BusinessDay 27 Aug 2018 by BusinessDay

businessday market monitor Commodities

NSE

Bitcoin

Brent Oil

Biggest Gainer

Biggest Loser

$76.15

Dangcem N230

Total N177.6

Cocoa

US $2,365.00

6.98 pc

₦2,306,532.08

-2.95 pc

35,426.17

FMDQ Close

Everdon Bureau De Change +1.17 pc

news you can trust I **MONDAY 27 AUGUST 2018 I vol. 15, no 126 I N300

Buy

Sell

$-N 357.00 360.00 £-N 457.00 465.00 €-N 405.00 413.00

Foreign Exchange

Market Spot ($/N) I&E FX Window 362.35 CBN Official Rate 306.10

3M 6M 0.03 0.30 11.41 13.25

-0.17

10 Y -0.11

20 Y 0.04

14.58

14.78

14.90

Andersen Tax, Deloitte fear agent banks may violate confidentiality obligations Nigeria records 8% Tax to GDP, but still behind peers, target

IHEANYI NWACHUKWU & Onyinye Nwachukwu, Abuja

Continues on page 37

Inside Buhari’s 1983 coup helped plunge Nigeria into recession – Study P. 2

NGUS OCT. NGUS JAN. NGUS JUL. 30, 2019 24, 2019 31, 2018 0.00 362.23

0.00 362.68

0.00 363.58

Anxiety as FIRS moves to ‘manage’ defaulting taxpayers’ bank accounts n what shows that Nigeria’s tax landscape is changing, if not rapidly, the Federal Inland Revenue Service (FIRS) has directed banks to freeze the accounts of defaulting taxpayers to prevent them from drawing funds, and lately the FIRS appointed agent banks for collection of taxes due from alleged tax defaulters. In the letters issued to the appointed agent banks by the FIRS and some State Internal Revenue Service (SIRS) they were instructed to set aside the tax amount due from the bank accounts of alleged defaulting taxpayers and remit same to the

Currency Futures ($/N)

fgn bonds

Treasury Bills

Nigeria’s tomato processing stalls on lack of competitiveness ... as Dangote tomato factory to re-open January 2019 Josephine Okojie

ocal production of tomato paste and concentrate in Nigeria is currently at a stand-still due to a lack of competitiveness by processors, which is stalling the hope of having a flouring tomato processing industry in the country. According to the latest National Bureau of Statistics (NBS) selected food prices report, an average price of a kg of tomato cost N336.3. This means that a ton of fresh tomatoes sells for about N336, 287 ($921). Processors need four tons of fresh tomatoes to produce a ton of concentrate. This means the Continues on page 37

Participants of 2018 BusinessDay CEO Apprentice during the excursion to Olusegun Obasanjo Presidential Library (OOPL) in Abeokuta, Ogun State. Pic by Olawale Amoo

As Venezuela’s oil-based economy collapses, lessons for Nigeria LOLADE AKINMURELE

igeria is no Venezuela but the embattled nation does have a lesson for Africa’s largest oil producer, and it is that oil

wealth does not insulate a country from ruin when government policies lack economic sense. Venezuela holds the world’s largest oil reserves and was once the wealthiest country in Latin America, yet it has managed to

soil its economy after more than a decade of frittering away its oil wealth on maintaining expensive subsidies designed to help the poor. The government also frusContinues on page 37

Halfway into preelection year, Nigeria’s economy remains extremely fragile Endurance Okafor

he National Bureau of Statistics releases GDP figures for the second quarter of 2018 this morning showing that the country’s economic growth continues to underperform. For a country that needs a 7.0 to 10 Continues on page 37

2 BUSINESS DAY NEWS

C002D5556

Hope dims on early completion of Nigeria’s most strategic gas pipeline ... new date for 123km East-West pipeline now Q2, 2019 OLUSOLA BELLO

he desire of Nigerians to enjoy a significant uptick in electricity supply to their homes and businesses has again suffered a setback, following the failure of contractors handling the 123 kilometre East-West Obiafo/ Obirikom to Oben (OB3) gas pipeline (worth $700million) to meet the project completion deadline again. The project which supposed to be completed by July 2017 was shifted by one year on technical grounds, but again, this year, even though a lot of mileage has been achieved by the two contractors handling the project they still could not meet the deadline again because of weather and other technical issues. The new date of completion for its own phase of the project by Nestoil Limited has been fixed for first or second quarter 2019. Chekwueluka Umeh, an executive director with Nestoil Limited, one of the companies working on the project when contacted by BusinessDay, said the problem has to do with seasonally swamp which affected their equipment and delayed the company from making any reasonable progress during the rainy season. “Our equipment gets stuck most times when it rains and when this happens we may have to wait until when the rains abate. By the time the rains stops we may discover that some of the equipment are badly damaged and this may necessitate us ordering for another set of equipment,” Umeh, told BusinessDay. The executive director of Nestoil Limited said the project is about 87 per cent completed but most of the pipelines are submerged underwater, a situation he said has made the job a challenging one. He stated that the rain fall pattern of the country has changed greatly and this has become a major challenge for the company in carrying out its jobs. “The pipelines must be welded and buried under ground but this is difficult to do when there is flooding of the terrains as the river banks are

