CO has been charging industrial consumers in the state #41.45 kobo, as against the approved tariff ” he said. BusinessDay observes in a document on NREC’s website, number NERC/ GL/170 signed on August 19, 2019, by the chairman of NREC, James Momoh, and the commissioner, Legal Licensing and Compliance, Dafe Akpeneye, notes the tariff comes into effect on July 1, 2019. Effort made to get the view of the management of KEDCO on the new tariff was not successful as calls made to the telephone of the head of corporate communications of the company, Dan-Muhammadu Ismailia, was not picked.

Monday 26 August 2019

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Zenith Bank appoints Henry Oroh, ED, and AlMujtaba Abubakar independent non-ED

Why Nigeria may not end open defecation by 2025 - experts Godsgift Onyedinefu, Abuja

xperts in the public health sector have expressed concern that Nigeria may not be able to end open defecation by 2025, as its current progress on the matter does not support set target. The United Nations Children’s Fund (UNICEF) had declared that the country would by October 1, 2019, take over from India as the number one open defecation country in the world with over 47 million still practising the menace in the country. To tackle the menace, Ni-

geria must improve access to Water, Sanitation and Hygiene (WASH) experts say. Available statistics indicate that only 26.5 percent of the population use improved drinking water sources and sanitation facilities, while 23.5 percent of the population practice open defecation. Figures from WaterAid Nigeria indicate that 123 million Nigerians currently don’t have a decent toilet while 59 million don’t have clean access to water. The implication of this has not only been open defecation, but high morbidity and mortality rates, experts say.

WaterAid further indicates that nearly 60,000 children under the age of five die every year due to poor water and sanitation, and millions currently facing the dire results such as disease outbreaks. With only 11 of 774 local government areas in Nigeria so far declared open defecation free by the UNICEF, Onome Oraka, a WASH expert at WaterAid Nigeria, notes that states are yet to develop a state Action Plan, which is a requirement to key into the National Action Plan Fund so as to commence full relativisation of the WASH services.

Oraka points out that Nigeria will not meet the target with the current level of progress, warning that the implication of open defecation will not only be on the health of Nigerians, but also the country will lose economically on the long run. She advises that a multiplier approach should be adopted where government and citizens must put hand on deck to tackle the menace. According to Oraka, citizens must be actively involved because, “if they don’t change their hygiene behaviours no matter the level of project implemented, it will be a failure on arrival.”

Henry Oroh

oard of Directors of Zenith Bank plc has approved the appointment of Henry Oroh as Executive Director of the bank. The appointment is consistent with the bank’s tradition and succession strategy of grooming leaders from within. Also, the Board has approved the appointment of Al-Mujtaba Abubakar, as an Independent Non-Executive Director. Both appointments are effective September 1, 2019, and have been approved by the Central Bank of Nigeria. Henry Oroh holds a Bachelor’s Degree in Accounting from the University of Benin, Edo State, and an MBA from the Lagos State University as well as an LLB Degree from the University of Lagos. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and an honorary member of the Chartered Institute of Bankers (CIBN), Nigeria. He has over two decades of banking experience. He began his banking career in 1992 at Citibank where he served for seven years in Operations, Treasury and Marketing. Al-Mujtaba Abubakar is currently the managing director of Apt Pensions Funds Managers Limited. He is a graduate of the Leeds Polytechnic, UK. He is a renowned Chartered Accountant and a Fellow of the Institute of Chartered Accountants of Nigeria. Abubakar has extensive and tremendous experience in the financial services industry, audit and consulting. He worked with the firm of Akintola Williams Deloitte between January 2000 and November 2008, and rose to become the Partner and Board Member of West Africa sub-region. Prior to this, he had served on the Board of several financial institutions in Nigeria. He has attended several management and leadership training programmes and conferences both within and outside the country. He brings to the Board of the bank tremendous track record in Risk Management, Credit and Marketing, Auditing and very outstanding leadership skills. www.businessday.ng

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The World Bank estimates that if Nigeria must achieve the goal, it will be required to triple its budget or at least allocate 1.7 percent of the current Gross Domestic Product (GDP) to WASH, whereas the gap for improved rural sanitation services is 64.1 percent. The Federal Government in an effort launched a nationwide sanitation campaign with the aim to make Nigeria an open defecation free country by 2025. In addition, the Federal Government declared a state of emergency in the WASH sector and also launched a National Action Plan in 2016 for its revitalisation.

BUSINESS DAY

Monday 26 August 2019

PHOTOSPLASH

At the African Policy Road Show, themed, building Robust Policies for Increased Social Investment and Inclusive Business in Lagos

L-R :Patsian Low, chief of staff and Asia Policy director, AVPN; Royston Braganza, CEO, Grameen Capital India Limited; Adeyemi Dipeolu, special adviser to the president on economic matters ; Bala Mogaji director, Convention on Business Integrity and Business Innovation Facility; Melanie Melano, program director, Inclusive Business Program Board of Investments, trade and industry, Philippines and Oluwatoyin Adegbite-Moore, executive director, West Africa.

L-R : Andrew Kaiser-Tedesco, director, Africa and Impact Investment, iBAN ; Royston Braganza, CEO, Grameen Capital India Limited;Okechukwu Enelamah, former minister of trade and investment, and Oluwatoyin Adegbite-Moore, executive director, West Africa,

Cross section at the event.

L-R : Adeyemi Dipeolu, special adviser to the president on economic matters ; Royston Braganza, CEO, Grameen Capital India Limited; a guest and Pat Utomi, founder of CVL. Pic by Pius Okeosisi

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At the mercy of thieves, bandits and incompetents (2)

BASHORUN J.K RANDLE

either could Mrs Christine Lagarde believe the front page report of The Punch newspaper of June 22, 2019; “AMOSUN, KALU, GOJE, OTHERS TO POCKET N273.64 BILLION IN FOUR YEARS. “Four hundred and sixty-five members of the 9th National Assembly, including Senators Orji Kalu, Danjuma Goje and Ibikunle Amosun, would have received N273.64billion by the time their tenure ends in June 2023, should the current law on remuneration of political office holders and the tradition that held sway in the 8th National Assembly remain, an analysis has shown. This package excludes what the President of the Senate, Ahmed Lawan; his deputy, Ovie Omo-Agege; Speaker of the House of Representatives, Femi Gbajabiamila; and his deputy, Ahmed Wase, will get because their earnings as principal officers are calculated differently from what other members of the National Assembly get. An analysis of the statistics of lawmakers’ earnings carried out by our correspondents showed that each member of the Senate would get as

much as N728.25million in emolument for the four years they would spend in the red chambers. This will take the earnings of 107 senators, excluding the President of the Senate and his deputy to N77.92billion in four years. On the other hand, each member of the House of Representatives will get as much as N546.7m in four years. This means that 358 members (excluding the Speaker and Deputy Speaker) of the Green Chamber will get N195.72bn within the four-year tenure. A breakdown of a senators’ package shows that each of the lawmakers will get N648million from overhead payment at the rate of N162m per annum or N13.5million a month. From salaries and regular allowances, a senator is entitled to N51,065,280 in four years at the rate of N12,766.320 per annum or N1,063,860 a month. The regular allowances are paid lawmakers on a monthly basis along with their salaries. The regular allowances are calculated as a percentage of the salaries and include motor vehicle maintenance and fuelling. This is pegged at 75 percent of their monthly salary. Others are personal assistant – 25 per cent; domestic staff – 75 per cent; entertainment – 30 per cent; utilities – 30 per cent; newspapers/periodicals – 15 per cent; wardrobe – 25 per cent; house maintenance – five per cent; constituency – 250 per cent. The irregular allowances that senators are entitled to include accommodation, furniture, recess and severance. From accommodation which

is paid once a year, a senator will get N16,211,200 in four years at the rate of N4,052,800 per annum. The furniture allowance is paid once during the tenure and is put at N6,079,200. Recess allowance is paid once a year and from it a senator will get N810,560 in four years at the rate of N202,640 per annum. Severance allowance is paid at the successful completion of the tenure and for a senator; the amount if N6,079,200. A member of the House of Representatives, on the other hand, will get N480m from overhead payment at the rate of N120million per annum or N10million a month. From salaries and regular allowance, a Rep is entitled to N38,116,152.24 in four years at the rate of N9,529,038.06 per annum or N794,086.83 a month. From accommodation, a Rep is entitled to N15,881,700 in four years at the rate of N3,970,425 per annum. A Rep is entitled to a furniture allowance of N5,955,637.5 once in four years and is also entitled to a similar amount as severance allowance on successful completion of tenure. For recess, a Rep is entitled to N794,085 in four years at the rate of N198,521,25 per annum. Any lawmaker that desires can also get a loan to purchase a vehicle. For this, a senator is entitled to N8,105,600 while each Rep is entitled to N7,940,850.50. This, however, is not part of the summed package as the loan is supposed to be refunded by the end of the tenure. There are other entitlements that they are not paid directly for but pro-

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From salaries and regular allowance, a Rep is entitled to N38,116,152.24 in four years at the rate of N9,529,038.06 per annum or N794,086.83 a month

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

If Not Now, When?

riving through Lagos, I am struck by the juxtaposition of wealth and poverty. However, what is truly interesting is the contradiction between what one views and what one hears concerning the potential of this bustling metropolis. With all of its complexity, Lagos offers an excellent window into the problems that beset this country. First, I must note the incredible traffic congestion that requires workers to leave for their jobs at 4 or 5 am in order to arrive on time, if their employer expects them to commence by 7:30 or 8 am. And of course, they must fight similar congestion on the way home, which will require three or more hours in traffic just to arrive in time to get a few hours of sleep before one must repeat this torturous process again. The daily commuter must also deal with horrible road conditions and persistent flooding during the rainy season. Then there are the “hawkers,” the car to car salesmen who possess anything that you might need, often times carrying the merchandise on their heads. What else will you see as you travel around this city? You will note the frequency of beggars who will approach your vehicle asking for money or food, oftentimes they are physically disabled or minors, sometimes they are mothers accompanied by their children. You will also see the trash. Litter on the streets, litter in what passes for parks, and the plastic bottles and other refuse that are thrown into the waterways around Lagos. One cannot omit the kekes (motorized tricycles), okadas (motorcycles), and danfos (passenger vans), which are the principal

vided and paid for by the government. These are special assistants, security and legislative aides. What this means is that those engaged in these capacities are paid directly by the government as the allowances cannot be claimed by political office holders. These allowances apply to senators and reps. Medical expenses are also borne by the government when they have need for such services. The lawmakers are also entitled to tour duty allowance and estacode (when they travel abroad). For a senator, the tour duty allowance is N37,000 per night and estacode of $950 per night. For a member of the House of Representatives, the tour duty allowance is N35,000 per night and estacode of $900 per night. Theoretically, the package of an ordinary lawmaker is greater than what the principal officers (President of the Senate and Deputy President and Speaker of House of Representatives and Deputy Speaker) get. This is because most of the allowance for which the lawmakers are paid, the principal officers do not get money for them but have the items fully provided by the state. Such services include accommodation, furniture, motor vehicle maintenance and newspapers.

THOMAS PAINE source of transportation for anyone who does not own or have access to a car. They magnify the chaos in the city by their ignorance of any semblance of the customary rules of the road and their refusal to abide by traffic regulations. Which brings me to my fellow drivers; they are hardly blameless for the city’s chaos. In the main, they adopt an every man, or woman, for himself/herself attitude that leads them to make three lanes on a street intended for two, even if it means driving toward on-coming traffic; making left-hand turns from the right-hand lane; they do not hesitate to block intersections, and at times will drive on the pedestrian walkway, if necessary. This is the Lagos that exists today. Why should I expect more or something different? Perhaps it is because alongside these attributes, I also see the success of Nollywood, the brilliance of local fashion designers, an energetic financial hub, and a blossoming tech community, in sum, one of Africa’s most ingenuous creative communities exists in that same Lagos. How can these undeniably impressive characteristics be scaled up in a way that will produce greater prosperity for the majority of the people who live in this city? Let’s not bother with the obvious. As soon as you land at Murtala Muhammad airport, the crying need to bring that facility and the rest of the nation’s infrastructure up to just latter 20th century standards is painfully clear. The state government will have to invest

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in modern mass transportation, regardless of the predictable impact on the kekes and danfos. Do I really have to point out that a massive road repair program is in order? Not only will it ease traffic congestion but it would also serve as a much-needed jobs program. I could go on … Lagos must continue to strive to provide reliable power to all of its citizens and a public education should be free. No child should be kept out of school due to the inability to pay school fees. What is less obvious is, as one of the country’s less appreciated slogans says, Change begins with me. If Lagos is going to become a first world city, Lagosians will have to change. They will have to give up driving as they currently do. Lagosians will have to stop throwing their trash on the street or polluting the waterways. There can be no tolerance for seeing minors hawking when they should be in school. The “me first” attitude that makes it difficult for many Lagosians to queue up for anything, in the supermarket or at the airport, will have to be cast aside. Undoubtedly, some will say this is rubbish. They will contend that such changes are impossible, or worse, they will argue that they are unnecessary. Nigeria is not Europe or America, they will say, Africans are comfortable with things just as they are. Really? I would counter that part of the attraction of life in the US or in the UK for many Nigerians is that they admire the fact that those societies seem to work, that there is a greater sense of organisation, less chaos. Many Nigerians desperately long for the same attributes to take hold in their country.

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What is undoubtedly true is that change will not come quickly or easily to Lagos. It will be difficult for many to absorb, there will be resistance and skepticism, for change often requires sacrifice. Yet, progress always requires some degree of change. And if not now, when? It is time to make the steps, as hard as they may be, to bring Lagos, if not all of Nigeria, into the 21st century. Step by step, day by day, it is the only way for Lagos and Nigeria to join the ranks of the developed world! It can be done. If China can become a superpower in a couple of generations, if the Emirates can build world-class tourist destinations out of the desert over the same period, why should it be impossible to achieve similar progress here? If it can be done, if it should be done, when do you start? If not now, when? Paine is a media consultant based in Lagos. He can be reached at thomas.paine78@outlook.com

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Monday 26 August 2019

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Nigerian banks: opportunity or value trap

PATRICK ATUANYA

uaranty Trust Bank (GTB), Nigeria’s largest Bank by market capitalisation, trades at a price to earnings (PE) ratio of 4 and price to book (p/b) value of 1.4x, Zenith Bank the second largest by market capitalisation has a PE of 3, p/b value of 0.7x dividend yield of 15 percent. The Nigerian Stock Exchange (NSE) banking index has underperformed the broader market, returning -16.6 percent year to date, compared to a -11.55 percent return for the NSE all share index (ASI). Nigerian Bank stocks are cheap, when compared to frontier market peers, despite a majority of them still declaring profits and paying out juicy dividends. First Rand, South Africa’s largest bank trades at a PE multiple of 12 and p/b value of 2.62x, for instance. The two biggest Nigerian Banks just announced interim dividend

pay-outs of 0.30k each. For GTB it is equivalent to N8.829 billion and Zenith N9.42 billion or a total of N18.25 billion ($50 million). If you wanted to be a shareholder in GTB you can currently buy it on the floor of the stock exchange for N27.9 per share (Friday closing price). In the past year it traded as high as N39/share. Zenith can be bought for N18.6 per share today even as it traded as high as N26.85 per share in the past year. GTB recorded profit after tax of N99.1 billion in the half year (H1) 2019 period, while earnings per share (EPS) rose 3.6 percent to N3.5, while Zenith saw H1 profits rise 8.7 percent to N88.8 billion, while EPS printed at N2.83. Clearly both banks are quite profitable and willing to reward owners of stock, so why are investors pricing the shares at such a discounted level to fair value? Banks in Nigeria have been facing a number of headwinds which investors fear could dampen profits in coming years. On the macro-side growth remains sluggish, inflation high, real per capita incomes falling, and unemployment elevated, while on the policy side regulatory uncertainty is beginning to creep in. In a circular issued last month, the Central Bank of Nigeria (CBN) set the minimum loan-to-deposit ratio (LDR) for banks at 60 percent in a bid to spur lending. This means that for every N100 in deposits banks hold, they must at least lend out N60 to retail clients and small businesses, instead

of binging up of ‘risk free’ Federal government securities. As a result, investors are fretting that profitability of the banks may take a hit in the short to medium term due to potential reduction relatively easy to earn interest income from lending to the Federal Government, as opposed to the difficult (and inherently risky) business of granting consumer and other forms of retail/SME credit. Another potential headwind for lenders in Nigeria would be the coming licensing by the CBN of Telecommunication firms to allow them play in the mobile money space, which could be a huge game changer for financial inclusion and of course banking as we know it. The country’s mobile operators; MTN, Airtel, Globacom and 9mobile recently announced their commitment to deepen financial inclusion to at least 90 million customers in about 2 years, once issued payment service banking (PSB) or mobile money licenses. The four Telco’s combined have some 173.6 million customers, compared to the 21 deposit money banks (DMBs) with about 30 million bank accounts with unique bank verification numbers (BVNs). The Telco’s also have the resources to deploy in the coming fight. MTN Nigeria Full Year 2018 results showed it had 21.6 million smartphone users on its network, Ebitda margins of 44 percent and revenues eclipsing the N1 trillion mark. No DMB in the country currently boasts such revenues.

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“Banks in Nigeria have been facing a number of headwinds which investors fear could dampen profits in coming years.”

Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

For new ministers there is no honeymoon

t has been five months since the elections and three months since the inauguration, and finally we have ministers. I think it is problematic that it took so long to pick ministers and assign them their portfolios, especially for a president who is in his second term and should have been looking to keep things moving. A lot could have been done in five months. Still, it is what it is and there is no point crying over spilled milk. If the new ministers needed any reminding of the gravity of the situation they have been thrust with then here it is. A slow burning security crisis seems to have taken hold across the country with many Nigerians now scared to travel on highways. The economy is sluggish, at slower rate than population growth. In fact, the last quarter for which data was published showed a slowdown in growth. The less said about the state of the education sector the better. Unemployment continues to rise with poverty rising as well, although we do not know for sure how bad it is as funding constraints continue to delay poverty surveys. All these challenges must be tackled in a fiscally challenging environment. It has been in the news recently, and should come as no surprise, that the federal government is fiscally constrained.

Based on the third quarter 2018 budget implementation report – unfortunately the latest report thanks to the absence of a finance or budget and planning minister for months – the federal government generated only enough revenue to service its debt and pay 47 percent of its recurrent expenditure. The debt burden continues to pile up with debt servicing allegedly now accounting for near 70 percent of all actual revenues. The federal government’s liabilities also continue to increase with new wage demands from labour and ever-increasing fuel and electricity subsidies, or under-recoveries. To make matters worse, the country is hopelessly exposed to dangers from a crude oil price shock with the excess crude account virtually empty and the sovereign wealth fund not holding up to two billion dollars in liquid assets. The foreign reserves are also not great; once you remove the liabilities to foreign portfolio funds the balance is probably only somewhere between $25 and $30 billion. For context, that is the range it was during the peak of the foreign exchange crisis in 2016 and 2017. To add insult to injury, as the popular saying goes, the ministers have essentially only two years to propose and implement any policies and start to show www.businessday.ng

ECONOMIST

results before the political cycle starts. As we know all too well once the political cycle starts the space for policy simply shrivels. Anything that is going to be done, especially if it is unpopular, needs to be done now. If the ministers thought they had time to relax and enjoy the trappings of their office then they had better wake up and smell the coffee. The situation is dire, the funding options are constrained, and the time to implement is limited. So, what do I hope to see in the next few weeks? On the fiscal front I hope to see a path towards the removal of fuel and energy subsidies. It would also be good to have an agreement with labour that does not lead to a big jump in the recurrent liabilities of the federal government and that includes labour’s buy-in on the closure of redundant federal agencies. A plan to hedge against a potential collapse to crude oil prices probably needs to be put in place in lieu of an empty excess crude account. A legislative agenda for more fundamental tax reform would be in order too. In case we have not figured it out yet, telling FIRS to work harder is unlikely to yield results given the current tax structure. On education I hope to see a comprehensive reform plan that shifts the focus to basic education and learning and away from the federal

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There is also the issue of attractiveness of bonds relative to equities. With FGN bonds on average yielding 14 percent per annum and stocks returning -11.55 percent year to date, it’s a no brainer that investors will rotate into bonds from stocks. So are bank stocks currently a value trap?, defined as a stock that appears to be cheap because it has been trading at low valuation metrics such as multiples of earnings, cash flow or book value for an extended time period. The trap springs however when investors buy into the company at low prices and the stock continues to languish or drop further. We think the answer is not quite. Huge opportunities abound in the banking space largely due to huge demographic gains to be had from a population expected to hit 350 million by 2050, cost savings from digital and technology innovations by banks, and the upside from being able to solve the financing needs of millions of Nigerians. Lenders have no alternative to real banking as opposed to financial engineering, which should largely be left for investment banks and other players in the capital markets. However there will be winners and losers, and investors will be well served by closely monitoring their holdings of bank stocks, trading around positions, and betting big on those names that are driving innovation in the space.

NONSO OBIKILI

government’s current focus on higher education. On infrastructure, a legislative agenda to remove certain items from the exclusive legislative list and allow for private investment. There is no technical reason why seaports, airports, and even land border posts need to be the exclusive preserve of the federal government. On security, a pilot experiment on formal state police. It does not have to be everywhere, but we can certainly test it out in a few states we think can handle it. No doubt there are countless other areas which require urgent policy attention. But for me, as one of the 180 million Nigerians, these are the things I hope to see in the next few weeks. Oh, we also need to plan a census too. Are we really 180 million people? If we don’t know then how can we even start to implement policy? Dr Obikili is Chief Economist of BusinessDay

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Monday 26 August 2019

BUSINESS DAY

EDITORIAL PUBLISHER/CEO

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

Buhari and the mockery of stewardship

resident Muhammadu Buhari may have complicated matters by publicly admonishing his ministers to report to his Chief of Staff. On May 29, the president swore an oath to uphold the constitution of the Federal Republic of Nigeria and serve the country to the best of his ability faithfully. One obligation this places on the president and at least the minimum requirement for a man occupying the office of president is to appoint a cabinet made of the best the country has, give them unfettered access and provide the leadership needed to inspire them to achieve to their objective. On these counts, this president, in his second term is failing. To start with, it took him nearly three months after his inauguration to select a cabinet in a country with an economy recording slow

growth of less than 2 percent, severally indebted and badly in of bold reforms. The cabinet of Buhari is uninspiring, except in a few instances. It could easily pass off as a collection of tired politicians whose relevance is their supposed loyalty to the ruling party or the president. In a country with over 60 percent of the population in their 20s, the president appointed ministers with an average age of 60. The Minister of Youths and Sports is 53 years old. The president’s uninspiring performance as Minister of Petroleum Resources is set to continue for the next four years characterised with failures to pass a petroleum industry bill, attracting fresh investments into the sector or conducting a bid round as many oil-producing countries are doing. Worse still, candidates who appeared in Senate screening brimming with ideas were

posted to ministries unsuited to their capabilities. Festus Keyamo, a lawyer and advocate is a junior minister of the Niger Delta and Adamu Adamu whose tenure as Minister of Education in the first term was disastrous is returned to head the ministry. As president, a key part of the leadership Buhari is expected to offer the ministers is unhindered access to him. It ensures the high-level consultation required to move the country forward is done seamlessly. Assuming some may forgotten, the cabinet is known and called the Federal Executive Council for good reason. Barring ministers from direct contact with him portrays an Abdicator- rather than a Commander-in-Chief, it makes ridicules the millions of Nigerians who voted to re-elect the president, and the other millions who are no less citizens. This directive portrays the president as aloof. How

does the president expect his ministers to “collaborate” and “succeed in their given assignments” without a direct channel of communication? The directive of the president gives ample room for his chief of staff (an unelected post) to exercise his discretion as he pleases and leaves ample room for an Aso Rock of confusion – the recent query issued to the Babatunde Fowler, head of the Federal Inland Revenue Service, came from the office of the chief of staff. No doubt, the suspicion that certain interests are controlling the presidency will fester further. In the wake of President’s Buhari’s cabinet appointment, many people are already looking towards the next election cycle because the situation is well and truly hopeless. For the president to direct that ministers should report to his Chief of Staff is to abdicate the office he swore to uphold and to disdain his cabinet. This is totally unacceptable.

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Monday 26 August 2019

BUSINESS DAY

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Economics of protests: Why Nigeria should be having more demonstrations GLOBAL PERSPECTIVES

OLU FASAN

rust economists, they will analyse anything. Would you believe that some of them have investigated the conditions under which a democracy is likely to be having regular protests and have concluded that it’s when a country is below certain income threshold? Well, that’s the subject of a paper titled “Democracy, Development and Conflict” written by the Oxford University professors Paul Collier and Dominic Rohner. They argue that democracy would increase protests in countries with poor economic conditions, where poverty and inequality are rife. Some other economists have, indeed, proved empirically that large-scale collective protests are often driven by poor national economic performance. But the puzzle is that this theory doesn’t seem to hold true in Nigeria. Given the widespread misery and suffering in Nigeria, this country should be having an epidemic of protests. Yet, as we saw recently with the aborted #RevolutionNow protest,

Nigeria is not a country prone to protest. Nigerians are not what the US columnist Thomas Friedman called “the square people”, that is, people who demonstrate in public squares “aspiring to a higher standard of living and liberty”. But why does Nigeria defy the theory? Why is Nigeria not having riots and protests despite its appalling social and economic conditions? Well, let’s explore the theory a bit more. The starting point is that every government must make lives better for its citizens. Thomas Jefferson, the third US president, famously said that, “The care of human life and happiness is the only legitimate object of good government”. But, as we know, not every government cares for the wellbeing and happiness of their people. Well, there are two theories as to when a government may do so. The first theory was propounded by Timothy Besley, professor of economics at the London School of Economics, and Torsten Persson, a Swedish economist. In their paper titled “The origins of state capacity: property rights, taxation and politics”, Besley and Persson developed the concept of “a common interest state”, where the interest of the people in power is coincident with the interests of ordinary people. In other words, without any democratic pressure, they adopt policies that serve their own interest but also happen to benefit ordinary people. It’s the equivalent of the economic theory of how self-interest can end up serving the public interest. For Besley and

Persson, China is a common interest state. But the common interest state theory relies too much on what the leaders would do voluntarily. Can you imagine leaving Nigerian politicians to their own devices and hoping their interest would be congruent with those of ordinary Nigerians? No, it won’t. Most of them would adopt policies that benefit only themselves, their families and friends but damaging to ordinary people. So, the common interest state theory can’t work in Nigeria. Which brings us to the second theory. This one is based on the concept of democratic pressure. In their book titled “Why nations fail: The origins of power, prosperity and poverty”, Daron Acemoglu and James Robinson argue that a government is likely to work for ordinary people when it faces democratic pressure in the sense that if it doesn’t generate and spread prosperity widely to ordinary people, it would be voted out of power. So, that democratic pressure would force a government to work for the people. But, as one scholar points out, in many countries today, elections have become just “a collective celebration of popular powerlessness” because once politicians win elections, often through vote-buying and other malpractices, they do virtually nothing to improve the lives of ordinary people. Basically, the people have no means of making the government work for them between elections. They have to wait until the

‘

Nigeria is, of course, the “poverty capital of the world”, according to Brookings Institution, being the country with the largest number of the extreme poor, with nearly 50% of its population living on below $1.9 a day

next elections to make their will felt, but those elections are also likely to be manipulated. So, what can the people do? Well, this is where pressure between elections matters. Pressure from below, that is, from the citizens, is the only means of forcing government to work for the people. Surely, a democracy can reduce protests only if it delivers prosperity for the people and provides channels for grievance ventilation and resolution. Which is why, as Professors Collier and Rohner argue in their paper that there should be little proneness to protest in economically strong and democratically accountable countries. By contrast, given that democracy generates, as Collier and Rohner put it, “technical regression in repression”, that is, it constrains government repression, a democracy that is below an income threshold, thus unable to meet the basic needs of its people, would be prone to protests. Professors Collier and Rohner put that threshold at a per capita income of $2,750. In other words, a democracy with a per capita income of below $2,750 should be experiencing regular protests.

Note: the rest of this article continues in the online edition of Business Day @ https://businessday.ng 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 Nigerian Code of Corporate Governance, 2018 Principle 16 - Remuneration Governance

rinciple 16 of the Nigerian Code of Corporate Governance 2018 (NCCG) deals with Remuneration Governance and provides that “The Board ensures that the Company remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.” Remuneration Governance is one of the most sensitive and sometimes controversial topics in corporate governance. Today, NonExecutive Directors are clearly spending more time on their Board roles with Board and Committee meetings, videoconferences, shareholder meetings and Director Development programmes among other commitments. They also need to make out time to attend to Board and individual Director performance evaluation. With more stringent corporate governance expectations, reputational risk is now included in the basket of an already time-consuming job. Given the vital importance of the responsibilities assigned to Non-Executive Directors, it is expected that they will devote signiﬁcant time and effort to their boardroom and non-boardroom duties. Section 267 of the Companies and Allied Matters provides that a company is not bound to pay remuneration to Directors but where the company agrees to pay, Directors shall be paid such remuneration out of the funds of the company and such remuneration shall from time to time be determined by the company in general meeting. The NCCG recommends that the remuneration policy should be designed to attract, motivate, reward and retain high performing human capital, to pursue the long-term growth and success of the organization. The policy is also expected to demonstrate a clear relationship between Key Performance Indicators and remuneration. However, where

remuneration is linked to performance, it should be designed in a way as to prevent excessive risk taking. The Code provides that the Company’s Remuneration Policy as well as remuneration of all Directors should be disclosed in the Annual Reports. The decision on Non-Executive Director compensation should not be that of Management. This is to ensure that the Board is able to maintain its independence of Management and not feel beholden to the CEO for his/ her “benevolence”. The Board Governance/ Remuneration/Nomination Committee, armed with appropriate data, should make recommendations to the Board, mindful of the company’s ability to pay and sustain the compensation package as well. As much as possible, most members of the Committee should be Independent Non-Executive Directors. Executive Directors should not be involved in the determination of their own remuneration. Committee members should have access to up-to-date- industry pay levels, structuring methods and components of remuneration of peer companies. However, while remuneration levels may take into account relevant benchmarks and market conditions, these criteria should not be used exclusively to justify levels of remuneration. Too much reliance on relative peer analysis leads to unjustified escalation in executive pay. Each plan should be tailored to the unique circumstances of the company as well as the responsibilities of the position(s) in question and the experience and expertise of the individual. (ICGN Guidance on Executive Remuneration, 2012). There should be a balance between recommending over-generous remuneration which is not in the interest of the shareholders, and a level of remuneration which fails to attract the desired quality of human capital to the www.businessday.ng

organisation. It is expected that the remuneration of Executive Directors will be structured in a manner that will motivate them to achieve the long-term objectives of the company. Therefore, the Remuneration Committee should offer competitive base pay combined with performance-based rewards such as bonuses linked to medium and long-term targets, shares and share options. The Code provides that MD/CEO and other Executive Directors should not receive sitting allowances for attending meetings of the Board or its committees and Director’s fees from the Company, its holding company or subsidiaries. Their remuneration should however cover reward for time spent on the Board, its committees, and related work. A novel provision of the NCCG is the requirement for companies to implement a Clawback policy to recover excess or undeserved rewards, such as bonuses, incentives, share of profits, stock options, or any performance-based reward, from Directors and senior employees. The clawback should be triggered if the account or financial performance on which the reward was based is later found to be materially false, misstated, misleading, erroneous, etc. or in instances of misdemeanour, fraud, material violation of Company policy or material regulatory infractions. The concern had always been expressed that when companies are penalized for “wrong-doing”, no actual persons are punished. Shareholders ultimately bear the brunt of “bad-behavior”. It is expected that Clawback policies will include staggered incentive payment to ensure that the the company actually has something to claw back. The Code further recommends that NonExecutive Directors should not receive performance-based compensation as it may lead to bias in their decision-making and

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BISI ADEYEMI compromise their objectivity. Another novel provision of the Code is the payment of compensation for loss of office or retirement to Directors – including Non-Executive Directors. In the case of the MD/CEO, EDs and senior management, the compensation payable for any loss of office or termination of appointment should be consistent with their contractual terms, fair and not excessive. Increased demands coupled with the unique requirements of each Board means that Non-Executive Director pay should be fair, but not enough to tilt the balance of independence required of an effective Board. It is also not good practice for the Board to use executive compensation as a benchmark for determining Non-Executive Director remuneration. In addition to their statutory responsibilities, Executive Directors have day-to-day responsibilities to which they are expected to devote all their time and attention.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ 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 26 August 2019

BUSINESS DAY

In Association With

Today we rise

The writers breathing fresh life into Ugandan literature A new generation of authors is inspired by subjects as diverse as oral tradition, corruption and feminism

N 2003 Harriet Anena was a schoolgirl in northern Uganda, a region then at war. The army had ordered people into squalid, crowded camps; insurgents stalked the bush. “We scratch our destiny / from hands of a curtailing fate,” she scribbled, sitting beneath a mango tree. In poetry she found a way to ask questions that children, especially girls, were not supposed to ask. “I started writing for therapy,” she says. This month Ms Anena recited those lines on the stage of the National Theatre in Kampala, melding drums, dance and poetry in an arresting evocation of love and war. Her performance was the highlight of this year’s Writivism festival, an annual celebration of creative writing, and a testament to the vitality of the country’s small but flourishing literary scene. Uganda was once at the fulcrum of African literature. It was at Makerere University, on a hill above Kampala, that giants such as Chinua Achebe and Ngũgĩ wa Thiong’o gathered in 1962 for the first African Writers’ Conference, a landmark event held on the eve of independence for many countries. But Uganda would soon sink into an abyss, where power flowed from the gun and not the pen. Literary attention has since moved elsewhere, to cities such as Lagos and Nairobi. These days roadside booksellers more often flog volumes about getting rich or finding Jesus than new works of fiction. Yet in a place where history and politics weigh heavy, writers are finding fresh voice. A

A Balkan Tick tock betrayal

Boeing’s troubles cost the aerospace industry $4bn a quarter There is no end in sight

number of trailblazing authors have passed through FEMRITE, a non-profit founded in 1996 to publish and promote women’s writing in Uganda. Writivism, now in its seventh year, publishes an annual anthology and runs a short-story prize. And Ugandan literature can boast of an international superstar in Jennifer Nansubuga Makumbi (pictured), whose debut novel “Kintu” is a multi-generational saga that ties oral myth to a recognisable present. It has won critical plaudits as well as the Windham-Campbell Prize for Fiction, a major American literary award which offers winners $165,000 to support their writing. Encountering the names of familiar places in a novel “just blew by mind,” says Nyana Kakoma, who runs a small publishing house in Kampala. “I said wait a minute, this is me, this is my life, this is Uganda as I know it.” Much of this new literature

is strikingly political. “The Betrothal”, a play by Joshua Mmali, is a retelling of a multimilliondollar corruption scandal that he covered as a journalist for the BBC; its performances at the National Theatre in Uganda last year were greeted with whoops of recognition from audiences. Bold writers can draw on the daily chronicles of hypocrisy and clampdowns recorded by a lively press. Authors are also confronting the countless petty tyrannies of patriarchy. The government frets about skirt lengths; its “pornography control committee” arrests women whose nude pictures have been leaked online. New Ugandan writing often has a feminist bent, exploring themes such as domestic violence or female desire. In “I Bow for my Boobs”, Ms Anena imagines her breasts transformed into a “weapon of destruction” against a drunken husband. She has also pro-

duced an unpublished collection of “political erotica”, which she describes as “looking at politics through the body of a woman”. War, corruption and sexism are not easy topics, and creative expression has its limits. Uganda has an authoritarian government, presided over by an ageing and increasingly testy strongman. This month Stella Nyanzi, an activist and academic, was sentenced to 18 months in prison after posting a poem on Facebook which graphically described the vagina of the president’s mother. For all that, it would be a mistake to assume that Ugandan writing is glum, pious or austere. Young writers are finding humour in struggle, and joy in the everyday. There is the promise of freedom in their work. “Do not miss the chance to groove, my child,” writes Peter Kagayi, a poet, “at the pattering of life’s raindrops.”

OEING HAS long been a central cog of America’s industrial machine. Each year it sells $100bn-worth of aerospace equipment and services around the world and pays $45bn to other American firms. It is the world’s largest aircraft-maker and America’s largest manufacturing exporter. Its commercial jets, which account for 60% of revenues, ferry millions of passengers. One in 100 American workers toils either directly for Boeing, whose workforce numbers 137,000 in its home country, or one of its 13,600 domestic suppliers, which employ a further 1.3m people in mostly well-paid jobs. In short, what is good for Boeing is good for corporate America. The flipside is also true, as has become obvious in the wake of two crashes of Boeing’s 737 MAX aircraft, in October and March, which have been linked to a malfunctioning

flight-software system, and which killed 346 people. The human cost is immeasurable. The financial blow to Boeing itself, its suppliers and its airline customers is more tangible— and mounting. The company has continued to churn out the troubled aircraft since its grounding by regulators in March. But it has not been able to deliver them to customers. As a result Boeing’s inventories have grown by $6bn so far this year. The flightless planes fill all free space at its facilities, including car parks. Add the knockon cost for airlines and for the supply chain and a rough estimate is that every quarter that the best-selling airliner remains on the ground costs $4bn. As the bill spirals an entire industry is now willing the plane to be back in the air by the end of the year. Start with the airlines. Pressure on carriers to cut costs made the fuelefficient MAX Boeing’s fastest-selling Continues on page 19

Monday 26 August 2019

BUSINESS DAY

In Association With

Big business, shareholders and society

Boeing’s troubles cost the aerospace industry...

What companies are for

Continued from page 18

Competition, not corporatism, is the answer to capitalism’s problems

CROSS THE West, capitalism is not working as well as it should. Jobs are plentiful, but growth is sluggish, inequality is too high and the environment is suffering. You might hope that governments would enact reforms to deal with this, but politics in many places is gridlocked or unstable. Who, then, is going to ride to the rescue? A growing number of people think the answer is to call on big business to help fix economic and social problems. Even America’s famously ruthless bosses agree. This week more than 180 of them, including the chiefs of Walmart and JPMorgan Chase, overturned three decades of orthodoxy to pledge that their firms’ purpose was no longer to serve their owners alone, but customers, staff, suppliers and communities, too. The CEOs’ motives are partly tactical. They hope to pre-empt attacks on big business from the left of the Democratic Party. But the shift is also part of an upheaval in attitudes towards business happening on both sides of the Atlantic. Younger staff want to work for firms that take a stand on the moral and political questions of the day. Politicians of various hues want firms to bring jobs and investment home. However well-meaning, this new form of collective capitalism will end up doing more harm than good. It risks entrenching a class of unaccountable CEOs who lack legitimacy. And it is a threat to long-term prosperity, which is the basic condition for capitalism to succeed. Ever since businesses were granted limited liability in Britain and France in the 19th century, there have been arguments about what society can expect in return. In the 1950s and 1960s America and Europe experimented with managerial capitalism, in which giant firms worked with the government and unions and offered workers job security and perks. But after the stagnation of the 1970s shareholder value took hold, as firms sought to maximise the wealth of their owners and, in theory, thereby maximised efficiency. Unions declined, and shareholder value conquered America, then Europe and Japan, where it is still gaining ground. Judged by profits, it has triumphed: in America they have risen from 5% of GDP in 1989 to 8% now. It is this framework that is under assault. Part of the attack is about a perceived decline in business ethics, from bankers demanding bonuses and bail-outs both at the same time, to the sale of billions of opioid pills to addicts. But the main complaint is that shareholder value produces bad economic outcomes. Publicly listed firms are accused of a list of sins, from obsessing about

short-term earnings to neglecting investment, exploiting staff, depressing wages and failing to pay for the catastrophic externalities they create, in particular pollution. Not all these criticisms are accurate. Investment in America is in line with historical levels relative to GDP, and higher than in the 1960s. The time-horizon of America’s stockmarket is as long as it has ever been, judged by the share of its value derived from long-term profits. Jam-tomorrow firms like Amazon and Netflix are all the rage. But some of the criticism rings true. Workers’ share of the value firms create has indeed fallen. Consumers often get a lousy deal and social mobility has sunk. Regardless, the popular and intellectual backlash against shareholder value is already altering corporate decision-making. Bosses are endorsing social causes that are popular with customers and staff. Firms are deploying capital for reasons other than efficiency: Microsoft is financing $500m of new housing in Seattle. President Donald Trump boasts of jawboning bosses on where to build factories. Some politicians hope to go further. Elizabeth Warren, a Democratic contender for the White House, wants firms to be federally chartered so that, if they abuse the interests of staff, customers or communities, their licences can be revoked. All this portends a system in which big business sets and pursues broad social goals, not its narrow self-interest. That sounds nice, but collective capitalism suffers from two pitfalls: a lack of accountability and a lack of dynamism. Consider accountability first. It is not clear how CEOs should know what “society” wants from their companies. The chances are that politicians, campaigning groups and the CEOs themselves will decide—and that ordinary people will not have a voice. Over the past 20 years industry and

finance have become dominated by large firms, so a small number of unrepresentative business leaders will end up with immense power to set goals for society that range far beyond the immediate interests of their company. The second problem is dynamism. Collective capitalism leans away from change. In a dynamic system firms have to forsake at least some stakeholders: a number need to shrink in order to reallocate capital and workers from obsolete industries to new ones. If, say, climate change is to be tackled, oil firms will face huge job cuts. Fans of the corporate giants of the managerial era in the 1960s often forget that AT&T ripped off consumers and that General Motors made out-of-date, unsafe cars. Both firms embodied social values that, even at the time, were uptight. They were sheltered partly because they performed broader social goals, whether jobs-for-life, world-class science or supporting the fabric of Detroit. The way to make capitalism work better for all is not to limit accountability and dynamism, but to enhance them both. This requires that the purpose of companies should be set by their owners, not executives or campaigners. Some may obsess about short-term targets and quarterly results but that is usually because they are badly run. Some may select charitable objectives, and good luck to them. But most owners and firms will opt to maximise long-term value, as that is good business. It also requires firms to adapt to society’s changing preferences. If consumers want fair-trade coffee, they should get it. If university graduates shun unethical companies, employers will have to shape up. A good way of making firms more responsive and accountable would be to broaden ownership. The proportion of American households with exposure to the stock-

market (directly or through funds) is only 50%, and holdings are heavily skewed towards the rich. The tax system ought to encourage more share ownership. The ultimate beneficiaries of pension schemes and investment funds should be able to vote in company elections; this power ought not to be outsourced to a few barons in the asset-management industry. Accountability works only if there is competition. This lowers prices, boosts productivity and ensures that firms cannot long sustain abnormally high profits. Moreover it encourages companies to anticipate the changing preferences of customers, workers and regulators—for fear that a rival will get there first. Unfortunately, since the 1990s, consolidation has left two-thirds of industries in America more concentrated. The digital economy, meanwhile, seems to tend towards monopoly. Were profits at historically normal levels, and private-sector workers to get the benefit, wages would be 6% higher. If you cast your eye down the list of the 180 American signatories this week, many are in industries that are oligopolies, including credit cards, cable TV, drug retailing and airlines, which overcharge consumers and have abysmal reputations for customer service. Unsurprisingly, none is keen on lowering barriers to entry. Of course a healthy, competitive economy requires an effective government—to enforce antitrust rules, to stamp out today’s excessive lobbying and cronyism, to tackle climate change. That wellfunctioning polity does not exist today, but empowering the bosses of big businesses to act as an expedient substitute is not the answer. The Western world needs innovation, widely spread ownership and diverse firms that adapt fast to society’s needs. That is the really enlightened kind of capitalism.

model ever. Around 5,000 have been ordered since its launch in 2011 and nearly 390 delivered. Southwest, an American carrier with 34 such planes, has cancelled thousands of flights. In July it revealed a $175m hit to pre-tax profits in the second quarter. American Airlines, which has scrapped 115 or so flights a day, reckons that full-year profits will be $350m lower as a result. OAG, an airline-data firm, estimates that, globally, the grounding will cost airlines $4bn in sales by November. Many airline bosses would agree with Michael O’Leary, chief executive of Ryanair, Europe’s secondbiggest carrier with 135 MAXes on order, who has told Boeing to “get their shit together”. Some airlines have put the plane back in their schedules for November, on the assumption that once Boeing submits fixes to the faulty software in September, America’s Federal Aviation Administration (FAA) and its counterparts in other countries will allow a return to service before the end of the year. This looks optimistic. Even if regulators approved the new software, it would take six to eight weeks to get planes out of storage and in the air. And as Jose Caiado of Credit Suisse, a bank, points out, it is unclear if pilots require retraining in flight simulators, adding more delays. Southwest, which aims to get the MAX in the air by January, seems to admit as much. In the meantime, airlines are plugging gaps with other planes. Southwest is retiring seven fewer older, thirstier 737s from its fleet this year than it originally planned. United Airlines is pressing into service wide-bodied jets, which are costlier to run than single-aisle jets like the 737 and so generally reserved for long-haul routes. Affected airlines can expect compensation in kind from Boeing, in the form of bigger discounts and better deals on other services. The same cannot be said of Boeing’s suppliers. It has relentlessly squeezed their profit margins in recent years in search of efficiency. Many have invested in extra capacity to supply parts for 57 MAX planes a month, Boeing’s original production target for this year. Instead, Boeing cut monthly output back from 52 to 42.

Monday 26 August 2019

BUSINESS DAY

In Association With

Travels in Europe

Boris Johnson’s German and French dealings Britain’s prime minister hopes the EU is softening its line on Brexit. It isn’t

HEN HE became prime minister, Boris Johnson insisted that he would not be a supplicant visiting continental capitals to plead over the terms of Brexit. Unless the European Union agreed in advance to ditch the Irish backstop from the current Brexit withdrawal agreement, he would not talk to his fellow leaders at all. Instead, Britain was ready to leave the EU on October 31st, with or without a deal. Yet this week he flew to Berlin and Paris to see Angela Merkel and Emmanuel Macron before going on to the G7 summit in Biarritz. Beforehand, Mr Johnson wrote to fellow European leaders to repeat that the backstop, intended to avert a hard border in Ireland in all circumstances by keeping the United Kingdom in a customs union with the EU, must go. He also insisted that, contrary to promises to adhere to many Brussels rules so as to preserve a level playing-field, Britain must have freedom to diverge from EU regulations. Despite this uncompromisingly hard line, he was politely received by the German chancellor and the French president. Mr Johnson’s supporters promptly talked up the results, claiming that Mrs Merkel had given him 30 days to produce

an alternative to the backstop, while Mr Macron had conceded that the withdrawal agreement could be amended. Both suggestions are wide of the mark. In reality, Mrs Merkel was just musing that, since no realistic alternative to the backstop had been found in three years, it would be testing to

find one in the next 30 days, implying that any idea that was found would go into the non-binding political declaration about the future. As for Mr Macron, who earlier called the current backstop “indispensable”, he was merely pointing out that the shortage of time before October 31st meant that any Brexit deal would have

to be fundamentally the same as the current withdrawal agreement. The truth is that European leaders have every incentive to listen to and engage with Mr Johnson. They wish to avoid the no-deal Brexit that he is threatening on October 31st, as it would damage the EU, albeit less than Britain. But their bigger concern

is to stand solidly behind the Irish prime minister, Leo Varadkar, who has staked his position on keeping the backstop as the only guarantee against any risk of a return to a hard border in Ireland. When Mr Johnson duly fails in late September to produce a credible alternative, EU leaders will insist that it is up to the British government whether to accept the backstop in some form or to leave with no deal. Although many European leaders would like Brexit to be over, they will also make clear that they are willing to extend the deadline beyond October 31st if needs be. They will certainly want to emphasise that, if Britain falls off a cliff, it will be by choice, not because the EU pushed it. They also have half an eye on the Westminster Parliament, which returns to work on September 3rd. They are keenly following discussions by MPs from all parties on how to thwart a no-deal Brexit, either by legislative means or by the nuclear option of a vote of no confidence in Mr Johnson’s government. The talk of giving him 30 days to come up with a solution may yet delay a vote of confidence. But the EU still believes that, if MPs really want to stop Britain leaving with no-deal, they have the numbers to do it.

Daily chart

Deforestation in the Amazon may soon begin to feed on itself Under President Jair Bolsonaro the rate of tree-clearing is rising fast

INCE THE 1970s nearly 800,000km² of Brazil’s original 4m km² (1.5m square miles) of Amazon forest has been lost to logging, farming, mining, roads, dams and other forms of development—an area equivalent to that of Turkey and bigger than that of Texas. Scientists worry this is uncomfortably close to the threshold for tree loss, of between 20 and 25%, beyond which deforestation begins to feed on itself, turning much of the Amazon basin into drier savannah known as cerrado. Under Jair Bolsonaro, the right-wing president of Brazil who was inaugurated in January, the Amazon appears to be rushing towards that tipping point. The deforestation rate had slowed between 2004 and 2012, when the government beefed up its environmental protection agency, Ibama, and an international Amazon Fund was created to pay for conservation projects. But it began ticking up again after a weakening of environmental legislation and budget cuts during Brazil’s recession of 2014-

tion, called the data “lies” and told a journalist that those concerned about the environment should eat less and “shit every other day.” When Germany announced on August 10th that it was cutting 35m euros ($39.6m) of funding for conser vation projects, Mr Bolsonaro said that “Brazil doesn’t need it.”

2016. Between August 2017 and July 2018 Brazil lost 7,900km² of Amazon forest—nearly a billion trees. This year’s figure is almost sure to be higher. Preliminary satellite data showed that 920 km² were cleared in June, 88% more than the same month in 2018. In July 2,255 km² were

cleared, a startling 278% more than the same month last year (see chart). Environmentalists blame Mr Bolsonaro’s insouciance about the Amazon. It is a “virgin” that should be “exploited” for agriculture, mining and infrastructure projects, he says. The

environment minister, Ricardo Salles, fired 21 of Ibama’s 27 heads ; he has yet to replace most of them, crippling the agency’s enforcement duties. In response to increasing alarm about the jump in tree-clearing, Mr Bolsonaro fired the head of the agency that tracks deforesta-

Monday 26 August 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

MARKETS

Nigeria’s largest firms shed N2.36 trillion in stock market rout DAVID IBIDAPO & GBEMI FAMINU

nvestors have soldoff on stocks at a frantic pace in the last 8 months, with the big companies bearing most of the brunt. The most capitalised firms on the exchange have shed N2.36 trillion cumulatively since the start of the year, BusinessDay analysis show. The NSE30 index which consists of the 30 most capitalized firms on the exchange has been battered, with share prices languishing at two-year lows. While investors still await fiscal reforms around major sectors of the economy in which analysts believe would create better business environment for listed firms, “I think the market will remain choppy,” Gbolahan Ologunro, equity analyst at CSL stockbrokers noted. “Until we see bold policy statements and reforms from the fiscal authorities in the areas of power and oil which are major catalyst to spur market performance,” he added. BusinessDay however excluded MTN Nigeria and Airtel Nigeria, instead com-

pared companies within the same time frame. Among peers on the index, Dangote cement, the most capitalised company on the NSE shed the most in market value losing a whooping N403.488 billion, a decline by 12 percent in stock price. BusinessDay’s analysis also showed that market rout eroded the most 10 companies to the tune of N2.07 trillion. Among these companies were financial institution with accounted of 50 percent. Others include fast-moving consumer goods companies, industrial companies, and oil & gas companies. The financial institutions were worst hit losing a total of -N847 billion accounting for 41 percent of the total value lost among the ten companies, while the consumer goods followed closely loosing N735 billion accounting for 35 percent of the loss. Industrial goods companies received less blows as its loss constituted 19 percent of total value at N403 billion while the oil and gas companies were least affected with 4 percent of the loss accounting for

N88 billion. While the equity market especially financial institutions are largely dominated by foreign investors due to the belief that these companies guarantee stable and higher returns compared to other companies, one major factor that rules the market is investor’s sentiment which weighed on banks’ performances. Coupled with the sentiment factor is the recently announced increase of lender’s loan to deposit ratio (LDR) to 60 percent by the apex bank which saw

investors sell off their stocks on the believe the move will hurt the banks’ books. Furthermore, analysis of the entire NSE 30 index further showed that 80 percent of total listed companies in the index underperformed the ASI eroding more than 12 percent of investors’ worth on the exchange. Occupying the top 10 spots amongst companies that returned negatively to investors include International Breweries (-62%), ETI (-55%), PZ (-55%), Total (-48%), Nigeria breweries (-41%), Forte Oil (-41%),

Flourmill (-40%), FBHN (-37%), Dangote sugar (-37%), and Okomu Oil (-36%). The list was largely dominated however by consumer goods which accounted for 50 percent of the top 10 entries. Consumer goods firms during the period were largely affected by general negative market sentiment coupled with the move of the fiscal and monetary authorities to restrict FX on food importation which investors perceived the timing as inappropriate giving

challenges currently faced in the industry. Some companies on the index however were able to weather the storms still returning value to their investors despite rout. These companies include Custodian, Wapco, Union Bank, Sterling Bank and Trancorp gaining cumulatively N108.7 billion in market cap. However, these companies’ gains were not sufficient enough to by the index up as the NSE30 index closed on Wednesday at a YTD performance of -24.06 percent.

Naira faces pressure as offshore players book profit on local debt notes ISRAEL ODUBOLA & OLUWASEGUN OLAKOYENIKAN

igeria’s naira has been under pressure since the third quarter of 2019 on tightened dollar liquidity following profit-taking by foreign investors in the local debt market. The local currency depreciated against the dollar, trading above N362 level on the Investor & Exporter (I&E) window of the foreign exchange market since July 30, according to data tracked by BusinessDay. Nai ra e xcha ng e d at N363.14 to a dollar Friday, weakening slightly by 4 basis points percent from N363.01 in the previous day. But the rate has however been stable on the interbank window. “It’s driven by sentiment.

Having ministers gave investors a relief,” said Uchenna Minnis, Chief Market Analyst at Eagle Global Markets (EGM). “But the long-term outlook depends on Nigeria’s Central Bank policies to curtail pressure in the market considering global risks and performance of crude oil prices.” Dollar-demand pressure is not fuelled by selloffs on local bond market alone; weaker oil prices and apathy for Nigerian equities also aroused their decision to move funds outside the country. “The pressure has increased on massive selloffs of local debt instruments by foreign investors in response to falling yields” said, analysts at Lagos-based CSL Stockbrokers in a note to clients.

“But initially, dollar inflows slowed due to lower yields in the market,” they said. Brent crude, Nigeria’s benchmark grade, for the third consecutive week is trading below $60 per barrel on which the federal government’s budget is based on, following the escalation of trade war between the world’s two economic heavyweights, the United States and China. This dents the country’s ability to settle forex obligations in the face of lower prices given Nigeria’s heavy reliance on the commodity. Meanwhile, the bond auction conducted by the Debt Management Office last Wednesday was undersubscribed with only N95 billion of the N145 billion was offered.

The state debt agency also undersold total subscriptions at 0.14x bid to cover, with a total sale of N13.51 billion marking the lowest auction sales since December 2018. Yields on 10-year government benchmark bond were bullish Friday, declining 36 basis points to 14.31 percent. With the risk-free US 10year Treasury note yielding 1.5 percent, investors are demanding an extra 13 percent return to take further risk in Nigeria. In the six months through June, investors were bullish in the fixed income space which has moderated yields. According to figures quoted by analysts at CSL Stockbrokers, yields in the Treasury bill markets have eased by a cumulative average of 0.55 percent across the curve, while bond yields have

also eased a cumulative 0.78 percent yearlong. As a result of the rout on the Lagos stock exchange and profit taking seen in the fixed income space, inflows to the I&E window slumped by a quarter to $2 billion in the seven months through July, 2019. Portfolio flows and foreign direct flows plunged 41 per-

cent and 75 percent respectively, while the portfolio of internationally-sourced to the inflows tanked to 45 percent in July from 61 percent in January, thereby fuelling pressure on the naira. Analysts expect the local debt market to remain in bear territory amid the significantly low volume of sales by the Debt Management Office.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: Samuel Iduh

Monday 26 August 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

BANKING

Four takeaways from Zenith Bank’s H1 financial result ISRAEL ODUBOLA & SEGUN ADAMS

enith Bank, Nigeria’s second most valuable lender w i t h a ma rke t value of around N565 billion released its halfyear result for the period ended 30th June last week. Interestingly, the tier one lender is the most profitable so far in H1 with profit-after tax and total assets of N88.9 billion and N5.9 trillion as at mid-year 2019. These are the key takeaway from the recently announced results. Declining yield environment hurts interest income Interest income of Zenith bank contracted albeit at slower pace of 6 percent to N214.6 billion in H1 2019. This is not surprising as cash earned from loans and advances account for more than half of total interest income. The increase in money earned on placement with banks and discount incomes and other investment securities such as treasury bills and government bond, couldn’t save interest income from falling. The 6 percent decline in interest income was driven by a 21 percent plunge in loans and advances to customers. Analysts say the steeper decline in interest income relative to decline in loans suggests that yields on risky assets are trending downwards. The bank however, devised other ways to generate earnings and this justifies the 140 percent surge in interest income on bank placement and extension of interest base to promissory notes and commercial papers. Meanwhile, interest expense of the tier-one lender further trended south to on account of its profound

improved funding mix and excellent treasury management skills. Retail footprint drives profit Zenith Bank posted some 8 percent growth in post-tax profit in the first half of this year on the back of deepened retail footprint, leading to a surge in the group’s ebanking income and further reflecting progress made in its retail banking initiatives. Although net interest income fell 7 percent in halfyear 2019 to N142.5 billion, the tier-one lender had a lot to cheer about as noninterest spiked 24 percent to N109.73 billion largely driven by a 170 percent growth to N27 billion in fees from electronic products. This contributed 43 percent to fee and commission income as against 22 percent share it recorded in half-year 2018. The significant boost in non-interest income largely translated to N331.6 billion gross earnings recorded by the bank, which represents a 3 percent increase from N322.2 billion garnered in the corresponding period of 2018. Retail footing to strengthen on LDR Slip After a slip-on Loan-toDeposit ratio in mid-year, Zenith Bank is planning to up its game and increase its presence in Nigeria’s retail banking space. The bank which is Nigeria’s second-largest by market value reported its LDR at 51.24 percent in the half-year period on the back of a 3.2 percent growth in customer deposit to N3.81tn while loan book has shrunk by 3.2 percent since the start of the year. The big lender is intent on meeting up with the 60 percent regulatory benchmark for loan issuance ahead of September 30, the deadline set by the Central Bank of Nigeria. Zenith’s mid-year LDR

which is 8.8 percentage points below 60 percent minimum of the Central Bank of Nigeria the bank at risk of losing part of its funds if the lending gauge is not improved. Management plans going forward/ full-year outlook For the remaining half of the year and the bank’s prospects for the full-year 2019, the lender plans to continue to consolidate its leadership in the corporate space while its retail banking drive would be sustained unabated. In the retail banking segment, the tier-one financial institution targets growth in its retail business which would be achieved through the deployment of innovative products in mobile banking, internet banking, and cards services. Furtherance to the federal government’s resolve to boost the agricultural sector in the country which is believed to hold a number of opportunities in the areas of funding, job creation and indeed food security to Africa’s most populous nation, the bank would be leveraging the opportunity by putting in place Various Funding Schemes to ensure that the country’s economy is diversified. These schemes include Commercial Agriculture Credit Scheme (CACS) and Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL). Others are Seed and Fertilizer Scheme launched for banks to lend at a subsidized rate to local farmers and the value chain for the production of fertilizer. Going into the last six months of the year, Zenith Bank noted it would take advantage of the Differentiated CRR scheme to lend part of its CRR to manufacturing and agricultural-related projects.

AGRIBUSINESS

L-R: Olayemi Eniolawun, head membership/communication, ELAN; Andrew Emonuwa, executive secretary, ELAN; Bode Jenyo, director, ELAN; Elizbeth Ehigiamusoe, director, ELAN; Eddie Efekoha, MD/CEO, Consolidated Hallmark Insurance Plc; Mary Adeyanju, executive director, operations, Consolidated Hallmark Insurance Plc; Samuel Adeniyi, acting MD, Grand Treasurers Ltd; Akinde Obatuyi, assistant executive secretary, ELAN, and Lanre Alabi, head operations, Grand Treasurers Ltd, during a courtesy visit to Consolidated Hallmark Insurance Plc’s head office in Lagos.

L-R: Umar Ajiya, representative of GMD NNPC/ CFO, NNPC; Olatunde Dodondawa, chairman, NAEC, and, Victor Okoronkwo, group managing director, Aieto Eastern E & P Company Ltd, at the 2019 Association of Energy Correspondents of Nigeria (NAEC) Conference & Award in Lagos,yesterday. Pic by Pius Okeosisi

R-L: Tony Fadaka, registrar/chief executive, Nigerian Institute of Management (Chartered); Abdullahi Muraina, national treasurer; Pat Anabor, deputy president; Olukunle Iyanda, president/ chairman of council; Isiaka Bisiriyu, head of service, Ogun State/ guest speaker, and Zubairu Muazu, Lagos State Police Commissioner, at the 2019 awards, fellows and spouses day luncheon of the institute in Lagos.

First Bank Agric Expo set to promote new agribusiness opportunities

irst Bank of Nigeria Limited, has announced that its 2019 FirstBank Agric Expo would hold on Friday, 30 August 2019 at the Eko Hotel and Suites, Lagos. The 2019 edition - the third in the series – is themed “Agricultural Value Chain – Spotlighting OpportunitiesandManagingRisks” would have Professor Benedict Oramah, President of AFREXIM Bank as the Keynote Speaker. The annual FirstBank Agric Expo, launched in 2017 provides the lead in the national discourse on sustainable agriculture value-chain as a substantial source of Nigeria’s

economic development improved contribution to her balance of trade as well as foreign exchange. The 2019 edition would host over 600 delegates and over 60 exhibitors to display the latest technology in farm equipment, tools, and machineries as well as packaged finished agricultural produce, logistics, and supply, thereby keeping the participants and sundry agribusiness practitioners abreast with new opportunities in the Agricultural industry. Besides the plenary session, the expo will feature

three (3) Masterclasses with in-depth analysis on specific areas of Agribusiness, facilitated by enterprising Subject Matter Experts (SMEs). The Masterclass facilitators include Mr. Leonard Anyanwu, Group Executive Director, Saro International Limited; Segun Ogunwale, Team Lead, Kominity Digital and Bamidele Ayemibo Managing Director, 3T Impex Trade Centre*, *who will provide insight as well as share success stories and experiences.

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L-R: Yomi Adedeji , chief exective officer, Softcom Limited ; Tomi Amao, chief innovation officer ; Olukayode Pitan, managing director, Bank of Industry and, Afolabi Imoukhuede , senior special assistant to the president on job creation and youth employment, at the softcom conference on the role of technology in driving social change in Africa held in Lagos .Pic by Pius Okeosisi

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Monday 26 August 2019

BUSINESS DAY

COMPANIES&MARKETS TECHNOLOGY

Zinox, EdVigor re-train 1000 teachers, pledge to take citizenship-leadership outreach across Nigeria JUMOKE AKIYODE-LAWANSON

inox Technologies has par tnered w i t h E d V i g o r, an outreach of Harvard-trained resource experts versed in the development of learning curriculum, to re-train over 1000 tertiary teachers, even as the company has underlined its determination to take its message of responsible citizenship-leadership to teachers across other states in Nigeria. The company had hosted a Teacher Empowerment Workshop which featured master-classes, special curriculum development sessions, fireside chats with resource persons and a series of presentations which touched on responsible citizenship and leadership in a technology-mediated world. The three-day event was held at the Alvan Ikoku College of Education (AICOE) Owerri, Imo State. It featured participation by teachers from the host institution and others drawn from Imo State and other states in the South-East. Kelechi Eze-Okonta, managing director, Zinox, affirmed that the company is keen to break a new jinx with the re-training and equipping of teachers in various parts of the country. “Continuing in breaking further jinxes, we realized the need to commence the development of internal capacities through the empowerment of our teachers by improving their teaching skills and knowledge base. We firmly believe that the fu-

ture of Nigeria and Africa lies in the skillful impartation of knowledge and training of the citizenry to drive home the ideals of citizenship, leadership, self-awareness/ development, creativity and ability to learn and unlearn/ relearn. “In our efforts to bring this home, we happily, found a partner in EDVIGOR, an outreach of Harvard trained resource group; experts in the development of learning curriculum, with the mission to stimulate positive change through social and academic education. “This is another vital jinx we aim to break. We shall take this message to other states in our push to empower the relevant stakeholders and build the base for our socio-economic progression starting from Imo State. We, therefore, need your willingness, buy-in and support,” she enthused. Founder, EdVigor, Nneamaka Enechi toed the same path. The Harvard-trained educationist who anchored the master-classes, disclosed her delight at the support received from Zinox which made the workshop possible. She noted that the teachers displayed a high level of participation and quick grasp of the learning concepts, even as she expressed her intention to reach more teachers across the country in future editions. The auspicious event had in attendance representatives of the Imo State Government and senior management and academic staff of AICOE. Also in attendance were heads of schools

and institutions; company CEOs heads of organizations, agencies, parastatals, and representatives of various MDAs, among others. Further gracing the occasion was Khalil Faousaz, the Country Manager of Yahsat. Also instrumental to the success of the workshop was Chibuike Nwachukwu, head of the research and development committee of AICOE, who coordinated the planning of the event. The event also featured a panel session with the theme – ‘Citizenship and L eadership in a global world governed by ICT’. Panelists – including Ndu Dikeocha, a visiting scholar from the University of Houston, A.B.C. Duruaku, Nneamaka Enech, founder, EdVigor and Uche Onyechere, general manager, Zinox, – dwelt on the concept of responsible citizenship, the role of teachers in shaping citizenship and leadership ideals as well as measures to rein in irresponsible citizenship in tech usage/consumption. Also raising the excitement was a series of raffle draw/give-away from which participants won amazing prices including Zpad tablets. The event also featured a social media competition on the Zinox Instagram, Twitter and Facebook pages. Joel Omogu, a staff of the Research and Development unit, emerged the winner and smiled home with the grand prize of an iTEC TV. Four other lucky winners also won a 2KVA iPowerPlus inverter worth N45,000 at a give-away price of N5000.

Chi Farms set to increase production output amid ban on frozen poultry

HI Far ms Ltd., a member of the TGI Group and a leading agribusiness company in Nigeria, has announced its plans to increase production output. This growth is based on the Central Bank of Nigeria’s directive to stop illegal importation of frozen poultry. Earlier in the month, the apex bank explained that 1.2 million metric tonnes of poultry consumed in Nigeria is supplied through smuggling. The CBN Governor promised to stop the smuggling trend and promote local production in Nigeria. CHI Farms Ltd. has lauded the CBN for its zeal in supporting local production and stated its preparedness for the task ahead.

Tunji Olaitan, the general manager, CHI Farms Ltd., said the company will increase its business operations and improve on its warehousing facilities. “With plans to stop illegal importation, local poultry farmers are saddled with a greater responsibility to feed the nation. We at CHI Farms Ltd are ready for this task,” he said. Martin Middernacht, the managing director of CHI Farms Ltd., said that CHI Farms places premium on quality poultry products. “We believe that quality is our integrity. We pride ourselves in knowing that every CHI Farms produce is of the highest quality. We will continue to increase our production and our customwww.businessday.ng

ers can be reassured that our standard of quality will never dwindle,” Martin stated. Over the years, CHI Farms has strengthened and diversified its product ranges and services in poultry, aquaculture, fish feed, cattle breeding and fattening, meat and meat processing. It also offers a range of other services including technical support services, laboratory services and training institute for capacity building and manpower development. CHI Farms has been in business for close to three decades, and has grown steadily, offering products and services in the Nigerian Agricultural sector, while employing innovative approaches and technologies. https://www.facebook.com/businessdayng

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Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY

REAL SECTOR WATCH

Vietnam’s industrial success shows what Nigeria is doing wrong Stories by ODINAKA ANUDU

t i s p o s s i b l e t hat t h e clothes and footwear you are putting on right now are from Vietnam. In 2017, the Southeast Asian countr y earned $31 billion from exports of textile and garment industry alone, a year-on-year increase of over 10 percent, according to an online information platform Vietnam Briefing. In 2018, the country made $16.24 billion from footwear, representing a 10.5 percent increase over 2017, according to Lefaso, the Vietnam Leather, Footwear and Handbag Association. The country has gone from obscurity to fame in manufacturing, thanks to certain reforms done by the ruling class. Nigeria and Vietnam have things in common. One is that half of the population in both are less than 35, which provide ready labour force for industries and firms. But unlike Nigeria, Vietnam has well-trained skilled labour who fit into its industrial dream. This began with reforming the education system, paying attention to sciences which are important for industrial growth. Two, agriculture employs more than half of the population in both Nigeria and Vietnam. Rice is the most important crop in both countries. More so, both countries have comparative advantage in leather/shoes and have enormous raw materials in food and agroallied sector.

But Vietnam took certain steps to get to where it is. One of the major steps taken by the country is market reforms. Vo Tri Thanh, a Vietnamese economist, said keys to the country’s growth were an acknowledgement of the private business right; the market-oriented reforms; macroeconomic and social stability, as well as the opening and the integrating of the economy into the regional and world economy, especially in the areas of trade and Foreign Direct Investment (FDI). Vietnam sees trade as the most important part of its manufacturing sector. In an article entitled ‘Vietnam’s manufacturing miracle: Lessons for developing countries’, three economists Sebastian Eckardt, Deepak Mishra, and Viet Tuan Dinh said Vietnam has numerous bilateral and mul-

tilateral free trade agreements, which dramatically cut tariffs, anchored difficult domestic reforms, and opened up the economy to foreign investment, they said. “It is estimated that more than 10,000 foreign companies—including major global players such as Samsung, Intel, and LG—operate in Vietnam today, mostly in export-oriented, labour-intensive manufacturing,” they added. Today a sizeable number of the phones are from the country. Nigeria has over 50 trade agreements but many of them are not profiting local firms owing to lack of openness between Nigeria and the countries, and low capacity utilisation of most firms resulting from tough business environment. Vietnam reduced its cost of

doing business for enterprises. The World Bank said in its 2019 Doing Business report that Vietnam made paying taxes less costly for companies by reducing the corporate income and value added tax rates while eliminating the surtax on income from the transfer of land use rights. Taxes in Nigeria (state, federal and local governments) today are 54 and are increasing as states go increasingly cash strapped. As a serious country open to business, the country made starting a business easier by publishing the notice of incorporation online and by reducing the cost of business registration. It equally made enforcing contracts easier by making judgments rendered at all levels in commercial cases available to the public online, the World Bank added. It made exporting and importing easier by upgrading the automated cargo clearance system and extending the operating hours of the customs department. Scanners at the Customs in Nigeria are barely working, with roads to Apapa and Tin Can ports nightmares. “Of particular concern and importance to us (MAN) are the challenges we face in moving our raw materials and goods to and from the ports,” Seleem Adegunwa, chairman, Manufacturers Association of Nigeria (MAN), Ogun State chapter, said at a recent CEOs business luncheon at Agbara, Ogun State, when referring to challenges faced by Nigeria’s manufacturers at the ports. But Vietnam strengthened access to credit by adopting a

new civil code that broadens the scope of assets that can be used as collateral. Most banks in Vietnam, including VietcapitalBank, NamABank and ABBank, lend at between 8 and 8.6 percent, but almost all Nigerian banks lend at above 20 percent, and even up to 30 percent. The country likewise increased the reliability of power supply by rolling out a Supervisory Control and Data Acquisition (SCADA) automatic energy management system for the monitoring of outages and the restoration of service. According to energypedia.info, 100 percent of Vietnamese have access to electricity. However, things are different in Nigeria, with over half of Nigeria’s population without access to energy, and firms resorting to diesel or gas to fuel their generating sets. “Vietnam invested in infrastructure, especially in the power sector and connectivity. To keep pace with rapidly growing container trade (which expanded at a staggering average annual rate of 12.4 percent between 2008 and 2016), Vietnam also developed its connective infrastructure, including seaports and marine terminals,” economists Eckardt, Mishra and Dinh said. “Vietnam has leveraged its demographic dividend through effective investment in its people. In the latest 2015 OECD Programme for International Student Assessment (PISA)—which tests high school students in math, science, and other disciplines—Vietnam ranked 8th out of 72 participating countries, ahead of OECD countries such as Germany and Netherlands,” they added.

Paint makers re-strategize as AfCFTA nears ….PMA holds coatings exhibition

ith an investment of over N50billion and installed capacity of two hundred million litres of assorted paints annually, the paints makers are preparing for a future in the light of the recently signed African Continental Free Trade Area (AfCFTA). They are readying ahead of future developments in the manufacture and sale of paints, developments in raw materials for industry and a host of other issues. In the light of this, the Paint Manufacturers Association of Nigeria (PMA), an association of companies engaged in the manufacturing of paints and allied products throughout Nigeria, will hold the sixth edition of its bi-annual raw materials, equipment and paints exhibition tagged ‘PMA Nigeria 2019 Coatings Show’ from Monday, October 28, to Tuesday, October 29, at Sheba Centre, Ikeja, Lagos.

The two-day event is intended to showcase the array of raw materials, machinery, production and testing equipment as well as packaging materials used in the production of paints, inks and allied products. Abimbolu S. Babatunde, chairwww.businessday.ng

man, PMA, while speaking with newsmen in Lagos, said the event will provide a platform for all the players in the paint value chain to exchange ideas on current developments on raw materials, equipment and technology for paint manufacturing.

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“Made-in-Nigeria paint products will also be on display,” he said. In choosing this year’s theme, ‘Future Trends in Coatings Technology’, Babatunde said the global trend in paint manufacturing was taken into consideration, adding that it was more important to domesticate it to the need of paint manufacturers in Nigeria ahead of future developments in the manufacture and sale of paints, and developments in raw materials for industry. Babatunde equally noted that one of the major challenges members of the association have been facing over the years was the problem of adulteration and faking of premium brands of their products, which have negatively affected their volumes, profitability and returns on investments. He said this year’s show would make the local paint manufactur@Businessdayng

ers be in tune with the global requirements in safety, environment and quality, while equally exploring avenues to penetrate other markets outside Nigeria by leveraging on the recently signed AfCFTA. Exhibitors from over 12 countries are expected to participate in the conference while paper presentations would be made by academics, government agencies and ministries, regulators, professionals and industrialists. PMA is a sub-sector of the Chemicals and Pharmaceuticals sectoral group of the Manufacturers Association of Nigeria (MAN). Established in 1980, PMA has over two hundred registered members. The AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent.

Monday 26 August 2019

BUSINESS DAY

REAL SECTOR WATCH 5 things Adegbite, Ogar must do Oyo seeks partnership to to save steel sector from collapse revamp paper mill, cashew

processing company, others

ODINAKA ANUDU

lamilekan Adegbite was named minister of mines and steel development by President Muhammadu Buhari last Wednesday. His deputy is Uchechukwu Ogar, founder of Masters Energy, who is also an industrialist. Adegbite, an architect, is the immediate past commissioner for works and infrastructure in Ogun State. Both ministers have their work cut out for them as they are coming into the steel sector when it is dire need of government intervention. Their first task must be to liaise with the Central Bank of Nigeria (CBN) to remove some of the steel items that are on the list of 43 items barred from accessing foreign exchange. Some of the items are inputs for several manufacturing companies. A typical example is annealed cold rolled steel used in making wheel barrows and other aluminium products. The item is on the CBN’s list despite that no company is producing it locally. Many aluminium firms such as Grif, Federated Steel, Universal Steel and several other wheel barrow and aluminium drum firms have exited the Nigerian market because they could not get inputs. Hundreds of jobs were lost as a result. Other firms in the steel sector are struggling and are in need of salvation. “We are really struggling. In the metals industry, the majority of the companies are dead,” Oluyinka Kufile, chairman of roofing sheets company, Qualitec Industries, said. Others on the list are galvanised steel sheets, head pans, metal boxes and containers, wire mesh, and steel drums. “The major problem is that there was no study on the Nigeria’s production capacities of these items before the restriction in 2015,” a steel sector player, who preferred to be anonymous, told BusinessDay on the phone. “So, what happens is that we think, without data evidence, that because some companies are producing the items, Nigeria has achieved self-sufficiency in them. This does not reflect the true situation of things,” the industry player added. Second, the ministers must find a solution to the problem of the behemoth known as Ajaokuta Steel Complex. Many manufacturers would not have been importing a number of essential inputs if this complex were in good shape. The federal government has accepted the option of concessioning Ajaokuta whereby it would maintain some level of ownership while being funded and operated by a private player. Already, the procurement processes to engage a transac-

yo State government is seeking corporate bodies and private investors capable of partnering with the state to revamp some of the moribund companies so as to boost the economy and provide employment opportunities for its teeming youths. Segun Ogunwuyi, executive assistant to Governor Seyi Makinde on Investment Promotion and Public-Private Partnership, disclosed this on Thursday when he embarked upon on-the-spot assessment of abandoned companies around the state. Among the locations visited by Ogunwuyi and his team from the state’s Bureau

on the assessment exercise as the state was in a hurry to bring in investors to partner government towards bringing back the companies to what they used to be in the era of the old military administration and the late Chief Bola Ige era. “This assessment exercise is as a result of a directive from the governor that we have to know their conditions so as to know how to shop for capable and efficient investors that can turn-around these companies to yield profit for business, government revenue as well as provide multiple job opportunities. “Most of these companies were created in the late 70s and early 80s by military administrations and the Bola Ige regime, but were later

of Investment Promotion and Public-Private Partnership ( BIPP/PPP) were the Pacesetter Asphalt and Quarry Plant, Ijaye, Ibadan; Agbowo Shopping Complex, opposite the University of Ibadan, and Nigeria Marble Mining Company, Igbeti. Also visited were Eruwa Cashew Farm Plantation, Eruwa; Cashew Nuts Processing Company, Eleyele, Ibadan; Oyo State Paper Mill Warehouse, Oluyole, Ibadan; Conpole Nigeria Ltd, Ibadan; Trans Motel, Jericho, Trans Wonderland (formerly Trans Amusement Park), Ibadan, and some Manor Houses in notable areas in the State. Ogunwuyi hinted that the state governor had directed that the bureau to embark

abandoned by successive governments till date. We cannot be paying lip service to the problem of low IGR and high unemployment when we have these assets wasting away. That is why the governor would rather partner with local and foreign investors to bring them back and have a new economic dawn in Oyo State.” Governor seyi Makinde, while addressing audience at his inauguration on the 29th May at Liberty Stadium, assured the people of Oyo State of his administration’s readiness to turn-around the state’s commercial status by partnering with strong business interests within and outside the country to grow the state’s economy and boost its internally-generated revenue as well as provide jobs for its teeming youths.

REMI FEYISIPO, Ibadan.

Adegbite

tion adviser is on hold following its delisting from the list of enterprises to be privatised by the National Assembly. The National Assembly expects Nigeria to cough out $1 billion to revive the complex that has not produced a single sheet since it was established in 1971. This makes no sense, especially when the complex has gulped $8 billion from Nigeria’s coffers without producing any meaningful result. Moreover, it makes no sense that the federal government is budgeting billions annually for a complex that produces nothing substantial. The federal government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the moribund complex, despite an earlier business case in the last administration showing that the complex could only work if properly privatised. Hence industry players expect the ministers to convince legislators in the National Assembly to retrace their steps and jettison their socialist stance whose only achievement will be semblance of pouring water off the duck’s back. At the moment, the economy is reeling under neo-socialist direction which is doing nobody any good. Experts expect the ministers to quickly work towards concessioning the complex to kick-start Nigeria’s industrialisation journey. “The minister must know that they cannot achieve this, including discussions with the CBN, without the minister of industry, trade and investment,” Ike Ibeabuchi, an Enugu State-based chemicals manufacturer, said. “Inter-government collaboration is key,” he added. Moreover, the ministers must www.businessday.ng

ensure that the Aluminium Smelter Company of Nigeria (ALSCON) is handed to the right investor. Ime Ekrikpo, director of ferrous metals at the Federal Ministry of Mines and Steel Development, recently said in Lagos that issues around the company have been resolved, as the National Council on Privatisation (NCP) has engaged with the warring parties and returned the facility to UC RUSAL. Players in the aluminium subsector waiting to get ingots from ALSCON want the complex to kick-start immediately to enable them have their inputs without resorting to the foreign exchange market. Fourth is the removal of every discriminatory waiver given to any firm in the steel sector. Industry players say there must be consultations before waivers are given and these must be sector-based. For instance, the aforementioned annealed cold-rolled steel was first put on the list because it was thought that one company could produce it enough to sell to wheel barrow and other aluminium/ downstream companies. But the company is not doing so, yet the product is restricted from accessing FX in the country. Moreover, apart from issues around import and export policy, which also falls within the responsibilities of ministers of industry and finance, key players want the ministers to remove obstacles to productivity such as unfair competition, multiple taxation and lowering of standards for aluminium sheets. Aluminium makers say cheap and low-quality Chinese products come into the Nigerian market unchecked, making it difficult for genuine manufacturers to survive.

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Monday 26 August 2019

BUSINESS DAY

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Go, explain to Nigerian’s why their lives, corporate existence need insurance – Olabode Ogunlana

NIA seeks NSE, stock brokers support for recapitalisation of insurance companies

…as NCRIB confers heroes award on icons

Modestus Anaesoronye

ctogenarian and Doyen of the Nigerian insurance industry often described by the brokerage fraternity of the market as their living ancestor, Olola Olabode Ogunlana has charged practitioners to make insurance impact on the lives of citizens. “Go out there and sell not only to increase your profits but to improve the welfare of Nigerian’s and the well being of Nigeria, says Ogunlana during the ‘Celebrating our Heroes’ ceremony organized by the Nigerian Council of Registered Insurance Brokers(NCRIB) in Lagos. Ogunlana who was celebrated with late Talabi Adebayo Braithwaite, first Nigerian chartered insurer and icon too, said the insurance industry of which NCRIB is an important arm is called upon to assist in this endevour of nation building. “Our own part is to protect and to conserve the wealth of this nation, and so the industry must never underrate its relevance and importance, which appears to be the case now”. He said that the challenges facing the country is huge, and requires that insurance which is in the business of risk management and risk taking play their part actively, rather than folding its arms. “I repeat, our duty as insurance industry to the nation is to protect and conserve her wealth, while at the same time providing

L-R: Bola Onigbogi, deputy president, Nigerian Council of Registered Insurance Brokers (NCRIB); Siyan Oyebadejo, past president, NCRIB; Shola Tinubu, president, NCRIB; Olola Olabode Ogunlana, one of the heroes and chairman, Scib Nig. & Co Ltd and his wife, Kehinde Ogunlana at the maiden edition of “Celebrating Our Heroes” held in Lagos

the catalysts for increasing the national wealth.” Go out there and explain to individuals how they can use insurance products that have proved useful over centuries in this and other economies, Ogunlana charges operators. Shola Tinubu, president of NCRIB said the event ‘Celebrating of Our Heroes’ was aimed at giving due recognition and honour to past leaders who toiled unselfishly to lay the moulding blocks upon which insurance profession has been built till date. The conception of the idea under my leadership he noted, is buoyed by the realization of the missing link in our history as a profession and a people. Tinubu noted that these great men and women are symbols of what makes our profession great, and we must never forget all they have done to ensure we

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have a profession we could call our own. “There is no duty more urgent than that of returning thanks to these heroes as we are all gathered here to do today.” He further stated, it’s a thing of joy that the inaugural edition of the programme was starting with the celebration of two iconic figures of our profession, Late T.A Braithwaite and Olola Olabode Ogunlana. Tinubu comments on T.A Braithwaite: T.A Braithwaite is the first Nigerian to become a chartered insurer. He was also the pioneer President of the Nigerian Council of Registered Insurance Brokers. His foresighted leadership and selfless commitment to the growth of the insurance industry is legendary. He was one of those who gave us our identity in the comity of other professions. He is

being celebrated post humously. We pray God to continue to grant his soul eternal rest. On Olola Olabode Ogunlana, Tinubu said Baba is the pride of our profession and the Doyen of the Nigerian Insurance Industry. The first indigenous Managing Director of the defunct National Insurance Corporation whose charismatic leadership paved the way for other Managing Directors and leaders of the industry. His adroit, ethical and quintessential leadership made NICON the breeding ground for legion of quality insurance professionals that the country has produced till date. He is a “fountain” of several professional bodies and worthy Associations, bringing insurance image to the front burner of national and international reckoning.

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Modestus Anaesoronye

he Chairman of Nigerian Insurers Association (NIA), Tope Smart has asked Nigerian Stock Exchange to assist the insurance companies in their bid to meet the new capital level prescribed by the National Insurance Commission (NAICOM). The commission had increased the capital requirements for insurance and reinsurance companies from N2billion to N8billion for life insurance companies, 3billion to 10billion for general business underwriters, 18billion for composite insurers and 20billion for reinsurance companies with a one year timeline for compliance. Addressing the Executive Management of the Nigerian Stock Exchange during a courtesy visit to the exchange and sounding of the Closing Gong, Smart solicited the support of the exchange and other players in the capital market as well as palliatives for insurance industry in their capital raising efforts. Given a breakdown of the Insurance Companies in Nigeria, the NIA chairman noted that out of 59 Insurance Companies comprising 14 specialist life insurance companies, 28 General Insurance companies, 13 composite insurance companies, two takaful insurance companies and two reinsurance companies, 32 insurance companies are listed on the exchange. He declared the Association’s support for the exchange and welcomed the initiatives

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aimed at strengthening the cordial relationship existing between the Association and the Exchange. Responding to the issues raised by the NIA chairman, Director-General of the Nigerian Stock Exchange (NSE), Oscar Onyema commended the Association for increasing its advocacy efforts and expressed joy at the increasing participation of the Insurance Companies on the floor of the exchange. He described the Insurance sector as an important sector of the economy that is too critical to be ignored while promising to assist insurance companies in their bid to meet the new capital requirement. Speaking on some initiatives of the Exchange, Onyema stated that the exchange will soon introduce some derivatives to take care of takaful insurance products even as he urged the Insurance Companies to make use of its knowledge sharing platform in its capacity building and corporate governance training. Yetunde Ilori, director general of the NIA, while thanking the Nigerian Stock Exchange Director General and his executives for the opportunity to visit and exchange ideas on how to collaborate for the benefit of Insurance Companies, appreciated them for their support in releasing longer tenured fixed income instruments which insurance companies can leverage on for greater value for their long term products. Some members of the Governing Council and Executive Management team of the Association accompanied the chairman on the visit.

Monday 26 August 2019

BUSINESS DAY

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Listed insurers’ claims rises 21.57 percent to N55.24bn in HI BALA AUGIE

hile Insurers are more than ever before cautious of the business they admit in their books, listed insurers have incurred double digit growth in claims expense. A torrent in obligations to policyholders result in deteriorating underwriting capacity as combined ratio rises above the 100 percent threshold. A cursory look at the financial statement of the largest insurers that have released Half Year results showed cumulative claims expenses increased by 21.57 percent to N55.24 billion, from N45.43 billion the previous year. Companies were exposed to risks particularly from Egina FPSO claims, while aviation, motor, fire, and maritime risks further deal a great blow on operators’ bottom line. Additionally, huge expenses have hindered insurers from delivering a higher return to shareholders. Analysts have noted that insurance companies are grappling with deteriorating profit arising from falling rates due to unhealthy competition and craze to get few available particularly corporate. Consequently, claims are rising at an unprecedented rate more than ever witnessed in the industry, particularly since the last recession when many Nigerians have resorted to taking advantage of every opportunity in their hand to earn extra income or reduce expenditure. NEM Insurance’s claims expenses surged by 1434.87 percent to N2.08 billion in June 2019 from N135.78 million the previous year while its claims expense ratio otherwise known as loss ratio increased to 26.13 percent in the period under review from 3.07 percent the previous year. The loss ratio measures the extent, to which claims are paid out of revenue or premium income, and a high ratio means a firm is spending more on salaries, wages, and advisement in raking in revenue. The ratio is calculated as total net claims divided by net premium income. Drilling into the books of NEM shows claims on motor vehicle accounts for the

large chunk of total obligation. Wapic Insurance’s claims expenses were up 43 percent to N2.37 billion in June 2019 from N1.65 billion as at June 2018 while loss ratio increased to 61.78 percent in the period under review from 41.87 percent the previous year. A breakdown of Wapic’s financial statement shows motor Vehicle increased by 79.22 percent to N421.13 million in the period under review as against N234.45 million as at June 2018 while the Fire segment spiked by 96.05 percent to N774.45 million in the period under review from N395.05 million the previous year. Law Union and Rocks Insurance’s claims were up 40.0 percent to N775.80 million in June 2019 from N553.94 million the previous year while loss ratio moved to 50.74 percent in the period under review from N39.25 percent the previous year. Prestige Assurance’s claims expenses were up 52.30 percent to N980.55 million in the period under review from N643.84 million as at June 2018 while loss ratio increased to 54.98 percent in the period under review from 47.47 percent as at June 2018. AXA Mansard Insurance claim expenses increased by 17.56 percent to N8.54 billion in the period under review from N7.26 billion the previous year while loss ratio moved to 70.70 percent in June 2019 from 75.95 percent the previous year. Continental Reinsurance’s claims increased by 24.63 percent to N8.42 billion in the period under review from N6.75 billion as at June 2018,while loss ratio increased to 48.97 percent in June 2019 from 44.94 billion as at June 2018. Some insurance companies are unable to pay claims and settle salaries because they do not have the financial resources to do so, but the regulator is about to solve this quagmire as it has jerked up the capital bases of firms so that they can take on more risk and contribute to the economy. The revised paid-up capital requires life Insurance business operators to raise its capital from N2 billion to N8 billion; General business from N3 billion to N10 billion, while that of Composite business has been jerked up from N5 billion to N18 billion.

‘

Some insurance companies are unable to pay claims and settle salaries because they do not have the financial resources to do so, but the regulator is about to solve this quagmire as it has jerked up the capital bases of firms so that they can take on more risk and contribute to the economy The race to meet the capital requirement has begun as companies are either planning to tap the capital market for fund or raise capital by way of rights issue. Consolidated Hallmark Insurance has announced its plans to grow its capital base from N6.1 billion to N10 billion ahead of the deadline stipulated by the regulator, stating this in letter to shareholders as seen on the website of the

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Nigerian Stock Exchange. Mutual Benefit and Sovereign Trust (STI) had opted for equity capital raising. Mutual Benefit raised N1.59 billion via a rights issue in 2018 (79.50 percent of the N2 billion offered) while STI also recently conducted a rights issue of N4.20 billion ordinary shares of N0.50/ share (1/2) to raise N2.10 billion. Further analysis of the financial statement of listed insurers shows AIICO Insurance’s claims expenses were up 7.75 percent to N12.31 billion in June 2019 from N11.43 billion the previous year while loss ratio fell to 59.78 percent in the period under review from 79.35 percent the previous year. Mutual Benefit Assurance’s claims expenses were down 36.01 percent to N2.59 billion in June 2019 from N4.05 billion as at June 2018 while claims ratio fell to 36.01 percent in the period under review from 54.50 percent as at June 2018. Linkage Assurance’s claims expenses declined by 35.95 percent to N705.43 million in the period under review against N1.10 billion the previous year while loss ratio reduced to 38.60 percent in June 2019 from 62.40 percent the previous year. Owolabi, Salami, executive director, Alliance Nigeria said, “It’s not evry risk we accept. If the pricing is not good we reject it because you can’t be sure when the claims will come, be definitely it will come” He noted that a lot of companies to today will have problem asking new capital from their shareholders because they must justify why they need to be given more money, and that will depend on what dividend have been paid in the past.

Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY

MARKETS INTELLIGENCE

Supported by Asset Management Corporation of Nigeria (AMCON)

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Dangote Cement earns higher returns on assets than peers BALA AUGIE

angote Cement Nigeria has produced more income from the use of assets than peers as industry capacity utilization remains low due to slow economic growth. For every Naira of assets the largest producer of the building material invests in, it returns 7.0 percent or N.070 in net profit for the year, that compares with Lafarge Africa, (1.60 percent or N.016), and Cement Company of Northern Nigeria (CCNN), 2.06 percent or N0.0206. The return on assets ratio (ROA), often called the return on total assets, is a profitability ratio that measures the net income produced by total assets during a period by comparing net income

to the average total assets. It is calculated as net income divided by total asset. A higher ratio shows a company has put its resources to work in generating profit, and shareholders crave a corporation that deliver a higher

SHORT TAKES 11.08% Annual inflation slowed to 11.08% in July 2019, its lowest in almost four years buoyed by lower food prices on account of favourable harvest. This is second straight moderation in headline inflation after it peaked 11.4% in May. Core inflation eased to 8.8% in July to reach its lowest level in over three years, while food inflation bottomed to 13.39%

return on investment in form of bumper dividend and share appreciation. Dangote is better at converting its investment into profits, compared with Lafarge’s and CCNN. One of management’s most important jobs is to make wise choices in allocating its resources, and it appears Dangote management is more adept than its two peers. While industry’s ROA increased to 3.58 percent in June 2019 from 2.47 percent the previous year, it is lower than an all-time record of 9.12 percent recorded in 2015, when inflation rate was low and crude oil price, favourable. Cement companies in Africa’s largest economy are yet to recover from the 2016 recession that paralyzed economic activities and slowed down construction activities. Between 2004-2014, cement

sector expanded at a robust Compound Annual Growth rate (CAGR) of 13.70 percent, however, growth has averaged -1.0 percent, in the past three years with only marginal recovery in growth of 4.50 percent in 2018.

P.E

N`145

While the dominant players in the industry spent more in the acquisition of property plant and equipment in the period under review, their capital utilizations are low. Adebayo Bakare, Industrial Goods analyst at Afrinvest Securities Limited said that industry volumes are weak due to poor economic conditions in the private and public sectors. He also added that prices have also increased more than 40 percent since 2016, and that has pressured demand. The cumulative acquisition of property, plant and equipment of Dangote, Lafarge, and CCNN hit a four year high of N85.12 billion as at June 2019, but the figure is 5.01 percent of combined property plant and equipment (PPE) balance of N1.82 trillion in the balance sheet. This means that the acquisition of PPE by these companies is immaterial. A breakdown of the figures shows Dangote Cement’s capital expenditure spend stood at N74.10 billion in the period under review, which is 6.02 percent of N1.18 trillion PPE balance. Lafarge Africa spent N7.89 billion on the acquisition of asset,

which is 1.89 percent of total PPE balance of N417.19 billion. CCCN, which recorded the fastest expansion in capex spend among peers, expended N6.17 billion on the acquisition of asset, an amount that is 3.02 percent of the PPE balance of N222.75 billion. Onyeka Ijeoma research analyst –at Vetiva Capital Management is of the opinion that companies do not invest in new plants every year and that they still have to maintain the capacity that they have. Yinka, Yinka Ademuwagun, equity research analyst with United Capital Limited said the jump in CCNN’s capex spend was largely driven by mergers and acquisitions activities, and he added that Dangote Cement invested in distribution assets this year. “Dangote upgraded some their fleets but this will not be sustained,” said Ademuwagun. CCNN, the only cement company in the North West, has total assets was N358.47 billion as at June 2019, this compares with N20.03 billion in 2016. CCNN has an installed capacity of 2.0 million metric tonnes after entering a merger with Kalambaina cement (owned by BUA).

Average price paid by consumers for premium motor spirit (petrol) decreased by -1.2% year-on-year and -0.2% monthon-month to N145.0 in July 2019 from N145.4 in June 2019. States with the highest average price of premium motor spirit (petrol) were Kwara (N146.67), Ondo (N146.47) and Ebonyi (N146.43).

$34.8bn Remittances from Diaspora Nigerians into the country could grow to US$25.5bn, US$29.8bn and US$34.8bn in 2019, 2021 and 2023, respectively, indicating how important these inflows are becoming to the Nigerian economy, a new PwC report has found. For four consecutive years, official remittances have exceeded Nigeria’s oil revenues but these figures could be considerably higher considering that many transactions are unrecorded or take place through informal channels.

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

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

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Monday 26 August 2019

BUSINESS DAY

MARKETS INTELLIGENCE All but two listed banks set for N100bn recapitalization …Unity and Wema Bank in acquisition territory Ifeanyi John

he balance sheets of the 13 listed banks on the Nigerian Stock Exchange (NSE) seem to be ready for the recapitalization exercise the Central Bank of Nigeria might be mulling. All but Unity and Wema Bank have an equity position in excess of the anticipated N100 billion capitalization requirement. The CBN governor had earlier in the year stated that “In the next five years, we intend to pursue a programme of recapitalizing the banking industry so as to position Nigerian banks among the top 500 in the world. Banks will therefore be required to maintain higher level of capital, as well as, liquid assets in order to reduce the impact of an economic crisis on the financial system.” This higher level of capital has been anticipated to be around N100

billion based on CBN’s rhetoric on the $200 million capital requirement placed in 2001. “Today, when you relate N25 billion in 2001 exchange rate, which was about N100/$1, N25 billion was about $200 million. Today if you relate N25 billion at N360/$1, you can see that it is substantially lower

than $75 million.” Emiefele added New capital requirement at $200 million at an exchange rate of N360/$1 will see these banks be required to have nothing less than N72 billion in equity. At a conservative round figure of N100 billion only 2 national banks listed on the stock market, Unity and Wema

bank, are on the verge of a merger or acquisition to meet up with the recapitalization exercise. BusinessDay analysis of the net assets of the 13 banks listed on the stock exchange show Unity bank with a negative equity position and Wema bank with an equity position of N52.04 billion as at the second

quarter of 2019. Sterling bank’s equity position was N10 billion above N100 billion mark as at the end of the second quarter in 2019 and is the only other bank close to the N100 billion territory. “If CBN goes forth with the recapitalization exercise, Unity bank will definitely be the first Nigerian National bank to feel the pinch. The bank currently has a negative equity position of more than N200 billion. The bank will need to look for fresh capital in excess of N300 billion to meet any capital requirement change.” The list of the remaining 10 banks net assets in ascending order are FCMB N188.72 billion, Fidelity Bank (N202.03 billion), Union Bank (N238.97 billion), Stanbic IBTC (N263.05 billion), United Bank for Africa (N543.22 billion), First Bank (N560.92 billion), Access Bank (N576.47 billion), Guaranty Trust Bank (N603.01 billion), Ecobank (N651.32 billion) and Zenith Bank with a net asset of N819.52 billion

Stronger dollar weakens investor appetite for Nigerian Stocks Local bond market to remain bearish as trade tension fire up Ifeanyi John

stronger dollar is always bad news for Nigerians for obvious reasons, but the pain isn’t just kept within, it also finds its way back abroad. Since the doors of the Nigerian Stock Exchange was opened to foreign investors in 1995, a strengthening of the dollar has always triggered a selloff of equities in Nigerian market as foreign investors feel the brunt of exchange rate losses when they revalue their equity positions after an exchange rate devaluation, forcing them to sell early on fears of any devaluation in sight. While whispers of a possible currency devaluation continue to get stronger in the local business environment, it appears the strengthening of the dollar this year as measured by the rising dollar

index is forcing an increased pace of equity selloff in the Nigerian stock market. Trend analysis over the last 30 years has shown a negative correlation between the returns on the US Dollar index spot and the returns on the All Share Index of the Nigerian Stock Exchange. Historical data shows that as monthly yearon-year returns on the dollar rise, the returns on the All Share Index fall and vice versa. Obinna Uzoma, a chief economist at investment research firm, EUA Intelligence explained that “as the Dollar strengthens, the pegged Naira is at a higher risk of overvaluation and monies invested in the stock market falls in dollar terms if a currency devaluation occurs. As this risk heightens, foreign portfolio investors would prefer to liquidate their positions in the Nigerian stock market as a hedge to that risk of devaluation.” A stronger dollar also weakens

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the demand for oil and as Nigeria is Oil dependent nation, its stock market is also reflective of investors’ perception of the economy. Typically, oil prices trade inversely to the U.S. dollar. A stronger dollar makes oil more expensive to much of the world, so oil prices typically fall as the dollar rises. “Another way to look at it is the correlation between the dollar and oil prices. The stronger the dollar, the weaker oil prices trade and up until recently, then Nigerian stock market has had a positive correlation with oil prices. Investors look at a top-down analysis of the stock market and if the outlook of Oil is poor, the growth prospects of the Nigerian economy would most likely be bleak.” Uzoma added. Since the beginning of 2017, the relationship between the All Share Index and the US Dollar index spot has been quite distinct as the two variables have consistently moved in opposite directions.

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ISRAEL ODUBOLA

he local debt market which saw foreign investors booking profit in recent times is expected to remain in bear territory in near term as the trade dispute between United States and China reignites Friday. China, world’s second biggest economy imposed retaliatory tariff on $75 billion worth of American goods, prompting President Donald Trump to direct US companies to cut ties with Chinese firms. The federal government bond market was relatively flat, with yields rising marginally by cumulative two basis points, albeit few buy interests was seen on short to mid-year debt notes. “We expect the market to maintain a slightly bearish stance in the week ahead,” said analysts at Lagos-based Zedcrest Capital, in a note to clients. “This is on the back of renewed escalation in the trade tension,” they posited. Foreign investors are demanding more return before holding more of the country’s assets, given their heightened risk perception of Africa’s top crude producer. The difference between riskfree United States 10-year Treasury bond yielding at 1.5 percent Friday and Nigeria’s 10-year benchmark bond at 14.31 percent, a simple description of risk premium, widened to a record high of 13 percent. @Businessdayng

Th e Fe d e ra l G ov e r n m e nt through the Debt Management Office sold only N15.03 billion across three instruments offered at the August auction last Wednesday, which marks the first under-subscription in 24 months. Also, Nigeria’s central bank saw no buy interest at its latest OMO auction from offshore players who demanded for higher yields. Escalating trade tension coupled with uncertainties surrounding Brexit negotiations have taken a toll on global growth which the International Monetary Fund (IMF) expects to slow to 3.2 percent by 2019 year-end, further weighing on oil prices. Lower oil prices means more problems for Africa’s biggest economy grappling with revenue shortfall and terrifying debt levels since the 2015 global oil crash. Worrisome is the fact that the country might resort to more borrowing if oil prices trend below current levels, putting a dent on its debt management strategies. The IMF expects Nigeria to spend every N82 from every hundred naira to service debt by 2022. The local currency has been pressured since July on intense dollar demand pressure following selloffs on naira debt by foreign players. The naira weakened against the dollar slightly by 4 basis points to N363.14 on the Investor & Exporter (I&E) window from N363.01 a day earlier, albeit has been stable on the CBN’s official window.

Monday 26 August 2019

BUSINESS DAY

START-UP DIGEST

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Onwughalu: Changing the face of Nigeria’s make-up industry BUNMI BAILEY

enessa Onwughalu is the CEO of Taos Beauty brand, one of the recognised make-up brands in Nigeria. She became a success story owing to sterling virtues such as handwork and passion. The Anambra State-born make-up artist lived in the United Kingdom (U.K) for seven years and started her business after finishing a master’s degree in International Law from the University Of Warwick. “I have had the passion for beauty in general since I was a young girl,” she says. “I started in the U.K , where I was doing my research on the best kinds of production for beauty products, how on trend my products could be, and also the best manufacturing factories in the top make-up producing countries such as Canada, Spain, China and Germany,” she says. After seven months of starting the business in the U.K, she moved back to Nigeria in 2014 to participate in the compulsory National Youth Service Corps (NYSC.). That was when she pushed Taos Products and gave them popularity amongst makeup artists. The young entrepreneur, who will be 27 next month, has been running her business for five years now. But it has not been easy as she

Venessa Onwughalu

had to do a lot of research to stay at the top. It was not easy for the Law graduate to start her company in Nigeria as it had its challenges. Although the company, which started in 2014, was making a good name for itself and had good quality products, consumers considered its expensive at the outset. “It was expensive because I didn’t do enough research to know that Nigerians were not yet willing to spend that much on Nigerian brands and needed education on Nigerian beauty brands,” Venessa says. “ My p ro d u c t s w e re sourced from a private manufacturing company in

Canada where I choose my products and they put my logo on them,” she discloses. Before Venessa started in Nigeria, she had worked in a make-up firm for 18 months in the U.K. While there, she sought advice and help from experts. They were open to her by helping to connect her to manufacturers who were able to produce the quality she wanted at the required quantity. “So then, I actually had to do more research on the Ingredients that would not be harmful to the skin and also greatly pigmented for make-up ,” she explains. Some of her products are made locally and others, abroad.

“All our made-in Nigeria products are indicated as such. Some people are dishonest, but I don’t feel like there’s any need for me to be dishonest. I’m a very big fan of made-in-Nigeria products ,” she says. During the recession of 2016 and mid-2017 when foreign exchange (FX) was scarce, many firms struggled to stay afloat. But Taos’ case was different as it made good sales as demand at the time was higher than supply. This was when Taos’ popularity peaked. “I used all my money to buy dollars then and I won’t say it was a big issue for me because I pay for all my products in six months’ advance,” she says. She boasts that many Nigerians saw the products as exciting during recession and started doing pageposting on social media. “Then, no one knew me as face of Taos. They just knew Taos as the brand everyone had to have. And that really helped us to make sales and when I came out as face of Taos, people were amazed by my physical appearance, being so young to owned Taos,” she notes. Venessa started her business with N150,000 and is more in tune with current trends, thanks to social media platforms such as Instragram and Youtube, plus her relationship with top U.K makeup artists who give her insight into what consumers want.

Despite how tough the industry is, she remains consistent, prayerful, monitoring stores that resell for fake products. She has a brand strategy, anchored on quality and having influencers and make-up artists who help push her brand by recommending to others. Taos has clients consisting of the upper and middle class. With 40 distributors across Nigeria, it also exports its products internationally to U.K, Uganda, Ghana, Tanzania, America and Canada on small scales. “I still want to make Nigerian women believe in Nigerian products at affordable prices and quality,” she says. In Nigeria, the major problems faced by most entrepreneurs are insufficient capital, difficulties in getting loans, poor state of infrastructure, instability, inconsistent government policies, among others . But for Vanessa, her major problem is shipping. “When we are bringing in our raw materials into the country either by air or sea, it is always stressful. The charges that Customs officers impose on us for clearing are very high,” she says. “Like my first three shipments then, I cried so much, because when I brought in products worth like N500, 000, I had a Customs officer charge like N437,000,” she regrets. Although the industry does not have enough local

manufacturers in Nigeria, a lot of people are getting involved as it is a lucrative market. Venessa believes that there are a lot of investment opportunities in the industry based on the fact that the level of passion and demand for make-up products are increasing. “The government needs to be more open to investment opportunities. They should help develop the industry by looking into those issues affecting it and think of ways to develop the industry,” she recommends. “I think it is not just the funding. There needs to be different ideas from different people, female, male, young, old, that can actually come together and provide solutions,” the entrepreneur adds. Venessa also has a skincare company called Malichaluxury, which started in 2017, and so far, it is doing well. Her advice for people who want to venture into the make-up business is that they should not be scared but have the passion and dedication by doing a lot of research before venturing into it. “The makeup industry is getting more saturated. You have to do your research and don’t be scared that there are lot of people in that business. When I started, I was not really scared because I felt this was what I wanted to do for the rest of my life whether or not I got support from friends and family,” she recalls.

Steve Babaeko: His motivation, vision, entrepreneurship journey ODINAKA ANUDU

abaeko is a fastrising digital advertising/ marketing/ branding entrepreneur. He is the group chief executive officer of X3M Group, made up of X3M Ideas, X3M Music and Zero Degrees, among others. He recently added to his plethora of businesses an agro-based firm known as Babaeko Farms Ltd. He was recently selected as one of Adweek’s Global Creative 100. Friends and colleagues hosted the entrepreneur at the George, Ikoyi, Lagos, where they spoke exhaustively about the entrepreneur’s grit, which has catapulted him to the zenith of the advertising world. Babaeko recalled that he started his advertising career in one of Biodun Sobanjo’s companies known as MC & A Saatchi & Saatchi. “At the time, the com-

pany had Victor Johnson as managing director. Johnson gave me my first job around 1995 in September and those people really inspired me a lot to give this business a shot,” he said. He said the reason his group got into music was that there was so much talent in the music industry for the company to turn a www.businessday.ng

blind eye to. “What I just have to say is when you get to the top, don’t get the ladder down so that others younger guys can come up,” he said. He said he is consistently inspired by his wife and family, which is vital for his success. “My wife is a photographer. She recently had a

very successful photo exhibition about albinos. I have the limelight all the time, so when she is having her moment in the spotlight, I stay very far away from the spotlight and let her take the credit because she has worked hard,” he said. To the young and upcoming entrepreneurs, Babaeko said he tells them to be patient. “I have a lot of people in this category who walk up to me. When you hear that someone becomes an overnight success, that person might have put in eight to 10 years in the industry. In my own case, I put 17 years of serious servitude and learning the business, learning from people. By the time I started X3M ideas in 2012, we knew all the tricks; we knew where we had to play soft and where to play hard. The deep learning has really helped us,” he explained. “For young people, I am just going to preach

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patience. People are in a hurry and that’s wrong. Yes, you learn on the job but you should be patient to fully grasp the basics of the business you are going into. I just tell them, ‘be patient’,” he stated. He said one thing he does is to continue to inspire creative people to reach the apogee of their career. “Whatever the creative field we find ourselves, go out there shoot your shot and you can do it, whether its music, film, advertising or whatever,” he said. On managing competition viz-a-viz quality outputs, the entrepreneur said people are not going to understand or appreciate anybody’s capacity unless they demonstrate it consistently. “Talking about my music work, I have never signed any talent because someone said I should. I sign talents because I believe in those talents. If I invest @Businessdayng

N100 million in a talent and it doesn’t give me the return, I can live with it. I choose my talents and my talents do not choose me. So do your thing the right way, the world is going to understand and when you are done, they are going to give a round of applause,” he stated. On Babaeko Farms, he said he plans to grow the economy and create jobs with it. “There is so much unemployment in this country. We are one of the youngest in the world in terms of population, but people look towards entertainment for quick fame to acquire stardom. I think that is a poor mentality. The truth is, out of every thousand young people who go into entertainment, if we are lucky in a good year, 15 will come out successful. However, with agriculture what you put in is what you are going to get out of it,” he added.

Monday 26 August 2019

BUSINESS DAY

START-UP DIGEST

Omoefe Abimbola: Caterer with a difference GBEMI FAMINU

mo efe Abimb ola is the chief executive officer (CEO) of Summer’s Cuisine, a catering company that specialises in food and healthy eating/lifestyle. An international relations expert by training, she is also a certified nutritionist who makes use of her in-depth knowledge of natural and organic herbs and spices to do catering with a difference. An advocate for healthy eating, she conducts a lot of research on replacement of inorganic processed spices with organic herbs and spices. “This is information that is out there and available to everybody, but the awareness is not as much as it should be. I am very particular about the kind of ingredient I use in cooking,” she says. Right from childhood, cooking has been her passion and she used to watch her mom, who is also caterer, cook, which influenced her decision to become a caterer. “I wanted to make impact on people’s lives through their eating habits and create awareness about healthy eating,” Abimbola says. She started Summer’s Cuisine in 2014 from her brother’s kitchen with her savings on a part-time basis, juggling it with her 9-5 job. Despite having a budding career in the corporate world as well as earning a good salary, she resigned in July 2018 and took up catering as

a fulltime job. She grew it overtime with profits generated and ploughed back, setting up a mini industrial kitchen and buying bulk foodstuffs, plates, cups, glasses, and other necessary items. The entrepreneur says she was sceptical about taking loans while starting. Though she started as a normal caterer, an incident prompted a change in her cooking technique. In 2014, she lost her father after he battled with a protracted illness which piqued her curiosity.

“We did everything right in terms of medication, regular doctor’s visit and every other necessary thing but I kept pondering what we missed along the way.” This prompted her to conduct extensive research, which led to her realisation that they did not pay close attention to the meals and diet. She says it is not only about eating salads and fruits but about the kind of ingredients used in preparing the food. Her findings further drove her into making more research on

healthy eating, nutrition, use of natural herbs and spices. She found lots of useful information which was the drive behind her company. In 2017, she rebranded Summer’s Cuisine and became a catering company whose goals align strictly with healthy eating. Evaluating her business over the years, she agrees that it is booming, growing its profit, clientele and publicity. The business owner also states that the business is developing in line with global best practises, adding that in a bid to keep it growing, all the profits made from the business are ploughed back as investment. She adds that her clientele has been growing at an amazing rate, especially as she leverage Instagram, a social media platform, as a tool for publicity. She says 70 percent of her customers were got through online platforms. She attributes her clientele growth to the type of service she provides as well as the kind of quality and affordable meals she offers. Speaking on the various challenges she encounters as a caterer, she says, “Catering requires a large amount of patience and is very expensive to run as you have to get exquisite utensils and cutleries. Furthermore, the inconsistency in food prices affects earlier planned budget and I do not have enough helping hands.” Currently, she has staff strength of five, with two permanent staff members and three contract staff.

She is looking to grow her staff strength to 10 by the end of the year. She buys food stuffs in bulk from major Lagos markets like Mushin, Ijora, Mile 12, among others. She secures cutleries from Lagos Island market but intends to start buying them directly from manufacturers in China as it seems more costeffective. As part of her business expansion plan, Abimbola intends to collaborate with event planners to provide a wider reach to clients and extend her catering to larger amounts of people. As a nutritionist, she is also involved in public speaking especially children nutrition and intends to give health talk internationally, not just locally. As a development strategy for herself and her business, she engages in various trainings and networking opportunities both online and beyond the web. She also volunteers for the Lagos Food Bank NGO, a platform which she uses to promote healthy eating even among those who are less privileged. Juggling the role of a business owner, wife and mother, she has received support from family members, especially her husband who she describes as the force behind her excellence. Her life values are peace and integrity and she is inspired by God. Advising entrepreneurs, she says, “Embrace the process; do not rush your growth process; love your business like a marriage, as there will be the bad days.”

neurs, particularly those that are leveraging innovation can solve Africa’s problems. Fueled by the passion to boost entrepreneurship, he explained that his company developed different programmes in different parts of the country to support entrepreneurs and one of such programmes is the Start-up Incubation, which it is doing in partnership with the federal government. “Through this programme, we are incubating 110 companies, we are also supporting another 330 companies amounting to 440 companies to be supported by the Startup Nigeria Programme”. He explained that the winners emerged on merit, hence the start-ups that won were good and promising companies. Kingsley Amajuoyi, managing director, KR Foods explained that he began planning to bring hygienic and safe oil palm production and packaging when his father died from a certain foodrelated sickness.

“I am speechless, I am so excited. I wished that my father was alive to see this happen; I am very grateful to God”, “I dedicated this to my father because losing him woke me up to the responsibility of helping people consume healthy foods and I am glad to be doing that. “In the next couple of months you will see us in shops around Nigeria and we aim to expand into other products”, he stated. Venture platform is a leading source of capital, capacity building, support and advocacy, for under-served entrepreneurs, communities and institutions, enabling them to enhance creation of wealth and development in Africa. Ventures Platform is a pan African early stage fund focused on supporting post MVP teams to grow their startups. Ventures Platform invests in seed and early-stage companies that are operating in markets that have existing positive offline indicators.

KR Foods wins 2019 Start-Up Nigeria contest …gets N2m equity free funding GODFREY OFURUM

ernelincs Resources, brand ow ners of KR Foods, an Abia Statebased integrated oil palm processing and packaging company, has won the 2019 Startup Nigeria Demo Day competition for South-East region. The Ventures Platform Demo Day is a culmination of 16 weeks of coordinated activities and interventions, designed to support start-ups with mentorship, business re-engineering, work space, living space, back office support, shared services and seed funding. Start-Up Nigeria is organised by Ventures Platform in partnership with the Federal Government to support start-ups in the North Central, North West and SouthEast regions of the country. The participating companies are allowed to pitch their businesses to an audience of investors at the Demo Day final, where the winners emerge.

The 2019 Demo Day final of Start Up Nigeria for South-East region took place at the Innovation Growth Hub (ighub), Aba, where Kernelincs Resources pitch was selected as the best by an online audience. The firm was rewarded with N2 million equity-free funding. Honey Empire, a honey production and packaging firm, came 2nd, while the 3rd position went to GreenBox Africa, which produces cheap solar-powered electricity generators. Daniel Chinagozi, founder/ chief executive officer, Innovation Growth Hub (ighub), whose company incubated the participants, explained that the 2019 edition of the programme, which is second in the series, received 543 applications, which were pruned down to 330 companies, enlisted to receive free business advisory services. He observed that Kernelincs Resources pitching was promising and would receive N2 million prize money, stressing that the www.businessday.ng

company would receive N1.5 million this month (August 2019) while the balance of N500,000 would be released to them after the three months mentoring programme. He stated also that the other nine finalists would receive N1 million equity-free funding in two tranches, the first coming before the end of August and the remaining N500, 000 after the three months mentoring programme. Chinagozi expressed joy that a company incubated in Abia, emerge winner, noting that the pitching was part of a three months ongoing business incubation programme. He said that the incubation programme was to upgrade the knowledge and skills of young entrepreneurs to help them succeed. Mimshack Obioha, executive director, Venture Platform Foundation, organisers of the programme, noted that his company believes that entrepre-

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Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

8 ways leaders delegate successfully DEBORAH GRAYSON RIEGEL

or many leaders, delegating feels like something they know they should do, but don’t. Senior leaders often struggle to decide what they can delegate that would actually be helpful to them, or how to delegate responsibility and not just assign tasks, or what delegated responsibilities could serve as a learning and growth opportunity for others. In addition, senior executives themselves may not have had role models along the way to show them how to delegate successfully. And,

of course, there’s the perceived reputational risk. Before leaders can successfully delegate, they need to understand the nature of their own

resistance. Once a leader has begun to shift his or her mindset, it’s time to start shifting behaviors. In my own work as a leadership coach, I have

identified eight practices employed by leaders who delegate successfully: 1. They pick the right person — and it isn’t always about capabil-

ity. Successful delegators also explain why they chose the person to take on the task. 2. They’re clear about what the person is responsible for and how much autonomy she has. 3. They describe the desired results in detail. 4. They make sure team members have the resources they need to do the job, whether it’s training, money, supplies, time, a private space, adjusted priorities or help from others. 5. They establish checkpoints, milestones and junctures for feedback. 6. They encourage new, creative ways for team members to accomplish goals.

7. They create a motivating environment. Successful delegators know when to cheerlead, coach, step in, step back, adjust expectations, make themselves available and celebrate successes. 8. They tolerate risks and mistakes, and use them as learning opportunities. Delegating well helps leaders maximize their resources, ensuring that they’re focusing on their highest priorities, developing their team members and creating a workplace where delegation isn’t just expected — it’s embedded in the culture.

• Deborah Grayson Riegel is a principal at The Boda Group.

How to avoid groupthink when hiring ATTA TARKI

here is wisdom in crowds when it comes to spotting talent. But without careful orchestration, groups can make bad decisions too. When individuals do not think long and hard about their own opinions before a group discussion, they are likely to gravitate toward the view that seems most popular; even with a good moderator who promotes psychological safety and dissent, freeform discussions reduce the variety of judgments, and this, in turn, suppresses useful discus-

sion that would otherwise occur. To make true group decisions about candidates, I advise hiring

managers to follow a rigorous process, to ensure that interviewers maintain a healthy level of independence:

First, make it clear to interviewers that they should not share their interview experiences with each other before the fi-

nal group huddle. Next, ask each interviewer to distill her interview rating to a single numerical score and write down her main arguments for and against hiring the person, and her final conclusion, before the group huddle. Finally, hiring managers should take note of the average score for a candidate. At this point, it is OK to have a lively discussion during a group huddle, with the purpose of influencing and being influenced by others. If interviewers want to change their scores, let them do so. They should also know it’s OK to not conform

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with the group, whether they want to stick with their original opinion or take a new stance. When the above process is applied — regarding decisions ranging from new CEO hires to hedge fund investments — I have observed healthier discussions that are not overly influenced by the most charismatic person in the group.

• Atta Tarki is the founder and CEO of ECA, an executive-search and staffing firm.

Monday 26 August 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

3 ways to build a culture of collaborative innovation will be assigned to them. But at nimble organizations, leadership is flipped upside down. The job of top leaders is to serve people who are close to the market. They do whatever they can to clear the way for promising new projects and get innovation teams the resources they need. Using these three practices, companies can harness the insights and energy of all their people through a collective “prediction market,” in which innovation ideas are examined, improved and pushed forward by the many, not the few. An innovation prediction market makes many small bets on new ideas, only a few of which will pan out after intensive collective vetting.

KATE ISAACS AND DEBORAH ANCONA

ll organizations have the ability to be smarter than the sum of their members’ intelligence and talent. Unfortunately, most are actually dumber. The good news is there are a handful of practical steps to boost collective intelligence. — CREATE TOOLS THAT ALLOW EVERYONE TO COMMUNICATE STRATEGICALLY ABOUT INNOVATION: Good ideas can come from all corners of a company, but would-be innovators may need help developing a strong strategic argument. What are you trying to do? Articulate your objectives using absolutely no jargon. How is it done today, and what are the limits of current practice? What is new in your approach and why do you think it will be successful? If you are successful, what difference will it make? What are the risks? How

much will it cost? How long will it take? What are the midterm and final “exams” that will allow you to measure success? — VET AND REFINE IDEAS COLLECTIVELY AND CONTINUOUSLY: In nimble organi-

zations, innovation ideas aren’t reviewed once or twice a year by a senior committee. Instead, they undergo a constant process of review, refinement and — if necessary — death. The goal is for only the best ideas to

survive. — BUST THROUGH BARRIERS THAT BLOCK INNOVATION: Most organizations have regular procedures for leaders to determine which new projects should get funded and who

• Kate Isaacs is a research affiliate at the MIT Leadership Center at the Massachusetts Institute of Technology Sloan School of Management. Deborah Ancona is a professor of management and the founder of the MIT Leadership Center.

Preventing opioid abuse shouldn’t mean ignoring patients’ pain must also be careful not to turn us back to an era when patients are denied access to the care they need. We must curb our rhetoric and acknowledge that opiates are appropriate medicines for some types of patients. I’d be professing woeful ignorance were I not to acknowledge the medical profession’s complicity in the epidemic of opioid abuse in the United States. But we are also key to the solution. We can’t retreat to and again be complicit in denying access to pain care to patients who need our compassion and our care.

SUBHASH JAIN

rom lawsuits by several states against the manufacturers of opioids to criminal prosecutions against pharmaceutical executives, much has been made about pain medications and their misuse. In many cases, these are necessary actions to address predatory practices that have hurt patients. Unfortunately, if you just pay attention to these headlines, you’re likely to miss an important fact: Pain medications are an important and medically necessary part of many patients’ treatment. In 2016, the Centers for Disease Control and Prevention issued a voluminous set of guidelines that were meant to set new standards for opiate use. The standards were, at their core, well intentioned. Given the incredible and growing burden of opiate abuse, the CDC standards were a call for heightened rationality in opiate prescribing. The CDC was forced to issue a clarification of its own guidelines after several studies showed that, in the wake of

those guidelines’ release, the number of patients who could not get insurance coverage for their pain prescriptions tripled. Similarly, many more patients reported they were unable to find pharmacies willing to fill or refill their prescriptions. Things got so bad, in fact, that more than 300 medical experts, including three former White House drug czars, took the unusual step of writing a

letter to the CDC in response to these guidelines in which they said the guidelines were harming patients. In my own practice, last year, I saw an insurer refuse to cover pain medication for a patient with chronic back pain. Remarkably, the insurer was happy to approve costly, repetitive back surgeries that even the surgeon wasn’t sure would be effective. Cancer patients

and patients at the end of life in particular need the opportunity to live the end of their lives pain free. Isn’t that what we would all want for ourselves and our loved ones? Confusing and arbitrary prescription guidelines are not the answer. While insurers, pharmacies and health care delivery systems should nudge physicians in the direction of sound clinical decision-making, they

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• Subhash Jain was the founding chief of the pain service at Memorial Sloan-Kettering Cancer Center in New York.

Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY

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Monday26 August 2019

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: August 23– August 30, 2019

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

2.01

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

Broad Money Supply (N’ trillion)

34.89

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

Credit to Private Sector (N’ trillion)

24.86

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

Currency in Circulation (N’ trillion)

2.11

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

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

11.08

Decreased to 11.08% in July 2019 from 11.22% in June 2019

Monetary Policy Rate (%)

13.5

Adjusted to 13.5% in March 2019 from 14%

Interest Rate (Asymmetrical Corridor)

13.5 (+2/-5)

Lending rate changed to 15.5% & Deposit rate 8.5%

External Reserves (US$ million)

44.13

August 21, 2019 figure — a decrease of 1.67% from August start

Oil Price (US$/Barrel)

60.33

August 23, 2019 figure— an increase of 6.35% from the previous wk

Oil Production mbpd (OPEC)

1.786

July 2019 figure — a decrease of 1.21% from June 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

23/08/19

16/08/19

27,818.50

26,925.29

3.32

13.53

13.12

3.14

Volume (bn)

1.14

0.26

342.02

Value (N’bn)

2.26

3.53

(36.00)

NSE ASI Market Cap(N’tr)

Change(%)

MONEY MARKET NIBOR Tenor

Global Economy In the US, industrial production declined by 0.2% month-on-month (m-o-m) in July as mining and manufacturing output fared particularly poorly. In the case of mining, Hurricane Barry saw oil extraction in the Gulf of Mexico decrease in July. Manufacturing production was down 0.4% m-om with the biggest fall recorded in the durable goods category. Output for utilities was sharply up. In a separate development, the trade surplus in China increased to $45.06 billion (bn) in July, from $27.49bn a year ago. Exports rebounded from a 1.3% contraction in June and registered the fastest rate of expansion since March. China's trade surplus with the US declined to $27.97bn, from $29.92bn in June. From January to July, the trade surplus with the US measured $168.5bn. Elsewhere in the Eurozone, the IHS Markit flash composite output index rose to 51.8 in August from 51.5 in July. The survey revealed a wide divergence in performance between the manufacturing and service sectors. The services Purchasing Managers' Index modestly improved to 53.4 from 53.2 a month ago. At the same time, the manufacturing sector remained in the negative territory in August. The indicator fell to 47.0 versus 46.5 in July.

Friday Rate

Change

(%)

(Basis Point)

23/08/19

16/08/19

Indicators

23/08/19

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.)

1-week Change

YTD Change

(%)

60.33 2.15

6.35 (1.83)

(6.41) (29.65)

2230.00 97.00 59.28 11.57 471.50

2.20 (0.77) (1.20) (0.52) (1.05)

15.19 (25.50) (23.51) (24.53) 8.77

1495.13 17.07 256.75

(1.21) (0.58) (1.08)

13.48 (0.70) (21.67)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

OBB

17.71

18.00

(29.0)

O/N

18.79

19.57

(78)

Friday

Change

CALL

19.17

17.69

147.9

(%)

(Basis Point)

30 Days

15.37

14.75

23/08/19

16/08/19

90 Days

14.88

13.81

107.1

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

23/08/19

16/08/19

23/07/19

Official (N)

306.95

306.90

Inter-Bank (N)

363.01

363.42

361.75

0.00

360.00

BDC (N) Parallel (N)

Tenor

1 Mnth

14.89

13.76

112

3 Mnths

15.06

12.08

298

6 Mnths

15.72

14.27

145

9 Mnths

15.38

14.27

110

12 Mnths

15.35

13.78

157

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

Change

(%)

(Basis Point)

23/08/19

16/08/19

2992.54

2974.23

0.62

Mkt Cap Gross (N'tr)

9.07

9.01

0.62

Mkt Cap Net (N'tr)

5.71

0.02

21.82

21.08

0.74

-33.99

-34.71

0.72

BOND MARKET AVERAGE YIELDS Tenor

Friday

Change

(%)

(Basis Point)

23/08/19

16/08/19

3-Year

0.00

0.0

5-Year

14.49

14.25

23.9

7-Year

14.05

14.04

0.3

10-Year

14.29

14.31

(2.5)

20-Year

14.33

14.55

(22.4)

30-Year

14.50

14.55

(5)

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.

Index

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

TREASURY BILLS (MATURITIES) Tenor 91 Day 182 Day 364 Day

Amount (N' million) 5,849.03 26,600.00 74,598.13

Rate (%) 9.74 10.75 11.139

Date 17-July-2019 17-July-2019 17-July-2019

Local Economy The Nigerian Stock Exchange (NSE) published its monthly Domestic & Foreign Portfolio investment report for July 2019. The report revealed that the total transactions at the nation's bourse decreased by 61.82% to N113.47 billion from N297.25 billion recorded in June 2019. In July 2019, the total value of transactions executed by foreign investors outperformed transactions executed by domestic investors by 2%. Total domestic transactions decreased significantly by 72.22% to N55.69 billion from N200.51 billion in June 2019. Likewise, total foreign transactions decreased by 40.27% from N96.74 billion to N57.78 billion between June and July 2019. Total domestic transactions which is split into retail and institutional investors revealed that institutional investors outperformed retail investors by 8%. Institutional composition of the domestic market notched lower by 33.28% to N30.25 billion in July 2019 from N45.34 billion in June 2019. In the same light, total retail transactions dipped by 83.59% to N25.44 billion in the reference month from N155.12 billion in June. The performance of the current month when compared to the performance in the same period (July 2018) of the prior year revealed that total transactions also decreased by 22.31%. In a separate development, the Nigeria Bureau of Statistics in its “Foreign Trade in Goods Statistics” revealed that total trade grew by 2.50% to N8.2trillion in Q1 2019 compared to Q4 2018, and 7.52% relative to the corresponding quarter in 2018. Total exports was recorded at N4.5trillion, which represents a 1.78% rise compared to the fourth quarter of 2018 but a 3.9% fall compared to the first quarter of 2018. Similarly, the value of total imports increased to N3.7 trillion, representing an increase of 3.39% relative to Q4 2018 and 29.84% compared with Q1 2018. The trade balance remained positive at N831.6 billion in Q1 2019, boosted by increase in both exports and imports. Stock Market The Nigerian Stock exchange witnessed a turnaround from its past bearish performance as the market closed in the positive. This upturn was on the back of interim dividend expectations and payouts. Accordingly, the All Share Index (ASI) edged up 3.32% to 27,818.50 points from 26,925.29 points the preceding

week. Market capitalization also increased by N41 billion to N13.53 trillion from N13.12 trillion the prior week. This week, we envisage that the market will remain bullish as bargain hunter's reposition, taking advantage of the seeming improvement in economic indices that were released recently and the corporate earnings that revealed the true position of listed companies.

Money Market Cost of borrowing witnessed a slight decline as OMO maturity of N92 billion hit the system bringing relief to the tight liquidity seen in the market. Consequently, short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates settled at 17.71% and 18.79% from 18% and 19.57% respectively last week. This week, rates are expected to remain elevated as expected Retail Secondary Market Intervention Sales (SMIS) keeps market liquidity pressured. Foreign Exchange Market The local unit witnessed mixed performance against the dollar across the major market segments monitored last week. The NAFEX window, saw a slight appreciation of 41 kobo to close at N363.01/$. The parallel market remained unchanged at N360/$ week-on-week. In contrast, the official window saw a slight depreciation as it ended N306.95/$, a 5 kobo loss from the prior week. This week, we expect the naira to hover around prevailing levels at the various windows, boosted by the Central Bank's sustained supply of liquidity to the market. Bond Market The Bond market experienced renewed interest at the end of last week as investors purchased 2028 and 2026 maturities. Yields on ten- and thirty- year debt papers dipped to settle at 14.29% and 14.50 from 14.31% and 14.55%. The Access Bank Bond index increased by 18.31 points to 2992.54 points from 2974.23 points the previous week. This week, market is expected to remain flat, due to tight liquidity in the system. Commodities Market Oil prices soared last week as the combination of the OPEC+ cuts, the worsening supply disruptions in Iran and Venezuela, and a slowdown in U.S. shale have led to the support seen in oil prices. Nigeria's crude oil benchmark, bonny light, edged up, recording a 6.35% increase to $60.33 per barrel compared to $56.73 the previous week. In contrast, precious metals prices dipped on account of profit booking. Investors are looking for clarity on monetary policy after minutes of the US central bank's July meeting tempered hopes of aggressive rate cuts. Gold declined by 1.21%, settling at $1,495.13 per ounce, while silver ended up 0.58% lower at $17.07 per ounce. This week, we anticipate oil prices will decline following China's unveiling of retaliatory tariffs against about $75bn (£60bn) worth of US goods. Precious metal are expected to react in the opposite direction as ongoing geopolitical and trade tensions spur safe-haven demand.

MONTHLY MACRO ECONOMIC FORECASTS Variables Exchange Rate (NAFEX) (N/$) Inflation Rate (%) Crude Oil Price (US$/Barrel)

Sep19

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Oct’19

362

361

362

11.2

11.5

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

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

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Aug’19

Monday 26 August 2019

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BUSINESS DAY

AbujaCityBusiness

Comprehensive coverage of Nation’s capital

Bello pledges to consolidate on achievements OAGF remains the life wire James Kwen, Abuja

he Minister of Federal Capital Territory, FCT Muhammad Bello has pledged to consolidate on the the solid foundation he build for rapid development of the capital city during his first tenure. Bello who made the pledge upon resumption at the FCT Administration Headquarters, Abuja after been sworn-in by President Muhammadu Buhari, alongside, Minister of State, Ramatu Tijjani promised to work under the general policy guidelines given to them by President Buhari, adding that the President was very clear on the direction he

want the country to move in the next four years “The direction is not to benefits him as a person but a direction that will take Nigeria to were it truly belong. What the administration did during the first tenure was basically to prepare ground and establish foundation what we need to do now is to build upon the foundation that has been established. Bello thanked the management and staff of the FCTA for the tremendous work they had been doing over the years, which had made Abuja a very proud city and them to guard the city jealousy. He said, “you have to work hard to build the city because it is a great city established by our

predecessors.Abuja is a city that is growing far beyond normal growth rates so we have to work at a rate more than the normal rate.” On her part, Tijjani who said the reappointment of Bello as the FCT Minister by Buhari symbolised trust, solicited the cooperation of the FCTA staff to enable them succeed and promised to join hand with the Senior Minister to continue to render the good services that he had started to take FCT to the next level. Earlier, FCT Permanent Secretary, Chinyeaka Ohaa who led Management and Staff to give the Ministers rousing welcome assured them of full cooperation and loyalty.

of the economy -AGF Cynthia Egboboh, Abuja

he Accountant-General of the Federation, OAGF Ahmed Idris has stated that his office remain the life wire of the economy as it has introduced a number of public finance reforms in the management of the economy. Idris in a statement signed by Okoro Anastasia, Deputy Director of Press, said several initiatives that aided the effective management and forecasting of government revenues has been formulated by the OAGF. “The Office of the Accountant general supervises Ministries, Departments and Agencies to ensure that the revenue allocated to them are utilized according to public service rules and financial regulations, therefore, the AGF is the life wire of the economy. We are not a bank or a Ministry but we have a strict mandate on financial management of the economy”, he said. The AGF while receiving Aliyu

Gambo, Director-General of National Agency for the Control of AIDS(NACA) and his management team in Abuja, said that the reforms introduced includes but not limited to Government Integrated Financial Management Information System (GIFMIS), Treasury Single Account (TSA), Integrated Personnel Payroll System (IPPIS) which is the platform for payment of salaries to civil servant in all MDAs and implementation of e-service in Nigeria. He congratulated the DirectorGeneral of NACA on his appointment and promised to partner and support the agency because they are doing a great job in curbing HIV/AIDS epidemic in Nigeria. The Director-General of National Agency for the Control of AIDS (NACA), Aliyu Gambo in his remark stated that the advocacy visit was to congratulate the AGF for his re-appointment, and also to get acquainted with him and solicit for deepened collaboration between the agency and his office as it was in the past.

Nasarawa partners NIRSAL on youths engagement in agribusiness Solomon Attah, Lafia

L-R: Head, Northern Region, United Capital Trustees, M.S. Kasandubu; Head, Northern Region, STL Trustees, Jibril Yanda Mohammed; His Excellency, The Executive Governor of Plateau State, Honourable Simon B. Lalong; Head, Northern Region, FBN Quest Trustees, Abimbola Ajinibi; Regional Head, UTL Trustees, Mathew Oghame; Director, Eczellon Capital, Dipo Wintoki during a business visit to the executive governor of Plateau State at the governor’s lodge in Abuja.

Insurgency: Group blames Customs for cancellation of pre-shipment inspection James Kwen, Abuja

easons behind unending insurgency and armed banditry in the land took a different dimension in with allegation of cancellation of pre - shipment inspection by the Nigeria Customs Service, NCS, as one of the reasons. The National Co- ordinator of the Social Integrity Network, SINET, Ibrahim Isah said escalation of the deadly crimes in the country by their perpetrators , began immediately after the cancellation of Pre-Shipment Inspection by NCS during the tenure of the former Comptroller-General, Alhaji Dikko Inde Abdullahi. According to him, restoration of the policy by Customs, will to a very large extent , helped in curbing

illegal shipment of firearms into the country by crimes magnates. “With the benefit of hindsight, the escalation of insurgency began immediately after the cancellation of Pre-Shipment Inspection by the Nigeria Customs Service during the tenure of the former Comptroller General, Alhaji Dikko Inde Abdullahi. “Therefore, a quick win to countermand insurgency is the restoration of Pre-Shipment Inspection services to forestall many containers which are supposedly to be carrying legal items/goods of different kinds being loaded with dangerous weapons and brought into the country without adequate attention”, he said. He alleged further that as at now, little or no inspection is carried out on containers at the points of loading, thereby, subjecting the lives of Nigeriwww.businessday.ng

ans to serious threats and uncertainty. Aside illegal weapons allegedly being shipped into the country without required interception by Customs , the SINET National Coordinator also accused operatives of the revenue generating agency and their counterparts with the Standard Organisation of Nigeria, SON, of negligence in curbing smuggling of all manner of substandard products into the country. “The conspiracy being perpetrated by officers of the Nigeria Customs Service and personnel of Standard Organization of Nigeria, (SON) with smugglers at the various ports across the country is creating serious economic threat to Local Manufacturers who have invested their lives through bank loans and workers’ salaries commitments to mention a few. https://www.facebook.com/businessdayng

he Nasarawa State Government has said that it is collaborating with the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) to create gainful employment for youths across the state who will be trained and given finance to engage in agribusiness. Govenor Abdullahi Sule revealed this while playing host to the delegation from NIRSAL at the Government House in Lafia, said, “we want to keep our youths active, we want to keep them in business, so that they can remain

in business, they can have something to do, earn income and have independence.” The governor pointed out that even though Nasarawa State is among the few states confronted with the challenges of unemployment particularly among the youths, the state is however blessed from all directions when it comes to agriculture, which explains the need for a collaboration with NIRSAL. Earlier, the leader of the delegation, Sheriff Salawu, Head Collaboration and Partnership at NIRSAL said the where in the state based on the interest the governor has shown in the activities of the corporation.

BSO, Jalingo lauds Buhari over Mamman’s appointment as Minister for Power Nathaniel Gbaoron, Jalingo

he Buhari Support Organization (BSO) has on commended President Muhammadu Buhar i over the appointment of Saleh Mamman as the Minister for Power, saying it would facilitate the construction of the 3500 mega watts Mambilla Hydro power project. Alhaji Zakari Ngoroje, the Taraba state Coordinator of the group told news men in Jalingo that the appointment was not for Mamman alone but for the entire state. According to Ngoroje, that the

project was key to the success of Buhari Administration and the Minister was in the position to bring to an end, all the obstacles in the host communities and the state at large that have being hindering the project from taking off. Ngoroje called on Governor Darius Ishaku of Taraba to cooperate with Buhari in order to fast tract the actualization of the project. On his part, Abdullahi Jalingo, an associate of the Minister described the appointment of Mamman as Minister of Power as a turning point in the development of Taraba and Nigeria.

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Monday 26 August 2019

BUSINESS DAY

Live @ The Exchanges Investors trade N1.2trn worth of Nigerian stocks in 7 months …represents N542bn decline year-on-year Stories by Iheanyi Nwachukwu

n seven months to July 31, 2019, investors traded about N1.201trillion worth of Nigerian equities. This represents a huge decline of about 31percent year-on-year (YoY) when compared with N1.743trillion recorded in

the corresponding seven months period of 2018. This was revealed by the Nigerian Stock Exchange (NSE) in its recently released report which shows the summary of transaction in the review period. Out of the record N1.201trillion worth of Nigerian equities exchanged in the seven months to July 31, domestic investors were responsible for N670.45billion or 53.44per-

cent of the total. Out of the total equities trade by domestic investors in the review period, the retail investors accounted for N355.15billion while domestic institutional investors traded stocks value at N315.29billion in the seven months period. Further check shows that the foreign portfolio investors (FPIs) traded just N530.57billion or 46.56percent of the total value of

L-R: Isyaku Tilde, acting executive commissioner operations, Securities and Exchange Commissioner, SEC; Mary Uduk, acting director SEC, Henry Rowlands, acting executive commissioner Corporate Services SEC; Reginald Karawusa, acting executive commissioner Legal and Enforcement SEC, at the Second Quarter Capital Market Committee Meeting held in Lagos.

Financial Reporting Council unveils new portal for individual registration

inancial Reporting Council (FRC) has unveiled a new portal for individual registration. This laudable development is in line with the Council’s effort to achieve her mandates through a friendlier, responsive and cost-saving process that makes it easier to do business with government. The new individual registration portal unveiled in Lagos on Thursday August 22 enables a professional to register with the Council at the comfort of his office, home or indeed anywhere internet is available without a physical visit to FRC offices. The Council attaches importance to professionals in line with its statutory mandate to “maintain a register of professional accountants and other professionals engaged in financial reporting”. “With the new individual registration portal, we expect to issue registration numbers within 48 hours after successful completion of the online registra-

tion process”, said Daniel Asapokhai, Executive Secretary/Chief Executive Officer, Financial Reporting Council. Recall that on January 15, 2019 the Council unveiled the Nigerian Code of Corporate Governance (NCCG) 2018. “We are therefore, pleased that strategy of the current Board is yielding tangible dividends”, Asapokhai noted. “We encourage all professional accountants and other professionals involved in the financial reporting process to leverage the new registration portal to ensure that your name appears in the register of professionals and for the general public to use the online register to confirm that the professionals you engage or deal with, are registered with the Financial Reporting Council”, he said. FRC further requests that the public constantly verifies on this portal, the FRC registration numbers of professional accountants and other professionals engaged in financial reporting. www.businessday.ng

traded equities in the review period. Foreign inflow stood at N243.35billion while outflow was N287.22billion. Looking at the monthon-month (MoM) report, it shows that total transactions at the nation’s bourse in July 2019 decreased significantly by 61.82percent, from N297.25billion in June 2019 to N113.47billion in July 2019. The performance in the month of July when compared to the performance in July 2018 revealed that total transactions also decreased by 22.31percent. In July 2019, the total value of transactions executed by foreign investors outperformed transactions executed by domestic investors by just 2percent. A further analysis of the total transactions executed between the current and prior month (June 2019) revealed that total domestic transactions decreased significantly by 72.22percent from N200.51 billion in June to N55.69 billion. Also month-on-month, the value of domestic transactions executed by Institutional investors outper-

formed retail investors by 8percent. A comparison of domestic transactions in the current and prior month (June 2019) revealed that retail transactions decreased by 83.59percent, from N155.12billion in June

Stock investors gain N400bn in one week following increased bargains

igerian stock market recorded increased bargain hunting in the trading week ended Friday August 23, 2019, which helped to push the market to a three-week high. With most fundamentally sound stocks recording capital appreciation, the cumulative value of listed equities on the Nigerian Bourse increased by N403billion, from weekopen level of N13.121trillion to N13.524 trillion as at August 23. The stock market’s benchmark performance Indicator the NSE All Share Index (ASI) rose by 3.25percent in the review trading week buoyed by gains in Dangote Cement Plc, the most capitalised company on the Nigerian Stock Exchange (NSE). Excluding NSE Insurance Index which closed negative (-1.38percent), all other Indexes closed the week in the

green zone. The NSE 30 Index increased by 4.93percent, NSE Banking Index (+9.19percent), NSE Consumer Goods Index (+3.97percent), NSE Industrial Goods Index (+1.21percent), NSE Oil & Gas Index (+1.64percent), and NSE Pension Index (+3.56percent). The All Share Index increased from preceding week low of 26,925.29 points to 27,800.17 points at the sound of trade closing gong on Friday. While the ASI recorded three consecutive sessions of positive returns – last seen in May 2019 –some market watchers looking into a new week expect the market to record mixed trading sessions from Monday August 26. They expect to see continued rally at the beginning of a new week, thereafter profit taking activities are expected in the later part of the week.

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2019 to N25.44 billion in July 2019. However, the institutional composition of the domestic market reduced by 33.28percent, from N45.34billion in June 2019 to N30.25 billion in July 2019.

Monday 26 August 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Who are you without that fancy title? MONEY MATTERS

Nimi Akinkugbe Regional Director EMEA Finance Director, Africa Director, Group Corporate Communications Group Head, Human Resources Executive Director, s you move through a corporate career you may aspire to have one or more of these labels; they come with prestige, status and money. Yet, why are so many successful, hardworking, high-performing professionals, underachieving when it comes to their personal finances? I have closely observed smart, driven, high-earning corporate people, accomplished in their roles. They do all it takes to drive multi-billion naira organisations to success whilst providing an exceptional lifestyle for their families, yet they often underperform financially when it comes to sustainable long-term financial security. Many haven’t carefully considered what it will take to fund children’s education, weddings, travel, and 30+ years in retirement. The easier option is to just stay on the corporate treadmill until they are asked to step off, are pushed off, or fall off! It is bizarre that this category of accomplished professionals in spite of the high income and comfort remains one of the most vulnerable. The truth is that complacency sets in and as it is hard to imagine the life after. Sometimes financial compensation can become a “handcuff” that ties you to a particular job or company and makes it almost impossible for one to leave. “Golden handcuffs,” are the financial security, comfort and safety of high-paying, cushy jobs that keep us bound to our desks and offices because we become dependent on them or are too scared to leave. Many people are fed up with their long term jobs and just working for that pay check because they feel that they cannot survive without it; it is understandable as often the perks are just too great to give up. Yes there may be a well-appointed residence in a choice part of the city, your children are in the most expensive private schools, one or two fully fuelled generators, luxury cars in the driveway replaced every few years, first or business class travel and holidays, access to the best health insur-

ance and medical care for you and your family, stock options, a team of domestic staff to attend to every whim, your business card and the corporate brand that opens doors and which you wear as your identity…the list goes on and on. It is easy to get used to having everything you want and need even though you have nothing of substance. How do you give up that lifestyle, the huge monthly “credit alerts” to your bank account and many other benefits that that just keep coming? The real issue is that most of us are living far above our means. For those who have lived large, when the carpet is pulled from their feet through illness, retrenchment or retirement, the shock can be staggering. If you have been spending excessively, living a lifestyle that society “expects” of your status, things can go awry. There is absolutely nothing wrong with staying in a long-term corporate job. Indeed beware of the narrative that everyone should become an entrepreneur; entrepreneurship is just not for everyone. It requires a certain disposition, tenacity and risk appetite that is not natural to all. Your path might be a corporate one within which very many achieve enormous success and fulfillment. A successful career in a corporate organization is a laudable path and one in which you can leave your mark and legacy without going into business. What is important however is to have the freedom of choice. This means that you should be conscious of the way you live and

very deliberate about building assets over many years when you are earning significantly. This will ensure that your standard of living doesn’t plummet if and when you decide to leave the lucrative position. Breaking free from the golden handcuffs is never easy, but if you have been conscious about building financial security over the years in spite of your job, it will be so much easier to walk away from a role particularly if it gives you little or no fulfilment. If your bonuses or your “upfront” payments are the key motivation for staying in a particular role that you are very unhappy in, then you should start to think of what really matters to you. Ask yourself these questions. Be honest. If you left your job today, do you have a plan? Would you still be comfortable or would your standard of living take a tumble. Are you preparing for life after corporate? Do you have investments that give you passive income to support your lifestyle? Can you afford to rent the property that you live in? Do you own your own home? Can you afford the school fees without this income? What is the cost of your lifestyle including the perks? How did you spend your last bonus or your last raise? Did you invest it or spend it largely on things, or experiences? It is so easy to spend all that comes in when you know that the money will be replaced in a few weeks or months. But remember

‘

Never lose sight of what you really want to do or what you should be doing with your life. Remember, money buys comfort and luxury but it does not buy lasting happiness and fulfilment

that investments don’t just happen; you must be deliberate about creating them. Use that high income and bonuses to build a solid foundation of passive income so that you can work because you love what you do and want to do, and not because if you step out, your life will change in an instant. We all need to get to that place where you can go to sleep and receive the alluring credits of passive dividend income from your stock and business investments or rental income from property you have invested in. These must be just as enticing as your corporate bonuses. Timing is always important, particularly when you have significant responsibilities and obligations. Of course it would be foolhardy, even irresponsible to walk away from a high paying prestigious role when you have enormous bills to pay. Don’t just walk away if you cannot afford to. Indeed in these times of staggering unemployment, one should feel very fortunate to have a job that pays your bills and keeps you in comfort. But always keep your sights on the prize, on your goals and what you want out of life. Never lose sight of what you really want to do or what you should be doing with your life. Remember, money buys comfort and luxury but it does not buy lasting happiness and fulfilment. Determine what truly matters to you and what you wish to achieve in this your one and only life then begin to work towards it, step by step. Golden handcuffs are very real. It is tempting to stay locked in; they look great on the outside, they can even feel great on the inside, but be careful; they can lock you up for a very long time.

Follow Nimi Akinkugbe on: Twitter and Instagram: @ MMWithNimi, Facebook: ‘Money Matters With Nimi’ Send an email to info@ moneymatterswithnimi.com Or visit her Website www. moneymatterswithimi.com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi.com Twitter: @MMWITHNIMI Instagram: @MMWITHNIMI Facebook: MoneyMatterswithNimi www.businessday.ng

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Monday 26 August 2019

BUSINESS DAY

Government Enterprise & Empowerment Program

Brought to you by

TraderMoni holds town hall meetings in Bayelsa markets ...empowers micro traders in new markets

raderMoni, the most popular of the social intervention programmes of the President Muhammadu Buhari-led administration, recently recorded another milestone in Bayelsa State. Town hall meetings were held at different markets in addition to the provision of collateral and interest free loans to petty traders and artisans in various locations across the state. Since inception in 2017, the Government Enterprise and Empowerment Programme (GEEP) scheme, which is now in its second phase, has empowered over two million beneficiaries across 36 states and the Federal Capital Territory (F.C.T), enhanced financial inclusion and improved the credit-worthiness of microbusiness owners. During the most recent outreach in Bayelsa, one of the key TraderMoni activities was at the newly commissioned Gold Coast Dickson Modern Market in Toru Orua community of Sagbama Local Government Area where new beneficiaries were empowered as agents enumerated hundreds

Registration of new Tradermoni beneficiaries

of traders to receive the N10,000 loans each. “We believe this new market will boost the economic activities of this community, and these loans will aid the productivity of these market women,” said

Beneficiaries at the Tradermoni Townhall at Tombia market, Yenagoa

List of approved beneficiaries published in different market clusters

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the Governor of Bayelsa State, Seriake Dickson, as he lauded the programme. Also present at the event which similarly marked as the commissioning of the ultra-modern Gold Coast Market, Ifeanyi Okowa, Governor of Delta state, noted that he was glad TraderMoni had come to the market to empower local traders. This, he believes, would

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result in positive impacts for the local economy, and by extension, the state and the nation at large. Commenting on the initiative, the Community Women Leader, Ebikadonme Odogu said, “We have heard of this loan for some time now and we are glad, it is finally here. I believe it would be beneficial to many of our local market traders here, and very

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certain they would repay the loan. We are grateful to the government for remembering us.” “For TraderMoni and MarketMoni, we are not dashing money to traders; we have a strong technology base that ensures we have the records of every beneficiary, managed by the Bank of Industry,” said Maryam Uwais, Special Adviser to the President on Social Intervention Programmes. At the town-hall meetings held at Okaka and Tombia markets in Yenagoa, GEEP officials engaged and interacted with TraderMoni beneficiaries, equipping them with an understanding of the concept and process of the scheme while also receiving feedback from them. GEEP would set up offices in local markets to enable easier access to loans and repayment. Speaking earlier at Toru Orua Community Market, Mr. Ladi Amusu, a GEEP official said at the heart of the TraderMoni scheme is the drive to enhance financial inclusion and credit-worthiness of the petty traders, who mostly have difficulties accessing loans. The repayment options of TraderMoni loans can happen directly at commercial banks using PayDirect or through self-service using designated scratch cards. Providing more first-hand information on TraderMoni, the Manager, Strategy and Operations at GEEP, Mr. Taiwo Ajetunmobi said about two thousand traders in three markets had been enumerated and paid within two days, a number he noted would increase in the coming days. He encouraged traders in other markets around the state to look forward to TraderMoni activations as well. In Tombia Market, Yenagoa, the market leader, Mrs. Felix encouraged beneficiaries to make good use of the loan to be able to pay back, access more loans and grow their business.

Monday 26 August 2019

BUSINESS DAY

NEWS

Sanwo-Olu’s cabinet ends retreats, pledges commitment to ‘Greater Lagos’ vision JOSHUA BASSEY

he retreat organised for members of Lagos State Executive Council and permanent secretaries ended at the weekend on high note, with the cabinet members resolving to apply their expertise and energy towards achieving the vision of the Governor Babajide SanwoOlu administration. The retreat held at the Eko Hotels and Suites was aimed at fostering inter-personnel teamwork and unity of purpose among administrators that will be implementing key items in the governor’s development agenda in the ministries, departments and agencies of government. Rising from the four-day event, the cabinet members came up with a communiqué, which indicated their resolution and expectations as they prepared to fully resume at their respective positions on Monday (today). Giving a summary of the communiqué on behalf of the cabinet, the Commissioner for Information and Strategy, Gbenga Omotoso, noted that the participants had intensive sessions with all the facilitators, who, he said, shared practical thoughts on governance and measuring performance. “We have just concluded a four-day intensive, energysapping and intellectually fulfilling retreat. We have been fully equipped and prepared for the task of governance. It is just a springboard for us to take up our programmes,” Omotoso said. “Now, Lagosians are going to be seeing a lot of actions from this government, because everything that has been planned will now be put into actions. We have been told all that could bring about bottlenecks implementation stages, programmes and policies. We are fully armed and energised to engage our duties for the realisation of better Lagos that would be the pride of everybody,” he said. Omotoso said the cabinet members made a commitment to work together and complement one another’s efforts towards achieving the governor’s vision. Commissioner for Budget and Planning, Samuel Egube, observed that each member of the Executive Council had made a commitment to a joint responsibility of tackling the challenges facing the state, stressing that the government would give no excuse to the residents. “We also discussed the need to drive a performance evaluation mechanism that would enable us to measure our progress in a transparent manner. This, we believe, will make us fulfil all the promises we have made,” Egube said. The Head of Service, Hakeem Muri-Okunola, said the retreat set the tone for the implementation of the administration’s plan for a “Greater Lagos”. He said each session of the programme was facilitated by “highly resourceful” leaders that shared their practical experience about administration and leadership.

Sugar imports down 35% on national master plan, health-consciousness BUNMI BAILEY

igeria’s sugar and sugar confectionery imports declined 35.7 percent between 2016 and 2018, according to BusinessDay analysis of data from the International Trade Centre, a multilateral agency that serves as a focal point for trade-related technical assistance. Sugar import reduced by 23 percent to $619.3 million in 2017, from $804.5 million in 2016, and by 16 percent to $519.9 million in 2018. Analysts say this is as a result of the progress recorded with the

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Federal Government’s National Sugar Master Plan (NSMP) as well as increasing health-consciousness among Nigerians. “We have increased our production of sugar through the NSMP, which makes it less necessary to import large quantities of sugar and people are getting more health-conscious of the damage that much sugar can do to their system,” said Emmanuel Ijewere, vice president, Nigerian AgriBusiness Group (NABG). “And also, other substitutes like honey are coming into the market. And if we continue like this, the imports will further go down,” he said. National Sugar Master Plan is

a policy roadmap for sugar production that was implemented in 2013 with the objective to achieve self-sufficiency in sugar production and, save foreign exchange on the importation of sugar and ethanol, establish 28 factories of varying capacities across the country, among others. The policy provides a fiveyear tax holiday for investors in the country’s sugar value chain, a 10 percent duty, plus a 50 percent levy on imported sugar and a 20 percent, plus a 60 percent levy for imported refined sugar. It is aimed to produce around 1.79 million tonnes of sugar in 2020-23. Major sugar refineries in

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Nigeria recently signed the revised edition of the backward integration programme for the sugar sector, according to a sugar forecast document by the United States Department of Agriculture (USDA) released in May 2019. “Local players in the sugar market are doing backward integration and these players have invested heavily in the backward integration plan, although it has not led us to be fully self-sufficient,” said Abiola Gbemisola, an agriculture analyst at Chapel Hill Denham. Nigeria’s three main sugar processors – Dangote Group, BUA Sugar Refinery, and Golden

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Sugar Refinery – are reported to be devoting $334.1 million, $107 million, and $142.4 million, respectively, to expansion. In 2018, during a chat with journalists after a one-day Northern Region Sugar Sensitisation Workshop organised by National Sugar Development Council (NSDC) in Dutse, Jigawa State, Latif Busari, executive secretary, NSDC, said that Nigeria has attracted N157 billion worth of investment in the five years of the first phase of the NSMP. Also that same year, the council had approved the disbursement of about N3.9 billion out of the N12 billion NSDP fund to boost local sugar production.

Monday 26 August 2019

BUSINESS DAY

news These private sector firms take long-term... Continued from page 1

lion deal with a consortium of 8 Miles (London), African Capital Alliance (Nigeria) and KFW DEG Bank (Germany). The investment was targeted at raising the company’s capacity from 40,000 metric tonnes (MT) to 80,000MT, and increasing the staff strength to 3,700. “It is important for us to localise the value chain in manufacturing. This has become very difficult for us as we have 71 local suppliers of raw materials,” Obi Ezeude, CEO of Beloxxi’s Industries, said in 2018 at a factory commissioning. Beloxxi has finished the second and third production lines and is investing in the fourth line at Agbara, Ogun State, with a target of raising staff numbers to 6,000. Some private sector firms are overlooking policy flipflops by the Federal Government and endogenous challenges in the economy and taking long-term positions in the economy, with a view to making money from a demography of 200 million people (and rising), half of who are below 18 years. Many of the firms are hard hit by multiple exchange rates, high import tariffs, multiple taxation and poor infrastructure, but they are undaunted by these challenges. A string of policies has hurt investors in Africa’s biggest market, with the restriction of 43 items since 2015 topping the chart. President Muhammadu Buhari has directed an FX restriction on food imports, which is perceived to worsen investors’ plight. The economy is sluggishly growing at below 2 percent (on average), putting 98 million in multidimensional poverty and 23.1 percent in the job market. Consumers’ wallets are shrinking, but some investors see into the future. BUA Group has an ongoing sugar project at Lafiaji, Kwara State, targeting at producing raw sugar. Less than six months after commissioning its 1.5 million metric tonnes per annum (mtpa) Kalambaina Cement Plant in Sokoto State, BUA Cement completed its newest Obu plant in Edo State, which has a capacity to churn out 3 million mtpa of cement annually. This brought the total capacity of BUA Obu cement operations to 6 million tonnes and moved the entire group’s installed capacity to 8 million mtpa. Abdul Samad Rabiu, founder and executive chairman of BUA Group, said his ultra-modern plants would enable him to export cement to Chad and consolidate its presence on southern parts of the country. Nisto, a ceramics maker at Agbara, Ogun State, is ex-

panding its ceramics plant to capture the African market. BusinessDay found that the company is exporting to Gabon and plans to capture the Central African Republic. “The company is expanding because it cannot even meet ceramics demands again,” someone familiar with the company said. The Norwegian Investment Fund for Developing Countries (Norfund) has just made an investment in the Nigerian company Sundry Foods Limited. Sundry, an integrated food services company operating in the Quick Service Restaurant (QSR), bakery and catering services sectors, currently has almost 50 outlets consisting of restaurants, bakeries and catering units spread across 11 states in Nigeria. Okomu Oil is planting 5,000 hectares of oil palm in Edo State. In 2018, the company disclosed that it was planting 11,400 hectares at a new Extension 2 Plantation in Ovia North East Local Government Area in Edo State. This was after acquiring two additional machines that produce 30 metric tonnes per hour mills, valued at $50 million. With approximately $150 million, PZ Wilmar, a subsidiary of PZ Cussons, has bought 26,500 hectares of palm oil plantations in Cross River State. About 5,549 hectares (ha) of oil palm plantation are located in Calaro Estate, while 2,369 ha are in an area known as Calaro Extension. The firm also acquired Ibiae plantations with 5,595 ha; Ibad plantations in Akamkpa with 7,805 ha; Kwa Falls in Akamkpa Akpabuyo with 2,014 ha, and Oban plantations, also in Akamkpa, with 2,986 ha. PZ Wilmar has acquired palm oil mill (POM) and kernel crushing plant (KCP), investing around N20 billion in an oil palm refinery in Lagos. “We are determined to continue with these investments and looking for opportunities to expand our plantations in the state. We have also invested around N20 billion in an oil palm refinery in Lagos,” Santosh Pillai, managing director of PZ Wilmar, told BusinessDay. Investors are betting on the opportunities in the economy, expanding operations in the face of tough business environment. Ninety-four percent of chief executives of manufacturing companies across the country said congestion at the ports significantly affects productivity negatively, a 2019 second quarter CEOs Confidence Index conducted by the Manufacturers Association of Nigeria (MAN) shows. Ninety-five percent of them said multiple taxation was their biggest impediment.

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President Muhammadu Buhari (r) shaking hands with Mohammed Sanusi II, emir of Kano, during the visit of Northern traditional rulers to the Presidential Villa in Abuja, weekend. NAN

Nigeria faces dilemma of lowering rates... Continued from page 4

get demand back, because at the current rates it doesn’t make sense for local buyers,” Akpata said. Foreign investors want rates to go up to compensate them for lower oil prices even as there are concerns over the cost of a lawsuit that may see the CBN part with $9 billion. That could set back the external reserves ($44 billion) by as much as 20 percent and foreign investors are not comfortable with that. “Investors want extra compensation for Nigerian debt which they feel is riskier today than when oil prices were above $60 per barrel and dollar inflows were strong,” one trader said. “If the CBN must keep interest rates low, then it could give additional return to FPIs through the FX futures market by putting the futures rates slightly lower than where it is now – like, say, between N360N370 per US dollar while spot moves to N370/380,” the trader said. The CBN was faced with a scenario like this in 2016 when it had to prioritise satisfying foreign portfolio investors

with higher yields to attract inflows and stabilise the foreign exchange market, even if it came at the cost of cutthroat debt servicing costs for the apex bank and the Federal Government. Although the high yields on offer attracted dollar flows, the economy was on shaky grounds. The Federal Government was borrowing at a record 18 percent and that crowded out the private sector in an economy plagued with low growth and negative GDP per capita, despite having just exited recession. Though yields would later fall to as low as 12 percent on average, foreign investors kept the dollars flowing, snapping up everything from Treasury Bills to OMO bills. Even the political uncertainty in the build-up to the February 2019 elections and its outcome that hammered stocks did not deter foreign flows into Nigerian local debt. The carry trade opportunities were enticing, traders said at the time, and foreign investors were satisfied. That love affair has, however, been strained recently, with the CBN offering lower rates, to the ire of foreign investors.

Nigeria missing as Africa leads in Greenfield... Continued from page 4

Nigeria,” Oni said. According to the Nigerian National Petroleum Corporation’s (NNPC) latest monthly report, total gas supply for the period May 2018 to May 2019 stood at 3,050.97BCF out of which 466.39BCF and 1,316.35BCF were commercialised for the domestic and export market, respectively, while gas-injected, fuel gas and gas flared stood at 1,268.23BCF. NNPC’s monthly report also noted that national gas production for May 2019 stood at 223.73BCF, translating to an average daily production of 7,430.96mmscfd. “If you take a holistic view

of Nigeria’s economy and what it needs for industrialisation, gas is a bigger enabler of what Nigeria needs than oil,” Bolaji Ogundare, CEO of NewCross Exploration and Production Limited, said. Stakeholders said Nigeria lost more than $5 billion to Olokola Liquefied Natural Gas (OKLNG), Brass Liquefied Natural Gas (BLNG) and Train 7 because of bureaucratic bottlenecks and delay in taking final investment decision. Louis Brown Ogbeifun, a former president of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), said

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The CBN’s change of tack is quite rational. The high yield environment, despite keeping dollars flowing and ensuring exchange rate stability, has become unsustainable since then. Today, the Federal Government’s debt servicing cost as a percentage of revenue is as high as 65 percent and is forecast by economists to hit 70 percent by year-end on the back of lower-than-expected non-oil revenue. If oil prices stay lower than the budget peg of $60 for longer and the budgeted oil revenue turns out lower than planned as well, the government could be paying N80 of each N100 earned to service debt. That’s a risky fiscal scenario for Nigeria. If 80 percent of revenues go to debt servicing, it means only 20 percent will be left to cater for non-debt recurrent expenditure, from payment of salaries to overhead costs and capital spending. With the Federal Government faced with the risk of a fiscal crisis and the economy still reeling from low growth, the CBN took the initiative to lower rates. But that is leading to investor apathy for local debt, with the government struggling to attract sufficient appetite.

Is Nigeria heading ...

the Federal Government conceptualised the projects in 2004 and gave them five years’ completion date. Fifteen years after, however, the projects are not yet completed, he lamented. “Brass LNG gulped $3 billion and Olokola $2 billion. This is aside that foreign exchange has changed significantly in the last 15 years, when the projects were awarded to contractors,” Ogbeifun told News Agency Nigeria. The $20 billion Brass LNG project in Bayelsa State and the $9.8 billion Olokola LNG project, located on the border town between Ogun and Ondo States, were initiated in 2003 and 2005, respectively. But the projects have been

stalled by a lack of FIDs over the years. The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Chevron, ConocoPhillips and Eni Group. But ConocoPhillips and Chevron have withdrawn from the project. OK LNG project, which was also designed to produce an initial 10 million metric tonnes per annum, was being built through a joint venture by the NNPC with Royal Dutch Shell, Chevron and BG Group. But all the international oil companies have pulled out of the project.

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Continued from page 4

expected the leverage level under the current administration to have stimulated growth in the economy, opposite is the case with subdued economic growth, recession in 2016 and slow growth at 2 percent levels as forecast by the IMF. Recently, in a bid to boost non-oil revenue, reduce budget deficit and end rising debt levels, Nigeria increased revenue target from tax remittances by 56.02 percent from N5.32 trillion in 2018 to N8.3 trillion in 2019. However, Tunde Fowler, executive chairman, Federal Inland Revenue Service (FIRS), who responded to a query sent by the presidency on the agency’s inability to meet targeted tax revenue, blamed this on sluggish economic activities coupled with low income from crude export due to fall in prices and production, which has weighed on company’s income levels.

•Continues online at www.businessday.ng

Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

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Monday 26 August 2019

BUSINESS DAY

NEWS

Multiple subscriptions: Investors consolidate 3.4bn shares, reduce unclaimed dividends - SEC IHEANYI NWACHUKWU

ecurities and Exchange Commission (SEC) says considerable progress has been made in the implementation of its consolidation of multiple shareholder accounts and electronic Dividend Mandate Management System (e-DMMS), adding that so far about 3.4 billion shares have been consolidated. Both measures were introduced as part of efforts to check the growth and possibly eliminate the unclaimed dividend menace in the nation’s capital market. The announcement was made by acting director-general of the SEC, Mary Uduk, while addressing the press at the end of the Second Quarter Capital Market Committee Meeting (CMC) in Lagos, weekend. Uduk said a total of 2.7 million share accounts have so far been captured under the e-DMMS.

She expressed satisfaction with the regularisation of multiple shareholders accounts since it was launched last year, describing investor response as very impressive. According to Uduk, with the help of the Multiple Subscription Committee, 3.4 billion shares have so far been effectively consolidated. The committee “informed the meeting that the Committee of Heads of Banking Operations had agreed to collaborate with the commission to display banners in (their) banking halls all over the country, sensitising the public on the regularization of multiple subscriptions of shares.” Similarly, stockbrokers and registrars are requested “to make available to the Committee on Multiple Subscription Account, on a periodic basis, the number of regularised accounts.” Company Secretaries of listed companies, she con-

tinued, “have also agreed to display similar information on their website and offices.” The meeting rose with a resolve that the SEC should engage relevant stakeholders on the e-Dividend and Multiple Subscription Accounts so as to ensure “that complete investor data are transferred among operators such as Brokers, registrars and the Central Securities Clearing System (CSCS).” SEC is also to help discourage unclaimed dividends from building up from securities of newly listed companies, just as modalities should be developed for validating shareholders’ registers, such that “registrars are furnished with incomplete information such as missing account numbers.” Speaking further, the Acting DG noted that the issue of unclaimed dividend is dynamic, given that as the old heap is being cleared by the registrars, new ones are mounting by the day.

Aviation Ministry queries NAHCON’s decision to prevent Skypower from carrying out hajj operations IFEOMA OKEKE

inistry of Aviation has kicked against the attempt to prevent the Skypower Express Airways as a charter operator for the ongoing hajj exercise to the Kingdom of Saudi Arabia (KSA) by the National Hajj Commission of Nigeria (NAHCON). The ministry insisted that Skypower Express as a Nigerian carrier had met all the necessary provisions, rules and regulations of the country and deserved to be allowed to benefit from charters, ad hoc flights, just like Flynas, a charter operator from Saudi Arabia and any other interested charter operator around the world. Reports obtained at the weekend queried the statutory power of NAHCON, which

granted it right to stop a charter operator like Skypower from the annual exercise to the holy land. One of the letters, dated August 9, 2019, and signed by legal adviser/aviation, Liman for permanent secretary and assigned to the chairman, NAHCON, insisted that the commission lacked the power to unilaterally exclude a carrier for the hajj exercise without liaising with appropriate government authorities before coordinating hajj and umrah activities. The correspondence declared that NAHCON did not liaise with the ministry on its circulars banning airlines on charter operations during hajj operation. It insisted that all issues of civil authority in Nigeria were superintendent by the Ministry

of Aviation as the aeronautical authority of Nigeria, noting that the Bilateral Air Service Agreement (BASA) agreed by the ministry between the Federal Republic of Nigeria and the Kingdom of Saudi Arabia was misrepresented in the commission’s letter. Liman in the letter insisted that cheater services were not discriminated by the BASA operational between the two countries, rather, it subjected the same to the approval of the contracting parties’ aeronautical authorities. The letter stated: “The decision whether or not Skypower Express or nay airline operators/companies of Nigeria should or can operate charter flight to Saudi is not for the commission to take as it is clearly beyond its mandate.”

AFC approves $230m loan for 9mobile growth plan JUMOKE AKIYODE-LAWANSON

fforts by the new board and management of 9mobile to reposition the company have started yielding positive results as the Africa Finance Corporation (AFC) has approved a $230 million loan facility to help it attain its long-term growth plans. The AFC is a pan-African multilateral development financial institution established to bridge Africa’s infrastructure investment gap through the provision of debt and equity finance, project development, technical and financial advisory services. Convinced by the initiatives so far taken by the Nasiru Ado Bayero-led Board and management headed by acting managing director, Stephane Beuvelet, to return the telco to the path of growth and profitability through cost efficiency, innovative product development and network efficiency, the AFC announced the approval of the loan on Friday, August 23. In a letter addressed to both Bayero and Beuvelet, the financial institution said, “Africa Finance Corporation is pleased to inform Emerging Markets Telecommunication

Services that it has received full Board approval to support the turnaround strategy of EMTS through a $230 million super senior debt investment.” The facility divided into two tranches would, among others, be used to repay historic vendor obligations, finance costs and an interest reserve account and payment towards quick win capex initiatives. Commenting on the approval, the Board chair, Ado Bayero, expressed happiness that 9mobile’s effort to recover previously ceded ground through an innovative growth plan was being supported by a prestigious pan-African financial institution as the AFC. “We can only express gratitude to the AFC for approving this loan facility that would not only help our business sustainability but also grow it to serve our teeming and loyal customers in Nigeria better. We have completely reviewed our operational, regulatory, financial and technical architecture to ensure we deliver quality services and this facility would go a long way in giving best in class services to Nigerians,” he said. Bayero further assured of the company’s resolve to continue its aggressive enhancement of network capacity and innovative features to

African private businesses investing in digital tech to drive growth MIKE OCHONMA

frican private businesses are optimistic about their prospects for growth over the next year and are investing in digital systems to support that growth, according to PwC Africa. PwC’s inaugural ‘Africa Private Business Survey,’ which surveyed 200 unlisted, privately owned retail, manufacturing and industrial companies with a yearly turnover of more than R150-million between February and April, showed that 81% of businesses rated their profitability over the past three years as having been good or fairly good – directly comparable to private businesses surveyed in Europe (84%) and Middle East (63.6%). However, African businesses stood out markedly from their European and Middle Eastern

counterparts with regard to whether they were optimistic and would grow their revenue over the next year, with 83% of African businesses indicating that they expect to grow their revenue compared to 54% in Europe and 49.5% in the Middle East. “Private businesses are aware of the long-term relevance of digitalisation and this helps to explain their optimism for future growth,” said PwC Africa private business leader, Gert Allen. When asked how relevant digitalisation and digital capabilities are to the long-term viability of the business, 81% of African companies said it was very relevant, which was in line with Europe and the Middle East. The survey found that 25% of companies were set to invest more than 5% of their total expected investment into new www.businessday.ng

digital technologies, mostly from their in-house resources or bank financing, with some considering private equity or venture capital. While the emphasis falls on different digital technologies depending on the market, African businesses highlighted process automation, the Internet of Things and product and service enhancement using digital technologies as their key focus areas. “The differences in emphasis between Europe, the Middle East and Africa are partly owing to more developed markets having already invested in some digital technologies, but 55% of African businesses surveyed are willing to invest between 3% and more than 5% of their total investment in new and emerging technologies to support their future growth and competitiveness,” he said. https://www.facebook.com/businessdayng

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guarantee optimum value to customers. He added, “Our turnaround efforts are well and truly underway. We had promised when we took over that we would justify the confidence in our brand by making significant investments that will improve the value Nigerians get for using 9mobile. This is part of fulfilling our promise.” Also commenting on the transaction, 9mobile’s chief financial officer, Phillips Oki, said, “The success of this transaction by way of the approval of the Board of Africa Finance Corporation is a sound affirmation of our belief that the fundamentals of the 9mobile business are indeed strong. It is also an attestation to the fact that the operational restructuring and financial reengineering we have done since we assumed ownership have launched 9mobile on the path of growth and profitability. With this facility, our subscribers, staff and vendors should get ready to switch on to better days with 9mobile. We will reclaim every lost ground in the market in the coming months.” It would be recalled that the new Board led by Bayero took over 9mobile in November 2018 following a successful acquisition by Teleology Nigeria Limited.

Monday 26 August 2019

BUSINESS DAY

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Monday 26 August 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

MICHAEL PEEL IN BIARRITZ AND KIRAN STACEY IN WASHINGTON

he White House has insisted Donald Trump remains committed to the trade war with Beijing after the US president admitted that raising tariffs on Chinese goods had given him “second thoughts”. The White House issued a statement on Sunday morning saying Mr Trump’s only regret was not raising levies higher, after the president appeared to cast doubt on his own policy during the G7 summit in the French coastal resort of Biarritz. The apparent confusion added to jitters over the state of the global economy as the gathering of leading economies hosted by France’s president Emmanuel Macron held talks on Sunday on averting a global slowdown. The three-day meeting also brings together Germany, Japan, the UK, Italy, Canada and Donald Tusk, president of the European Council of EU leaders. Mr Trump grabbed attention earlier on Sunday when he appeared to suggest a possible rethink over escalating a trade tariff war with China, just two days after increasing duties on almost all Chinese imports. Asked if was having second thoughts about imposing additional levies in Beijing, the US leader said he was. “I have second thoughts about everything,” he added, in remarks to the media on the margins of his first bilateral meeting with Boris Johnson, the UK prime minister.

US says Donald Trump regrets not being tougher on China

President has ‘second thoughts’ about trade war, then White House restates commitment to tariffs

But a White House spokesperson said the president’s answer had been “greatly misinterpreted”. “President Trump responded in the affirmative — because he regrets not raising the tariffs higher,” the spokesperson added. Mr Trump also defended his

stewardship of the US economy, saying he was unworried about the falling stock market. “The market’s doing great,” he said. “The country is doing great. People were telling me yesterday, people are trying to copy the formula.” He told reporters: “You people

want a recession because you think maybe that’s the way to get Trump out.” And he promised a partial trade deal between the US and Japan would be signed imminently. “We’ve agreed to every point, now we’re papering it, and we’ll be

signing at a formal ceremony,” the president said. Shinzo Abe, Japan’s prime minister, sounded a slightly more cautious note, saying there was still “some work that needs to be done”, but that the “goal” was to sign the deal next month. Nonetheless, fears about the health of the world economy preoccupied other leaders as they met on Sunday in the luxury Hôtel du Palais perched on the Basque region’s Atlantic shores. Washington’s trade policies towards China and other countries have provoked anxiety in Europe because of their potential to damage global growth, and because EU countries face the threat that they will be next to be hit with US tariffs. G7 member officials underscored the entrenched policy divisions but insisted they were still hopeful of finding common ground, including on the fraught question of reforming the World Trade Organization. “There was agreement that uncertainty could contribute to an economic downturn,” one diplomat said of the leaders’ talks on the world economy. “There are different ideas on how to deal with that. Maybe WTO reform could be part of the solution.”

Hong Kong police fire tear gas Israeli drone crashes while as protesters hurl petrol bombs another explodes in Beirut

Tension returns to the financial centre after a lull in violent clashes PRIMROSE RIORDAN AND NICOLLE LIU IN HONG KONG

ong Kong police used water cannon for the first time and fired tear gas at protesters as the political crisis afflicting the Asian financial hub for months turned violent for a second consecutive day. Protesters on Sunday afternoon blocked roads and hurled petrol bombs at police hours after family members of the police held a separate rally elsewhere in the city. They called on Carrie Lam, the city’s chief executive, to formulate a political solution rather than relying on the police to quell the movement, as the force has become a target of anger for its handling of the crisis. Ms Lam’s push to pass an extradition bill that would have allowed criminal suspects to be sent to mainland China for the first time sparked the protests in June. The proposed law has been suspended but the demonstrators’ grievances have expanded to encompass a range of demands, including an

independent investigation into the police’s handling of the protests and greater democratic freedoms in the Chinese territory. A rally on Saturday also ended in violent clashes, with police saying they had arrested 29 people after alleging that protesters had thrown projectiles and started fires. Ms Lam attempted to take advantage of the lull in violence to consult with power brokers and establishment figures in the city at her official residence on Saturday to determine how to set up a dialogue with the protesters. “The past week was a little calmer, and we’d like to take this opportunity to start the conversation,” she said, referring to the rally last weekend. But the meeting came after a long period during which she has refused to grant any concessions or present any substantive plan in public to deal with the crisis. The crisis has raised questions about the “one country, two systems” model established after the handover of Hong Kong from British to Chinese sovereignty, which granted the territory a high degree of autonomy from Beijing. www.businessday.ng

Crash came shortly after Israel confirmed it bombed Iranian forces inside Syria ILAN BEN ZION IN JERUSALEM CHLOE CORNISH IN BEIRUT

wo Israeli drones have crashed in Beirut with one exploding next to an office belonging to Hizbollah, according to the Iran-backed Shia paramilitary group as well as Lebanese officials. Israel has not commented on the drones, which fell in the Hizbollah-dominated district of the Lebanese capital early yesterday morning. But the crash came shortly after Israel confirmed it had bombed Iranian forces inside neighbouring Syria, foiling what Benjamin Netanyahu, the prime minister, said would have been “an attack against Israel”. Israel’s military said on Saturday night that it had prevented “multiple killer drones” attacking Israel “by striking Iranian Quds Force operatives and Shia Militia targets in Syria”. Iran, which Israel and the US

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accuse of spreading its influence in the Middle East through armed proxy groups such as Hizbollah, has a military presence in Syria, where it supports the ruling Assad regime in Syria’s eight-year civil war. The air strikes and drone activity are the latest signs that the proxy war between Israel and Iran is heating up. Unconfirmed reports that Israel has also attacked Iran-backed Shia militias in Iraq in recent weeks have stoked fears that Lebanon and Iraq could be drawn into the conflict. Saad Hariri, the Lebanese prime minister, said on Sunday that the Israeli aircraft had violated Lebanon’s sovereignty. Israel has frequently targeted Hizbollah inside Lebanon, which shares a border with Israel. The first Israeli drone fell in Beirut’s southern Dahiyeh suburb without causing damage, while the second exploded nearby in mid-air, according to a statement by the Lebanese @Businessdayng

army. The explosion damaged a building housing Hizbollah’s media operations. “Hizbollah did not bring down any aircraft,” said Moha m ma d A f i f, Hi z b o l l a h’s spokesperson. Three people suffered minor injuries, the Lebanese National News Agency reported. The Israeli bombing in Syria on Saturday night south-east of Damascus came just days after unnamed US officials told the Associated Press that Israel was behind a series of strikes against Iranian proxy groups in Iraq. Syrian state media said air defences intercepted incoming missiles. There were no confirmed casualty reports. Mr Netanyahu said that “Iran has no immunity anywhere. Our forces operate in every sector against the Iranian aggression.” On Sunday, Yoav Galant, a former general and member of Mr Netanyahu’s cabinet, said Israel “will not allow” Iran to use Syria to “transfer balance-changing weapons to Lebanon”.

Monday 26 August 2019

BUSINESS DAY

NATIONAL NEWS

Software sector braces for a split among leading companies Predictions of IT downturn leave investors hunting for who is best placed to ride it out RICHARD WATERS IN SAN FRANCISCO

resh from a powerful three-year surge, the software industry is entering a new period of uncertainty. But for companies that look as if they can stay the course, Wall Street’s enthusiasm is undimmed. Shares in Salesforce, the leading software-as-a-service player, surged more than 6 per cent on Thursday after a quarterly earnings report that dispelled recent worries about flagging growth. Meanwhile, tax and small business software company Intuit, which has seen its stock market value jump nearly threefold over the past four years, to $71bn, forecast another solid year of growth, sending its shares up 5 per cent. On the same day, however, shares in data centre software company VMware fell more than 5 per cent, as it reduced its key licence revenue forecast for the rest of this year and unveiled the two largest acquisitions in its history, for a combined $4.8bn. Meanwhile, data analytics company Splunk, which reported earnings the day before, dropped 8 per cent on a disappointing cash flow forecast. The divergence points to a growing separation in the expected fortunes of leading software companies, as Wall Street searches for those best placed to ride out what many fear will be a broader downturn in IT as big customers pull in their spending. With valuations in the sector looking highly stretched after the long rally, recent slips have been punished severely. Shares in Zoom — the video conferencing company that debuted on Wall Street earlier this year — currently change hands for nearly 50 times this year’s expected revenue, a symptom of sky-high expectations for many of the new cloud-based players. The software industry has just been through “a once-in-20-years infrastructure cycle”, said Brad Zelnick, software analyst at Credit Suisse in New York. That has been capped by a surge in sales over the past 12 months, he added, driven by a number of factors, including a US tax cut, a shift to “hybrid cloud” platforms that has seen many companies overhaul their basic IT infrastructure to combine their existing facilities with new cloud services, and a new urgency to accelerate their “digital transformation” to make their businesses more agile. After that burst of growth, yearon-year comparisons are starting to look challenging. According to Mr Zelnick, infrastructure software companies like VMware are losing momentum compared to cloud services that are seen as critical to how businesses are repositioning themselves in the digital age. Along with Adobe, Salesforce is “one of the first two cars on the digital transformation freight train,” he said. Uncertainty ahead Two things are complicating the picture as the software industry faces more uncertain times.

One involves the business model changes the sector has been going through as it adjusts to a new reality in which cloud-based subscription services come to represent a bigger share of sales. Splunk, for instance, said that its disappointing cash flow forecast reflected a move to a new way of charging which will see more payments delayed into future periods. VMware, meanwhile, blamed a disappointing licence revenue forecast for the rest of this year on an accelerating shift to subscriptions in part of its business, which also results in more revenue being deferred until later periods. Perhaps inevitably, however, Wall Street chose to see the disappointing forecasts as partly a sign of the dark economic clouds that are starting to gather. Pointing to the economic uncertainty, Pat Gelsinger, VMware’s chief executive officer, conceded: “There is uncertainty, and nobody is immune from that.” The second factor complicating the picture has been a rise in mergers and acquisitions, as software companies look for new avenues of growth. This week, VMware — which is majority owned by Dell — announced two purchases for a total of $4.8bn — security company Carbon Black, for $2.1bn, and cloud tools developer Pivotal, which had been majority owned by Dell, for $2.7bn. According to Mr Gelsinger, the deals reflect a shift to “hybrid cloud”. But VMware’s purchases received a mixed reception from Wall Street analysts, who questioned why it was acquiring the minority in Pivotal when Dell already controlled the company, and whether Carbon Black was too small a company to make VMware a real player in the security market. “The organic growth is starting to slow down, so they’re starting to turn to acquisitions,” said Daniel Elman, an analyst at IT research firm Nucleus Research. Growth in Salesforce’s original sales software fell to 13 per cent this quarter, compared to the 22 per cent growth in its newer customer service business. “They’ve dominated the market for quite a while and it’s starting to get tapped out,” Mr Elman added. ‘We see a buying environment’ The acquisitions have also weighed on Salesforce’s profit margins — contributing to longrun unease on Wall Street about the company’s failure to boost margins more as its business has grown. Announcing its latest quarterly figures this week, however, Salesforce predicted a further boost to the profit margins on its “organic”, or existing, businesses in the coming months, even as it steps up the acquisitions. “We do make trade-offs between our organic growth and margin,” said Mark Hawkins, the company’s chief financial officer. “We’ve made considerable progress over the years, but we know there’s more to be done.” www.businessday.ng

UK will refuse to pay £39bn divorce bill in no-deal Brexit

Johnson says Britain will withhold some of the money if it leaves without an agreement SEBASTIAN PAYNE IN BIARRITZ AND JAMES BLITZ IN LONDON

rime minister Boris Johnson on Sunday said the UK would not pay the £39bn Brexit divorce bill in full in the event of Britain leaving the EU without a deal on October 31. Ahead of a meeting at the G7 summit in Biarritz with Donald Tusk, president of the European Council, the prime minister said that while the chances of a revised Brexit withdrawal agreement being finalised were “improving”, it was “touch and go” whether a deal could be struck. Mr Johnson said that if the UK left without an agreement, it would not be obliged to hand over a significant part of the £39bn divorce bill that it agreed to pay to the EU as part of the withdrawal agreement negotiated by Theresa May, his predecessor. The new prime minister is seeking to renegotiate the agreement — notably by removing the so-called backstop that is intended to prevent the return to a hard Irish

border — although the EU has repeatedly said the accord cannot be reopened. “If we come out [of the EU] without an agreement it is certainly true that the £39bn is no longer, strictly speaking, owed,” Mr Johnson told ITV. “There will be very substantial sums available to our country to spend on our priorities. It’s not a threat it’s a simple fact.” He also said that “very substantial sums” available in the event of a no-deal Brexit could be used to support farmers and “all sorts of areas that are important to our people”. Mr Johnson appeared keen to temper expectations about a breakthrough on a revised Brexit deal, while also emphasising the EU was engaging with him. He told Sky News there was still an opportunity to strike a deal, noting a “change of mood” among EU leaders. Mr Johnson has repeatedly said the UK must leave the EU on the designated departure date of October 31, with or without an agreement. Last week a senior French gov-

ernment official said a no-deal Brexit would not mean the UK could avoid its billions of euros of financial obligations arising from the country’s departure from the bloc. Britain’s commitment to pay £39bn to the EU as part of Mrs May’s withdrawal agreement was one of the most contentious parts of the Brexit negotiations, particularly for Eurosceptic MPs. Some of the £39bn arises because the UK has pledged contributions towards the EU budget that have not yet been paid. Britain is also being asked to contribute towards EU staff pension costs that were incurred before Brexit. Two Sunday newspapers reported that Downing Street was eyeing a general election in midOctober, based on the premise that if the Conservatives won it would give Mr Johnson a mandate to secure a revised Brexit deal with the EU. But Number 10 insiders said that the public continues to strongly oppose an election and the government will not be seeking one, focusing instead on delivering on the outcome of the 2016 Brexit referendum.

Global cities begin to shrink as inner areas empty out Populations of Paris and New York City decline while immigration sustains London JUDITH EVANS IN LONDON

hen Kelly Simon cofounded the website “Paris, je te quitte” (Paris, I’m leaving you) five years ago, she was in her mid-20s and already felt leaving the French capital would be a rite of passage. “After spending your 20s in Paris, you start thinking about your future: first child, more space, be closer to nature . . . what’s next after Paris?” she said. The website, originally a blog, but now offering job listings, property finding services and coaching, has found an eager audience each month of tens of thousands whose longing to escape is showing up in

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the data: inner Paris is shrinking. The number of people living in the Paris departement, or administrative area, dropped by an average of 11,900 people a year between 2011 and 2016, the most recent figures available, according to the national statistics agency. Paris’s urbanism institute, Apur, forecasts that the decline of the inner city population will continue for about another six years. It is a sharp contrast with the urban renaissance that has taken place in many of the world’s major cities over the past 20 years, but Paris is not alone. NewYorkCityshedanet39,500people in 2018 and 37,700 the year before, reversing the previous upward trend. @Businessdayng

In London, the population is still growing, bolstered by births and international immigration; but when it comes to internal migration, the net movement of people out of the UK city totalled more than 100,000 in the year to June 2018. Global cities may be deeply plugged into the world economy, but that no longer guarantees their populations will grow. According to Yolande Barnes, chair of the Bartlett Real Estate Institute at University College London, the key reason is high land and property prices following decades of population growth. “It’s land economics at work, in that these cities have become very expensive,” she said.

Monday 26 August 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Bundesbank’s Weidmann opposes new stimulus German central banker sees no reason to panic over slowdown in Europe’s biggest economy MARTIN ARNOLD IN FRANKFURT

he head of Germany’s central bank has announced his opposition to launching a major monetary or fiscal policy stimulus package in response to the recent slowdown in Europe’s biggest economy. Jens Weidmann said it was not time to “panic” even though the German economy was heading for its first recession in six years after shrinking slightly in the second quarter, hit by US-China trade tensions, weak global growth and fears of a chaotic UK exit from the EU. His comments show how divided the world’s economic leaders are on the best way to respond to signs that the decade-long boom in the global economy is about to come to a shuddering halt. Positioning himself against a sizeable resumption of bond-buying by the European Central Bank, Mr Weidmann said he was “particularly cautious about government bond purchases” because they could blur the line between monetary and fiscal policy. “The question is whether new measures are necessary based on our inflation outlook, particularly

if side effects grow and effectiveness diminishes,” he told the Frankfurter Allgemeine Sonntagszeitung in his first interview since being passed over in the race to succeed Mario Draghi as president of the ECB. His comments put Mr Weidmann at odds with market expectations that the ECB will launch a sizeable package of monetary easing measures next month, including a cut in interest rates further into negative territory and a resumption of its bond-buying programme. “We are in an economic slowdown,” the Bundesbank president said, adding that politicians would need to provide fiscal stimulus if the German economy fell into a deep recession. However, he said that “automatic stabilisers” built into Germany’s generous tax and welfare system should be the first measures relied on to offset economic weakness. While he said the German government still had some fiscal headroom before running up against its constitutional ban on running large budget deficits, he argued that there was no need for a large-scale stimulus programme.

Customers vent fury over British Airways handling of pilots’ strike Passengers face problems rebooking cancelled flights TANYA POWLEY, TRANSPORT CORRESPONDENT

assengers have vented their fury at BA’s handling of a planned walkout by pilots next month. Members of the British Airline Pilots’ Association, Balpa, which represents a majority of BA’s pilots, confirmed plans to walk out on September 9, 10 and 27 after pay talks between the union and Britain’s flag carrier broke down. Over the weekend, passengers took to social media to vent their frustration about being unable to get through to BA as they sought to re-book their cancelled flights. “Impossible to contact BA,” tweeted one. “Cant even get in a queue — all the lines just hang up. Not as if this has been sprung on them at the last minute. The pilots have been threatening strikes for months. Get your act together.” A user named @sonicrog tweeted: “After working hard all year the strike has left my young family with no summer holiday together. I can’t begin to describe how awful this is. You and your staff have let them down and I’ll never fly with you again.” BA later apologised after admitting that some passengers were mistakenly told that their flights were cancelled on non-strike days. BA admitted its customer service phone lines were busy but said its

website was working fine. “We are doing absolutely everything we can to prevent this unfair action from taking place and ruining our customers’ travel plans,” said BA. “Airlines have a very complex operation and during times of widespread disruption, there can be knock-on effect on to flights on other days,” it added. Last month, members of Balpa voted 9-1 in favour of strike action, on a 90 per cent turnout. BA subsequently failed in an attempt to block mass walkouts through a court injunction. Balpa said the decision to go on strike was a “last resort” and had been taken with “enormous frustration at the way business is now being run”. It added that “it is clear following discussions with members over the past few days that BA’s most recent offer will not gain the support of anywhere near a majority of its pilots”. The airline said it had made a “very fair offer” and it was “completely unacceptable that Balpa is destroying the travel plans of tens of thousands” of customers. BA said its pay offer of 11.5 per cent over three years was fair and highlighted that the Unite and GMB trade unions, which represent nearly 90 per cent of all BA workers, had recommended the same pay offer to their members. www.businessday.ng

Jens Weidmann’s comments put him at odds with market expectations that the ECB will launch monetary easing measures next month © Reuters

Johnson & Johnson faces court judgment over opioids crisis Oklahoma to decide whether healthcare company contributed to deadly epidemic HANNAH KUCHLER IN NEW YORK

he reputation of Johnson & Johnson, the world’s largest healthcare company, is in the dock in Oklahoma, where a judge is expected to rule on Monday over claims that it sowed the seeds of the US opioid crisis. It will be the first verdict on whether J&J’s sales of opioids and raw materials contributed to an epidemic described by the Oklahoma attorney-general in his opening remarks as the “worst man-made public health crisis in the history of this country and this state”. He is seeking up to $17bn to cover the cost of treatment, healthcare and criminal justice bills. J&J — best known for consumer products such as “no more tears” baby shampoo — owns the Janssen pharmaceuticals business that sold two prescription opioids. Until 2016, it also owned units that farmed poppies and supplied the raw material to opioid makers including Purdue Pharma. “J&J’s whole public persona and reputation is built as ‘family friendly’ and ‘we care about your health’. So they couldn’t really

admit any of their products injure people,” said Carl Tobias, a law professor at the Richmond School of law. “They will appeal until they can’t appeal any more.” The verdict comes as negotiations are under way that could lead to a settlement which many have compared to the $206bn deal with tobacco companies in the 1990s. The defendants — up to 22 opioid makers, distributors and pharmacies — are trying to establish a class that could enter talks with the almost 2,000 municipalities pursuing them. Even if those cases settle, the majority of states will still fight for compensation from opioid makers. If J&J loses on Monday, it could open the door to more cases against the company and push others to settle sooner. While Purdue Pharma is considering bankruptcy, and fellow opioid maker Insys has already filed for Chapter 11, J&J’s much deeper pockets make it an attractive target for legal action. Shares in J&J fell in May when the trial opened. The potential legal bills from opioid cases come as the company is battling lawsuits that claim its talcum pow-

der caused cancer, which the company denies. The talc cases that J&J have lost have had their verdicts overturned, or are awaiting appeal. If J&J wins, it may not be a true bellwether for the other cases. J&J’s opioid products only had a small market share in Oklahoma and the state is pursuing them purely on a “public nuisance” claim, whereas some other cases are relying on claims such as fraud. J&J — which has a reputation as a tough litigator — was the only company in the dock after Purdue Pharma, owned by certain members of the Sackler family, settled with Oklahoma for $270m and Teva, an Israeli drugmaker, settled for $85m. Elizabeth Burch, a professor at the University of Georgia School of Law said: “This is the first shot so everyone is looking at it to see how it goes, what it tells us about future lawsuits. But it is a pretty narrow case — it is just about J&J now Purdue and Teva settled out.” Legal experts are divided on the likely success of Oklahoma’s central claim that J&J’s sale of opioids and the raw materials to create opioids caused a “public nuisance”.

EU citizens with iPhones left in limbo over Brexit residency application UK Home Office declines to confirm whether app for Apple devices will be ready for new deadline

DONATO PAOLO MANCINI IN LONDON, PATRICK MCGEE IN SAN FRANCISCO AND BETHAN STATON IN LONDON

U nationals seeking to secure their residency rights in the UK ahead of the government’s new deadline ending freedom of movement in a no-deal Brexit face being unable to apply on their iPhones. The Home Office has declined to say when the app to apply for the EU settlement scheme would be ready for use on Apple iPhones, which account for just under half the smartphones used in the UK, according to data company StatCounter. The uncertainty potentially af-

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fects hundreds of thousands of people, who can only prove their identity to apply for the EU settlement scheme, which ensures EU citizens’ residency rights in the UK after Brexit, by using the EU Exit app on an Android device or by post. Operators for the scheme’s helpline are telling callers they cannot confirm whether the EU Exit app will be available on Apple iPhones before October 31, when prime minister Boris Johnson insists the UK will leave the bloc, with or without a deal. Once individuals have had their identity confirmed they have to complete a second step, an application form online or via the app. Downing Street was accused @Businessdayng

of causing confusion on Monday when it said freedom of movement for EU nationals would end immediately if the UK left the bloc without a deal. However, the Home Office also said on Monday that the deadline for EU nationals to apply for settled status remained December 2020, regardless of whether a Brexit deal is agreed. It has not offered any clarification as to how people will be able to prove their rights to reside in the UK if freedom of movement ends and they have not applied for settled status. Just over 1m out of the 3.6m eligible have so far applied successfully, according to Home Office figures.

Monday 26 August 2019

BUSINESS DAY

ANALYSIS

FT Love in the workplace is an endangered affair

Online dating is the new normal, but getting to know a partner at work has many advantages MIRANDA GREEN

here are many benefits to living near to a world-class teaching hospital — the time the paediatric team at St Mary’s in west London saved my 17-month-old daughter’s life certainly springs to mind. Since then, my affection for National Health Service staff has been increased by eavesdropping. My journey to work goes through Paddington station, allowing me to overhear the St Mary’s trainee and junior doctors discussing their love life. I’m not planning to make my fortune writing a medical Mills & Boon any time soon, so here is what I have been able to glean from behind my FT: the training placements seem to dictate dating opportunities, and there is a fair bit of vetting by the peer group as these young people weigh up the suitability of potential partners they work and study alongside. Because it’s a seven-year course, cursed with long hours and blessed with intense, life-and-death situations to face together, this medical mating ritual seems as sensible — and inevitable — as it always did. But the billing and cooing on the Bakerloo line bucks the trend. Researchers have mapped the extraordinary rise of internet dating and its effects on other ways of meeting romantic partners — all have declined, including via family, school or work, as the lonely flock online in search of perfect strangers. Michael Rosenfeld of Stanford University found, in a study a few years ago, that the internet provided a significant boost to the love lives of those who had “thin” opportunities — his term not for sizeist preferences but for a paucity of available partners offline — including gay people and older

singletons. Meanwhile, the percentage of those who met “through or as co-workers” was being “crowded out” by the efficient sorting algorithms on dating sites. So much for the office romance, then? I have my doubts, and for two reasons. Which, if I’m wrong, can also serve as arguments in a campaign to revive the tradition. (We are talking here about looking for a partner, by the way, not the dismal behaviour of #MeToo gropers.) First, there is surely no better way to meet than at work, not least because the candidates are actually physically present for most of your waking hours. Research shows that we value proximity in our choice of mate. According to Viren Swami, a social psychology professor at Anglia Ruskin University, as many as half of us end up with someone who lives within a four-mile radius. Aside from this slightly-uninspiring thirst for convenience, there are other pluses to falling for someone at work. You are likely to be exposed to their best and worst traits and they to yours. Maybe you had to negotiate and establish reciprocity — this comes in handy later. You have shared experience and presumably similar things make you tick. Eyes locking above surgical masks is a feature of hospital love stories (think Grey’s Anatomy’s Meredith and Derek) but we all have equivalents — Dawn and Tim in The Office bonded while colluding against an appalling boss. And these relationships have a good chance of surviving. Taking our young doctors’ training years as a promising field of opportunities to find love at work, the assumption has recently been debunked that medical marriages are doomed because of long hours and high pressure — that should cheer anyone in a demanding environment.

Transylvania’s growing reputation as the new Tuscany Ancient Saxon villages and rustic cuisine are luring travellers to the bucolic region in Romania ANDREW EAMES

t was an Italian, the son of a count, who aired the idea. Transylvania, said Giulio da Sacco, was the new Tuscany. We were tucking into an al fresco lunch beside a Transylvanian sheepfold, talking about the increasing appeal of this relatively obscure region of eastern Europe to a certain kind of traveller. The moment he mentioned Tuscany, I looked again at our immediate surroundings. The long, linencovered table under shady oaks in a valley of wildflower meadows, above an Italian-sounding village — Floresti — of elderly ochre-tiled houses dominated by an ancient, fortified church, shimmering in the summer sun. Yes, this could be Tuscany, by another name. And at another price, too. On the table were nine different types

of freshly made cheese — goat’s, sheep’s and cow’s — with tomatoes, peppers and bread made with potato flour. There was grilled goat on the fire, which we were going to have with polenta, known here as mamaliga. All made by the shepherd and his wife, just for us, for the princely sum of €10 a head. So I could see what Giulio meant. I could close my eyes and imagine myself in “Chiantishire”, especially as the colourless liquid in my glass, a homemade plum brandy called palinka, had enough velocity to fly me there all by itself. Until 100 years ago Transylvania was part of the Austro-Hungarian empire, but at the end of the first world war it was handed over to Romania, trapping hundreds of thousands of German-speaking Saxons behind a new border. The Saxon villages, and their lifestyles, were preserved in aspic by the change. www.businessday.ng

Brazil: Jair Bolsonaro pushes culture war over economic reform Eight months after taking office, the president is more interested in playing identity politics over guns, faith and the Amazon ANDRES SCHIPANI IN TREZE DE MAIO

lton do Nascimento cocks his Brazilianmade .380 handgun and smiles. “Finally, we have a president who understands what we want,” he says, sporting a T-shirt with the map of Brazil and the face of the country’s far-right leader, Jair Bolsonaro, stamped on it. “I believe”, reads an inscription — and he is far from alone. Mr do Nascimento is a manager at a supermarket in the rural town of Treze de Maio, in the southern state of Santa Catarina, where more than 89 per cent of the population voted for Mr Bolsonaro in last year’s election. That made it the municipality where the president secured the largest share of voters. He attributes the town’s support for the former army captain to Mr Bolsonaro’s socially conservative pledges. “Religion, family, a strong hand” were key when he decided to run Mr Bolsonaro’s electoral campaign in Treze de Maio. “The guns issue” was also crucial, says the 28-year-old who owns three firearms, is training to be a police officer and whose brother is training to become an evangelical pastor. It is supporters such as Mr do Nascimento who underline the cleavage at the heart of Mr Bolsonaro’s eight-month-old government. With the economy still struggling to pull out of a prolonged slump, he is under pressure to push hard for further economic reforms on top of the expected passage of a shake-up of Brazil’s expensive pension system. Without a strong policy agenda, some economists fear the country could slip back into recession. Mr Bolsonaro, however, is much more comfortable playing identity politics. The president, his sons and several of his key aides want Brazil to be a central player in what they see as a global culture war, taking nationalistic

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inspiration from Donald Trump, Viktor Orban and Benjamin Netanyahu. After attempting in the early months of his presidency to strike an occasional pragmatic note, Mr Bolsonaro has in recent weeks stepped up his campaigning around the issues of guns and Christianity. He has repeatedly slammed “cultural Marxism”, “gender ideology” and “environmental psychoses” over accelerating deforestation. “We are going to get rid of all this crap in Brazil — crap that is corrupt and communist,” he said last week. Treze de Maio, or May 13, takes its name from the date when slavery was abolished in Brazil. But the mainly white town is the sort of place where Mr Bolsonaro’s cultural battles resonate. One woman walking down the road boasts a T-shirt reading “the wise woman studies the Bible”. Cars sport faded windscreen stickers supporting Mr Bolsonaro. The owner of a café imitates monkey howls as three Ghanian immigrants walk past his shop. Then, there are the guns. Like many of his neighbours, Mr do Nascimento affirms that he is “passionate about guns”. Although the president backs his economic team, the reforms they have been preparing are not close to his heart, government insiders say. Some fear that the president, with an eye on re-election in 2022, will use his political capital on his social agenda in order to stir his most loyal supporters. “Once the big economic things are done, that’s when we would start getting into potentially spooky stuff,” says a senior diplomat in Brasília. Once on the fringes of politics as a result of his hostile remarks about black Brazilians, women and homosexuals, as well as his admiration for torturers during Brazil’s 1964-85 military dictatorship, Mr Bolsonaro was last year propelled to the presidency with the support of more than 57m voters. @Businessdayng

Frequently described as a “Tropical Trump” for his crude, rightwing views and abrasive use of social media, his rise echoes a broader reaction in other countries to cultural liberalism. For Brazilians addicted to social media, anxious about criminal violence, disappointed by falling living standards and angry about widespread graft during over a decade of leftwing rule, he offered simple solutions: a hard line on criminals, continuation of the crackdown on corruption and a return to conservative social “values”. Brazil’s rapidly growing evangelical faithful, embattled security establishment and agribusiness lobby provided enthusiastic backing. Setting himself up in opposition to the centrist and leftwing parties that have largely run Brazil for more than three decades since the military dictatorship ended, Mr Bolsonaro warns constantly about a red menace in the country and the risk of following the path of Venezuela. Eduardo Wolf, a professor at São Paulo’s Pontifícia Universidade Católica, says the president believes he “embodies the values of the nation, family, religion, security”. “I believe Bolsonaro has not only no ability to govern, but also no interest in issues that classically characterise governing. What he is interested in, and also his closest, most ideological members of government, his sons and his guru . . . is in the cultural war.” He adds: “It may consume the government with its follies, but it is not an act of governing, you do not govern by waging cultural war. The cultural war is symbolic.” During the first few months of his presidency, Mr Bolsonaro made an effort to moderate his tone. But in recent weeks, the president has ramped up his culture war rhetoric — even as the government’s economic agenda is reaching a critical phase in Congress.

BD Money

Monday 26 August 2019

BUSINESS DAY

PERSONAL FINANCE

cover

EQUITY

INVESTING

What does it mean to be wealthy?

With money market rates at over 15%, nobody wants bonds

How bellwether stocks rank by dividend yield

Lessons from Nigeria’s ‘grim’ economy entrepreneurs must

“Sorry, but to me, a billion is a million million and I won’t be persuaded otherwise. So, what, to you, is wealth?” writes Richard Templer in his bestseller The Rules of Wealth.

Nigeria’s money market instruments are currently offering mouth-watering yields, and this is dampening investor appetite for long-duration local assets as global and domestic risks continued to raise red flags.

Dividend yield for Nigerian equities has risen on the back of low stock prices following the rout on Nigerian Stock Exchange (NSE) which has depressed most liquid and capitalized stocks.

As spelt out in the holy bible “money answereth everything”, while that is true, it is expedient to note that hard work does not guarantee wealth, smart work does.

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Monday 26 August 2019

BUSINESS DAY

BD Weekly Tenders Wrap-up Tenders Wrap-up Adekunle Ajasin University, AkungbaAkoko, Ondo State: as called interested contractors with requisite competence in construction for pre-qualification and tender for the remodelling of its proposed business school in Akure. The project bid fee is N100,000 and the bid documents including pre-qualification and financial tender will be collected in person not later 10am 24th, September. It should be address to the Registrar, Adekunle Ajasin University, Akungba, Akoko, Ondo state. Creative Associates International: a dynamic, fast-growing global development firm that specialises in education, economic growth invites firms to express interest in submitting offers for the printing and distribution of educational materials in Northern Nigeria. All offers must include the cost of shipment to Sokoto & Bauchi before 6th, September. The contractor must demonstrate capability, based on technical expertise, management capability, workload capacity and financial resources to implement and manage this contract. Candidates may obtain an electronic copy of the RFP including terms, conditions, and specifications by visiting http:// www.creativesassociatesinternational.com/ procurement-consultant-notices/ The Nigerian Petroleum Development Company Limited (NPDC): has tendrerd an opportunity for contract for the procurement of four Single Cameron Xmas Trees and Accessories for Oredo Wells 12ST and 9T in Oredo Field (OML 111). Visit the Nigerian Petroleum portal www.nipex-ng. com for further details. Tenders are expected by 3pm Thursday, September 12. The federal ministry of water resources: is inviting bids for the supply of leak detection equipment (IFB No. EKSWC/3NUWSRP/ NCB/GS/002). The bid security is not less than 2.5% of the total bid price, delivery period is 90 days, and location is #NUWSRP, Ado Ekiti.

Bidding will be conducted through the National Competitive Bidding (NCB) and interested eligible bidders may obtain further information from the project coordinator of 3rd National Urban Water Sector Reform Project (#NUWSRP) and inspect the bidding document. Emails can also be sent to ekiti3nuwsrpspiu@yahoo.com, kayessus@yahoo.com, adebolaw@yahoo.co.uk. Bids must be delivered to the address before 12 noon on September 17, 2019. The Central Bank of Nigeria (CBN) on be-

half of the Debt Management Office: notified that the Federal Government of Nigeria Treasury Bills of 91-, 182 and 364day tenors amounting to N244,372,790,000; N38,751,846,000; and N145,475,021,000 respectively would be issued by Dutch action on Thursday, August 29, 2019. All money market dealers are expected to submit bid through the CBN S4 WEB INTERFACE between 9.00am and 11.00am on Wednesday, August 28, 2019. Each bid must be in multiple of N1,000 subject to a minimum of N50,001,000 and authorised dealers can submit multiple bids. The Federal Ministry of Agriculture and Rural Development: is requesting for expression of interest on its IFAD Assisted Value Chain Development Programme. Interested bidders will be engaged for engineering design and supervision especially on agriculture, agriculture production services, market enterprise, development & advisory services, market/value chain infrastructure services and procurement advisory services among others. The criteria that will be used to short list applicants include – evidence of legal status of the firm which should not be less than seven years of relevant working experience.; profile of ownership of the firm including ownership, technical and managerial capability of the firm and experience of working in similar geographical region. Expression of interest must be delivered in a written form to the following: - The National Programme Coordinator, FGN/IFAD Value Chain Development Program, - Office of Permanent Secretary, Enugu Ministry of Agriculture. - Office of Permanent Secretary, Kogi Ministry of Agriculture. - Office of Permanent Secretary, Nassarawa Ministry of Agriculture. EOI must be delivered not later than 12 noon on 18th September 2019. The Federal Ministry of Agriculture and Rural Development: received a loan from the International Fund for Agricultural Development (IFAD) towards the cost of the Value Chain Development Programme (VCDP) and intend to use part of the proceeds towards carrying out various consultancy and non-consultancy service activities. The VCDP is an investment programme presently being implemented in six states – Adamawa, Benue, Ebonyi, Ogun, Niger and Taraba. The VCDP invites qualified candidates to express interest in offering their services to the following specialization – agricultural production consultants; market enterprise and

development consultants, agro-processing and quality management consultants, market value/chain infrastructure consultants, monitoring & evaluation/information system consultants, procurement consultants, financial management and knowledge management consultants. The criteria for evaluating individual consultants include general (education, qualification and membership of professional bodies); specific experience to related assignment; participation in similar assignments in IFAD and other donor projects and adequate knowledge of the terrain. Tender should be submitted or on before September 18, 2019. Federal Ministry of Water Resources call for interested bidders for the Procurement of Operational Equipment-Phase II Including Hiab Mounted Bed Flat Lorries and Cabin Truck. Interested Bidders may obtain information from: 3rd National Urban Water Sector Reform Project (3NUWSRP) at Project implementation Unit, 2nd floor, MTN Building, 11, Iyin Road, Beside Captain Cook Eatery, Fajuyi Area, Ad0-Ekiti. Deadline is 12:00 noon on September 17, 2019. The United Nations High Commissioner for Refugees (UNHCR), Family Health International (FHI 360) is collaborating with its affiliate Achieving Health Nigeria Initiative (AHNi) to improve access of Cameroonian Refugees to quality health and nutrition services in Cross River and Benue States. AHNi is calling for interested and qualified bidders to submit quotations to supply Essential Medicine, Medical Services Equipment and Consumables Under a Framework Agreement. Interested Bidders should visit https:// bit.ly/2KK67Y2 to access and download list of items. Closing date for Tender is Tuesday 2nd September 2019 at 5:00pm. Cocoa Research Institute: has announced the invitations for prequalification to interested applicants for the execution of the institute’s capital projects for execution in 2019. Completed tende document should be in three copies (Marked ‘one origibal and two copies’) for technical and financial bids addressed to the Executive Director Cocoa Research Institute of Nigeria, KM 14, Ibadan/Ijebu-Ode Road. P.M.B. 5244 Idi-Ayunre, Ibadan, Oyo-State. Bid collection starts 26th August 2019 and closes 7thOctober 2019. The National Orthopaedic Hospital Enugu: Intends to execute some projects as provided in the year 2019 appropriation. The hos-

pital invites reputable and experienced contractors/suppliers to tneder in respect of the following projects – supply of theatre/hospital equipment, rehabilitation of wards, offices, hostels, supply of utility vehicles, construction of outpatient complex, drilling of boreholes/ water-wells. Interested companies are to collect the Standard Bidding Document (SBD) from the office of the Head of Procurement at the Ground floor of administrative blocks of the hospital on evidence of payment of a nonrefundable tender fee of N10, 000 per Lot, paid into National Orthopaedic Hospital, Enugu’s Remita Account. Bidders are also invited to witness the opening of the bids on Monday, 16th September. The Petroleum Technology Association of Nigeria (PETAN): is building its multi-storey state-of-art headquarters at 15,520 sqm property at Greater Port Harcourt, Phase 1A Igwuruta. The project will comprise the following aspects – civil/ structural works, mechanical works and electrical works. Interested construction companies are to submit the following documents including Company’s Certificate of Incorporation, Nigerian Content and Training Policy, Project Quality Management, Contractor’s list of Sub-Contractors and Tax Clearance Certificate for the last five years. Applicants should send their proposal no later than Wednesday, August 28 by 12pm. Also, a non-refundable fee of N250, 0000 sin bank draft payable to PETAN should be attached. The National Sugar development Council, Abuja: has called for EoI for the supply of Goods and conduct of pre-feasibility studies for its 2019 capital projects. The project involves the supply of Soil Laboratory Equipment, Sugar Laboratory Equipment, Plant Laboratory Equipment, Laboratory Consumables/Glassware at National Sugar Institute Limited/ Guarantee, university of Ilorin, Kwara state. Interested parties may reach out to the Procurement Department of the National Sugar Development Council, Block A, Plot 45, Sugar house, Oro Ago Crescent, off Muhammadu Buhari Way, Garki 2, Abuja for eligibility requirement and collection of tender documents. The Federal Ministry of Education, Federal Government College New Bussa, Niger state: has published its invitation to tender for execution of 2018 appropriation. The project is titled: Rehabilitation/ Re-modelling of Boys hostel. Interested companies are expected to collect the Standard Bidding Document (SBD)

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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Personal Finance What does it mean to be wealthy? orry, but to me, a billion is a million million and I won’t be persuaded otherwise. So, what, to you, is wealth?” writes Richard Templer in his bestseller The Rules of Wealth. One common thing almost everyone shares is the “aspiration” to become rich, although for some this is more of wishful thinking than an actual objective. We often sing about wanting to become millionaires and travel around the world in private jets-or if heights scare us, cruising in superyachts. The milliondollar question, however, is: How much money do you need to consider yourself wealthy? One important reason to answer this question, Templer says, is that like in every other human endeavour, only what is measurable can be achieved. Also, while there are no right or wrong answers, understanding your definition of wealth can keep you out of the “rat race” and help you lead a more fulfilling life. Some common measures: The N1 million mark-or more In Nigeria where about 94.21 million people as at Thursday live in extreme poverty, currently measured as people living on less than $1.25 a day (according to World Poverty Clock), one million naira is a big deal and the hallmark of wealth to many. For middle-income folks in professionals services who according to Coronation Merchant Bank research earn anything between N6 million to N8 million per annum, the magic number might be pegged

at around N50 million. Regardless of where the line falls, it is common practice to define wealth as a monetary benchmark. It is not impossible that as one’s financial status improves, the minimum definition tends higher. The passive income measure This perspective to wealth was popularized by Robert Kiyosaki, the author of Rich Dad, Poor Dad. The Passive income theory simply looks at wealth in terms of what you earn on the average from an investment vs your average expenditure. If for instance you have N1m in the bank and spend N100,000 per month, your wealth is 10 months. On the other hand, if you earn N200,000 each month from your investments and spend N100,000 (or

N200,000 at most) per month, you have limitless wealth. A variant of this can be defining wealthy by how much more you earn by the hour than you spend in the same period, on the average. Living without care (Livin’ la Vida Loca) If the second definition is complicated this is simpler. Wealth in this instance is living without worrying about the cost of living. Templer puts it as: Having enough so you never have to worry about having enough. Although arbitrary, this is a common and acceptable definition of wealth; being able to afford almost anything you want at any point in time.

The downside to this definition might the stark reality economists preach about human wants being insatiable and resources limited. Since there is always an exception to a rule, the stars might align for you in that regard. Assets Acquisition The other definition you might hear people give to wealth is owning assets especially land properties whether it is a small property in the countryside or a sizable one elsewhere. It might be more common with senior citizens, owning assets even with little cash at bank is enough for one to be deemed wealthy or consider oneself so. Social Circle In today’s world who you know matters and it is often said that one’s social circle or network determines one’s net worth. One argument for this definition stems from the fact that privileges enjoyed by one’s relationship with an influential or well-to-do individual are sometimes invaluable. Having highly placed persons as one’s friends or folks can help you access the world-as it were-on a platter of gold. Health A cliché you must have heard a thousand times is that health is wealth. While a lot of people take this for granted, having a healthy body and mind at the very least saves you an unquantifiable amount of money in hospital bills, allows you make productive use of time and derive utility from being in a (near) perfect state. Although not everyone loves this measure of wealth people often appreciate the wisdom in this perspective when a cold knocks them off their feet.

from the office of the Vice-Principal (SD), FGC, New Bussa with evidence of N10,000 paid into the FGC New Busa, Niger state Remita account in any commercial bank. Prospective bidders can contact the institution for further information. Deadline is 12 noon, 6 September, 2019. National Orthopaedic Hospital Enugu: invites reputable and experienced contractors/suppliers to tender in respect of the following projects as contained in 2019 Appropriation: LOT 1: Theater/Hospital Equipment. LOT 2: Service Vehicles-Water tanker and Hiace 14-seater bus. LOT 3: Rehabilitation of wards. LOT 4: Rehabilitation of offices. LOT 5: Renovation of student’s hostels. LOT 6: Construction of General Outpatient Complex. LOT 7: Drilling of Borehole/Water well. Interested contractors/ suppliers are advised to obtain Tender Document from the

Procurement Department on presentation of evidence of payment of Non-refundable fees of N10,000 for each LOT direct to National Orthopaedic Hospital account. Further information can be obtained from the institution. Deadline is 9:00am Monday 16, September 2019. The African Development Bank: is calling for expression of interest from eligible firms for supply and installation of various office equipment, stationery, consumables and services for the Nigeria Country Department. Interested companies registered in Nigeria are invited to express interest for one or several of the following lots – clearing & shipping agent services, provision of car hire & rental services and supply of office and computer stationeries among others. Expression of interest and evaluation form are on the bank’s website www.afdb.org/en/about-us/corporate-

procurement/procurement-notices/current solicitations/ Interested firms are to submit their expression of interest forms by courier or at delivery at the address indicated below not later than 30th August, 3pm. Reference: ADB/EO1/RDNG/2019/0134 The Senior Director, African Development Bank, Nigeria Country Department, 1521 Cadastral Zone A0, Off Memorial Close, Abuja. Lagos State Government: invites expression of interest for the engagement of vendors to provide catering, office stationeries, consumables supply, ICT repair, hotel, travel management, 3rd party logistics, and insurance provision services. The interest should be addressed to the coordinator, Grants Management Unit, LSMOH, GMU, Office, Folarin Coker Staff Clinic, Alausa, Ikeja between the hours of 8.00AM -5.00PM from Thursday

8th August to Thursday 5th September 2019. Agip energy and natural resources: has opened advert for tender opportunity revamping upgrade od distributed control system and fire & gas system at Agbara platform. To be eligible, tenders must comply with the Nigerian Content requirements in the NipeX system. The closing date of the advert is 2nd September 2019. Additional information on www.nipex.com West African Power Pool (WAPP) Secretariat: is inviting interest from a reputable consulting firm. Interested consultants should submit an expression of interest in French and English latest September 16, 2019, by 10.00am addressed to West African Power Pool, Mr. Siengul A. K1 Secretary-General Zones des Ambassess, Pk-6 Akpapkpa Cotonou 06 BP Cotonou, Benin.

SEGUN ADAMS

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Monday 26 August 2019

BUSINESS DAY

Monday 26 August 2019

BUSINESS DAY

Equity

Cover Story

How bellwether stocks rank by dividend yield valuation because yields tend to be ‘surprisingly high’ for illiquid stocks trading at low prices.

ISRAEL ODUBOLA

With money market rates at over 15%, nobody wants bonds OLUWASEGUN OLAKOYENIKAN

igeria’s money market instruments are currently offering mouth-watering yields, and this is dampening investor appetite for long-duration local assets as global and domestic risks continued to raise red flags. Money market instruments are shortterm debt investments in the financial market such as Treasury Bills (T-Bills) with maturities ranging from overnight to one year and it’s often characterized with low return, while bonds are long-term fixedincome assets issued by the government or corporates with at least 2-year maturities, and a periodic coupon payment Average yield on benchmark Nigerian government T-Bills closed last week at 15.35 percent as against an average yield of 14.36 percent on benchmark Nigerian government bonds, according to data obtained from the FMDQ Securities Exchange. The Federal Government of Nigeria (FGN) bond auction for August 2019 conducted on Wednesday was grossly under-

subscribed the most in 2 year by investors on the back of weak offshore interest. The trend was also replicated at Thursday’s OMO auction, no thanks to escalating trade spate between the United States (U.S) and China and relatively low oil prices largely driven by build-up in U.S crude inventory. Besides, about $14.4 billion Open Market Operations (OMO) maturities likely to hit the market from September to November, 2019 as well as anticipated capital outflows from the country due to the risks, the impact of build-up in crude

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oil inventory on crude oil prices, and rising imports of goods and services are expected to create pressures for Nigeria’s balance of payment. This implies the rising uncertainties causing increased outflows would further increase short-term rates imminently. “Risk aversion for emerging market assets constitute an upside risk for bond yields,” Omotola Abimbola, a macro and fixed income analyst at Lagos-based investment house, Chapel Hill Denham, stated in a note to clients. This is as a result of offshore portfolio inves-

This implies the rising uncertainties causing increased outflows would further increase short-term rates imminently. Risk aversion for emerging market assets constitute an upside risk for bond yields

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ividend yield for Nigerian equities has risen on the back of low stock prices following the rout on Nigerian Stock Exchange (NSE) which has depressed most liquid and capitalized stocks. The equity market maintained a bullish run Friday gaining a marginal 62 basis points, but a year-to-date loss of 12 percent makes the bourse one of the worst performers globally. High yield signal good buy opportunity particularly for value investors who seek attractive returns on undervalued stocks. Also known as dividend return per stock, it is the percentage value of a company’s dividend per share to its market price. Assuming dividend declared by a company’s board of directors remain unchanged yields jumps when stock prices declines and vice-versa. However, it is unwise for investors to price in only yield when doing their stock

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So investors that want to take position in high dividend stocks need to complement yield with the dividend track record of such company and other market indicators. Nigerian stocks are trading seven times for each naira earnings compared to South Africa (15x), Egypt (12x) and emerging markets (11x), making them one of the cheapest in the emerging markets space. BusinessDay computed and ranked dividend yields of the thirty most liquid and capitalized stocks on NSE which accounts for over 90 percent of the bourse’s market value. The rationale is that some of these stocks still have attractive valuation, and hold potentials to deliver returns to investors. Data compiled from Bloomberg Taking the first spot is Total Nigeria provided figures on dividend yields for Plc, the country’s fourth-largest listed oil 23 stocks except EcoBank, Union Bank, Sterling Bank, Lafarge Africa, Oando, firm by market value (N35.92bn), with International Breweries and Airtel Africa. 16.07 percent yield ahead Mobil (5.22%)

Stocks of consumer goods firms are trading at their lowest level in 10 years, battered by the sluggish recovery of the Nigerian economy which has squeezed consumers’ purchasing power

tors holding a large proportion of OMO securities put at a record-high level of $17.5 billion as of May 2019, representing a about 37 percent of outstanding OMO bills. While these developments indicate vulnerability of Nigeria’s external account to shocks, and by extension downside risk to its exchange rate stability, focus would likely shift to the foreign currency debt market – Eurobond – with the inauguration of cabinet members. Based on historical trend, officials of the Nigerian government led by the Minister of Finance, Budget and National Planning are expected to proceed on a roadshow to woo investors to participate in the offering. Also, the Debt Management Office (DMO) has so far funded the 2019 budget with local borrowing, and in line with its debt management strategy which aims to increase external borrowing and reduce domestic debt exposure, it became more apparent that the days to the Eurobond offering are already counting down. Clearly, a move in that direction would create an opportunity for investors – both local and foreign – to hedge their funds against possible currency risks by investing in the Eurobond market to grow their funds. www.businessday.ng

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and Seplat (3.68%). However, weak investor sentiment on the back of tainted growth potentials of the broader economy coupled with unimpressive earnings performance tumbled Total’s share price to lowest in more than five years. Total has plunged some 48 percent since January equivalent to a monetary loss of N33 billion. This compares with Mobil, Seplat and Oando that has slid 14 percent, 23 and 25 percent respectively in almost eight months. Zenith Bank, Nigeria’s second most valuable lender, led other banks with 14.97 percent yield ahead UBA (14.05%), Guaranty Trust Bank (9.86%), Access (7.58%), Fidelity (6.59%), First Bank (5.2%) and Stanbic (4.29%). Banking stocks have declined 5 percent since July 3 when Central Bank of Nigeria mandated banks to loan at least 60 percent of their deposits to small businesses in a bid to boost economic growth through credit creation. Banks are keen to expand their retail footprints to bolster profitability amid weakening interest income. Dangote Sugar Refinery led the pack of consumer goods firms with dividend yield of 11.58 percent while Nigeria’s miller by market value, Flour Mill of Nigeria took the second spot with a yield figure of 8.66 percent. Stocks of consumer goods firms are trading at their lowest level in 10 years, battered by the sluggish recovery of the Nigerian economy which has squeezed consumers’ purchasing power. The presidential ban to freeze dollar sales for food imports mean more woes for consumer goods players that are already grappling with slow sales and weaker margin. Nigeria’s most-capitalized stock, Dangote Cement outperformed others in the industrial goods space with 9.61 percent yield. The cement giant saw weaker sales revenue mid-year 2019 but managed to grow profit by 5.4 percent, thanks to massive decline in tax expenses. Okomu oil drove the palm oil industry with a yield figure of 7.47 percent ahead Presco’s 4.88 percent. However, both companies are struggling to grow profitability in the face of smuggling and depressed crude palm oil prices which has dragged performance. Shares of Okomu and Presco have plunged 47 and 30 percent respectively since January.

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Monday 26 August 2019

BUSINESS DAY

Investing Lessons from Nigeria’s ‘grim’ economy entrepreneurs must know DAVID IBIDAPO

s spelt out in the holy bible “money answereth everything”, while that is true, it is expedient to note that hard work does not guarantee wealth, smart work does. Understanding wealth-making principles, being aware of economic and social policies and careful planning as a business owner is key to a sustainable growth. While these wealth Ps are subjective and peculiar to business owners, lessons that can be drawn from the plethora of challenges Nigeria is faced with can provide objective ways to ensure your business thrives even in harsh times. It is important to note that one’s action or inaction can cause a ripple effect either positive or negative on other factors which play important roles in wealth creation and sustainability. Subdued Growth The last four years have seen Nigeria’s economic growth barely grow 2 percent despite an average growth of about 5 percent, 4 years prior 2015. This can be attributed to a number of reasons ranging from reduced foreign direct investment, crude oil price slump, infrastructure deficit to mention but a few. The year 2018 saw Nigeria foreign direct investment fall to its lowest level in the last 13 years to $2.2 billion on the back of perceived harsh regulations of both the fiscal and monetary authorities on existing foreign direct investments. A chat with some analysts on this reiterated the need for the federal government to create a less uncertain business environment where FDI’s confidence are strongly built and not scared of sudden negative fiscal policies against them. A popular wise saying states, “no man is an island.” Investment is a key success ingredient to grow a start-up business and attracting such investment is largely dependent on how conducive your business environment is to investors. Policies can either usher investors through the exit door or welcome them with open arms. The slow growth in Q4 2018 reflected among other things the short fall in Nigeria’s FDI position being the life wire of any economy. The Nigeria federal government is a small fraction of the entire economy hence

why despite an increase by N4.96 trillion in total expenditure in the last five years to N23.29 trillion which accounts for about 7 percent of GDP couldn’t translate into economic growth. Problems with undiversified income stream During periods of oil price shock, the Nigeria’s economy had always suffered the consequences of an undiversified income stream as shocks deplete her foreign reserve, threatening naira value against other currencies. The year 2016 is a good point of reference when the economy slid into a recession following a plunge in crude oil prices to levels below $30 per barrel which saw earnings of a lot of companies nosedive and performances poor during the period. This therefore reawakened the federal government’s consciousness on the need to diversify the economy. Great investment experts have in time past attested to the benefits accrued to a diversified portfolio although a few insist on putting your eggs in one basket where all your attention will be. However, for a business faced with both systematic and unsystematic risks (diverwww.businessday.ng

sifiable and non-diversifiable risks), an expanded income stream is most advisable as effects of shocks within the industry and economy at large could have varied impact on revenue stream performances. Every business is located in an industry which forms the basis of its revenue stream(s), however avenues like the capital market are for all to profit within irrespective of the industry played in. Debt levels In the last five years, Nigeria has doubled its domestic and external borrowing, to fund its ever-growing budget deficit under the current government. Government’s desire to fund deficits to spur growth drove the country’s debt stock during the period to N24.94 trillion, up from N12.06 trillion that is an increase by 107 percent. Budget deficit of N9.16 trillion accounted for 71 percent of the N12.88 trillion increase. While the debt levels aren’t really the problem when considered as a percentage of GDP which is low compared to other African countries, the challenge remains Nigeria’s debt service to revenue ratio which is about 70 percent, hence putting a strain on her debt affordability metric

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and growth potential as more revenue is expended on interest payment. Although debt financing is a lower cost source of funds and allows a higher return to the equity investors by leveraging their money, A business needs to balance the use of debt and equity to keep the average cost of capital at its minimum. Investors’ negative sentiment The prevalence of investors negative in the Nigerian stock market has seen the market trend bearishly recording a negative performance of 12.09 percent as at Thursday. This is on the back of investors’ pessimism on current administration and responses to regulatory actions. Investors’ sentiment is driven by confidence on policy directions of both fiscal and monetary authorities. Start-up businesses serve both customers and stakeholders; hence policies and output can either boost or dampen confidence levels. A company must ensure market moving policies to keep sentiments strong and boost growth and profitability. The above are fundamental challenges faced within the Nigerian economy and provide lessons to businesses as they play within industries.

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Monday 26 August 2019

BUSINESS DAY

Data

Federal government Eurobond Yields on Eurobonds fell further week on week by 0.01 percent point from an average of 6.66 percent when the market closed last week to 6.65 percent Nigeriaâ&#x20AC;&#x2122;s Sovereign Eurobonds was muted week-on-week.

Corporate Eurobond Yields on corporate Eurobonds fell 0.215 percent points across all tickers week-on-week with average yield rising from 5.495 percent last week to 5.71 percent. www.businessday.ng

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Monday 26 August 2019

BUSINESS DAY

BANKING 7 takeaways from GTBank’s investor conference call OLUFIKAYO OWOEYE

igeria’s tier-1 lender, GTBank had its investors, conference call last week. The call had in attendance Segun Agbaje, CEO, who gave some forward-looking statement on the bank’s plans in the wake of new pronouncements from the apex bank. Race to meet the 60percent LDR target The CEO revealed that the bank’s LDR is currently at 57percent, noting that the bank is on track to grow its loan book by about N40 – N50 billion to meet CBN’s new LDR target by September 30, 2019 deadline. Noting that there has been an improved assets quality and NPL has moved from 7.4 to 6.8 with no particular loan gone bad, using IFRS 9, stage 3 loan into their calculation. Pressure on yields: The CEO admitted that there is growing pressure on yields from fixed income securities. He, however, allayed fears noting that

the pressure would ease soon. “The pressure is real as the portfolio has come down from 17percent to 15percent about 200bps hit, however, the pressure it is not going worse,” he said. On plummeting share price The management noted that it is not worried about share price, noting that there is a gen-

eral sentiment in the market that the economy is struggling. He, however, advised that investors should focus on the positives. “If we keep the fundamentals strong the share price would find its level,” he said. Pending court case between GTBank & Innosson Agbaje said there is no new

Week Ahead Week Ahead(Monday, August 26 – Friday, August 30, 2019)

development in that space, as it still waiting for pronouncements of the court. Takeover the bank for a debt of 8 billion and at half year we are over 115bn in profit. “If that is what we have been asked to pay I believe we can afford it,” he said confidently. Surging non-interest income

According to Agbaje, the bank has not scratched the surface, as it plans to boost its fee income to make up for lost revaluation gains. The bank’s USSD transaction has grown by 45percent, mobile banking 42percent, while account maintenance is growing. Teleco’s as a ‘threat’ in the financial space? Agbaje noted that the entrance of major telcos into the financial services space would spur competition as they are not a threat to the bank. He, however, believes that its brand, strong retail base, and digital offerings will support its market position. Inorganic growth strategy On the mid-to-long-term growth prospects, Agbaje noted that the bank was open to exploring inorganic growth avenues that may also include potential acquisitions outside of Nigeria. “In East Africa, we have to do one of two things, we either have to bring in capital or we have to think of acquisitions,” he said. GTB already has operations in Kenya, Uganda, Tanzania and Rwanda, and will also consider ways of expanding existing businesses

Chart of the week Banks race to meet regulatory Benchmark for Loan issuance

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

Oil: Brent traded below the Nigeria’s government $60 per barrel benchmark for third straight week. Going forward, oil prices are expected to continue trading below the budget peg due to reduced demand as the lingering trade tensions between US and China continues. This will choke Nigeria’s reserves. Sugar: Sugar prices fell by 5.36% to close the period at $11.47/pound from $12.12/ pound at the start of the period, driven by a supply glut. Prices are expected to rise due to lower output in Brazil and India. Nigeria imports about $100million worth of sugar. An increase in price will increase the import bill and filter through to high import costs for sugar producing companies like Dangote. Fixed Income: The local debt market was bearish in almost all trading days last week, as investors book profit, which further place pressured on the naira. Analysts expect the domestic bond market to remain in a bearish mood in near term. Currency We expect the naira to trade between N361/$ and 363/$ at the parallel market. Currently, the exchange rate at the Investors & Exporters Foreign Exchange (IEFX) window hover N363 per barrel, which is more expensive than the parallel window (N360/$). This has widened the spread between IE rate and parallel market rate to 0.91%. By implication, we could see a shift to the parallel market, thus increasing demand pressures. Data Release The Nigerian Bureau of Statistics will on Friday, August 30 release the social statistics report for the year 2018 and also Term of Trade report for second quarter. www.businessday.ng

Nigerian Lenders are rushing to boost lending to retail customers barely a month to the September 30 deadline set by the Central Bank of Nigeria (CBN) for banks to increase their loan-to-deposit (LDR) ratio to a minimum of 60 percent or risk sterilisation of a part of their fund.

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Monday 26 August 2019

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businessday market monitor

Biggest Loser

Biggest Gainer NESTLE N1230.00

DANGCEM N166.50 -0.30pc 27,800.17

0.82pc

Foreign Reserve - $44.06bn Cross Rates - GBP-$:1.22 YUANY-N 51.05 Commodities Cocoa

US$2,231.00

Gold

$1,533.80

₦3,604,703.45 -2.06 pc

$58.79

N300

Foreign Exchange

Buy

Sell

$-N 357.00 360.00 £-N 438.00 450.00 €-N 390.00 400.00

Crude Oil

FMDQ Close

Everdon Bureau De Change

Bitcoin

NSE

www.

Market I&E FX Window CBN Official Rate Currency Futures

($/N)

fgn bonds

Treasury bills

Spot ($/N)

363.14 306.95

-1.88 13.27

NGUS NOV 27 2019 363.97

-0.20

-0.01

15.50

14.33

NGUS FEB 26 2020 364.42

20 Y 0.00

14.24

14.46

NGUS SEP 30 2020 365.47

10 Y -0.03

These private sector firms take long-term view on economy

…overlook policy flip-flops to invest billions

Nigeria faces dilemma of I lowering rates or getting dollars

ODINAKA ANUDU

n the heat of foreign exchange crisis in Nigeria in 2016, Beloxxi Industries, a biscuit maker, shocked market watchers by closing an $80 mil-

Continues on page 46

Inside

See story on p. 4

Buhari and the mockery of stewardship

Editorial, P. 16