overflowing,” he said. All the weldings that needed to be done have been completed although joining spooks and burying are still undone while transferring metering stations and isolation valves that are built overseas are also being installed. According to him, security is also a major issue because the workers of the company are being harassed by Kidnappers. About 14 workers were kidnapped in one day. He said however that the Nigerian Gas Pipeline Trading Company (NGPTC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) are aware of these challenges which is why they are rescheduling the completion date. The pipeline was initiated to facilitate the transportation of gas from the eastern Niger Delta, where there are a lot of gas reserves, to the west Niger Delta, where high demand exists because of the high number of power plants and industrial gas consumers. Information gathered by BusinessDay in respect of Oilserv Limited which is another company handling the project is that it would start commissioning some of the equipment and perhaps those that can be ready for use put into use. The company it was learnt had its own challenges as it has done reconstruction of some of the existing infrastructure such as roads and bridges before some of the equipment could be transported through KoKo River to the sites where they are to be used. Already some of the gas plant at Oben, Ajaokuta, Geregu would probably be commissioned in October this year. The project, which is part of a network of gas pipelines under construction around the country, is expected to boost the start-up of hundreds of new businesses, reduce the cost of doing business in the country by as much as 30 percent, and generate several jobs, within a few years.

•Continues online at www.businessdayonline.com

FUNDS: What you need to know about target date funds Oghogho Edosomwan

number of companies offer target date retirement funds, sometimes referred to as “target date funds” or “lifecycle funds. Worldwide, target date mutual funds have become progressively popular and at the end of 2017, the Investment Company Institute (ICI) projected a total of $1.1 trillion was invested in these funds worldwide. Target date funds are designed to offer a suitable way to invest for a person expecting to retire around a particular date. Target-date funds are also designed to help manage investment risks. A target date fund pursues a long-term investment strategy, using a mix of asset classes (or asset allocation) such as stocks, bonds, and other investment. Over time, the mix gradually shifts according to the fund’s investment strategy. Some of the advantages of TDF are, it allows diversification across asset classes, your portfolio is professionally

managed offering a hassle free investment, and your portfolio is automatically adjusted for changing risk profile. However, one downside to targetdate funds is the lack of customization. Target-date funds do not take into consideration an individual’s life changes that may affect their capacity to save or the impact that life events may have on an individual’s retirement plans. Another drawback is high expense ratios. In some target-date funds, there is a fee for the underlying mutual funds and another layer of fees for managing the funds. Also, Like all investments, targetdate funds can lose money if the stocks and bonds owned by the fund drop in value. Though funds with identical target dates may look the same, they may have very diverse investment strategies and asset allocations that can affect how risky they are and what they are worth, at any given point in time, including when and after one retires.

•Continues online at www.businessdayonline.com

Monday 27 August 2018

Buhari’s 1983 coup helped plunge Nigeria into recession – Study DIPO OLADEHINDE

he military coup which brought Muhammadu Buhari to power in 1983 may have contributed to plunging Nigeria into economic recession. This is according to a research paper in the August edition of the Central Bank of Nigeria (CBN) Journal of applied statistics with the title ‘Estimating and Forecasting the Impact of Inflation on Economic Growth in Nigeria Using Threshold Analysis’, by David O. K. Okoroafor, Sesan O. Adeniji and Timilehin Olasehinde. According to the paper, the government’s policy of Structural Adjustment Programme (SAP) which commenced in 1980 entailed a number of austerity measures that was actually yielding some positive result by the high growth of Real GDP, before the Military intervention of General Buhari in December 1983. “The economy was already on the

path of recovery before the military coup of 1983; output of goods and services were improving as the economy was recovering from recession,” the authors David Okoroafor, Sesan Adeniji and Timilehin Olasehinde said in the August report. The research paper contradicts the opening remarks of then military President BuhariwhooverthrewShehu ShagariinamilitarycouponDecember 31, 1983, that promised among other things to save Nigeria from impending economic and political collapse. The paper which looks at the linkage between inflation and GDP growth rate notes that a two digit inﬂation rate had become a phenomena in the 1970s as it averaged 15.12 percent between 1970 and 1979 while Money supply over the same period grew at a double digit rate of 33.08 percent. “The Real GDP made improvement compared to the previous decade; it grew at an average of 31.01 percent. However the economy experienced negative growth rate

in 1970 and 1979. For instance, the growth rate of Real GDP for 1978 was -7.32 percent,” the CBN report said. The report admitted that some of the events that explained the behaviour of the economy included massive expenditure to reconstruct the war torn economy. The report showed that economic variance could forecast inflation rate in Nigeria with higher degree of accuracy than normal Autoregressive Moving Average (ARMA) as findings from this study would enable policy makers to forecast the level of inflation and maintain policy effectiveness. “This result is relevant for monetary policy formulation as it shows that monetary authority in Nigeria needs to consider inflation threshold for the country in the process of targeting single digit inflation as one of its major objectives,” the report said.

•Continues online at www.businessdayonline.com

Celebrating the life of a Nonagenarian: Suzanne Elumelu (sitting) the celebrant and the matriarch of Elumelu’s

family, flanked from left: Tony Elumelu, son of the celebrant and chairman of Heirs Holdings; Femi Otedola, chairman of Forte Oil plc; Segun Awolowo, CEO, Nigerian Export Promotion Council(NEPC); Aliko Dangote, president, Dangote Industries; Foluso Phillips, executive chairman, Phillips Consulting; Oscar Onyema, CEO, Nigerian Stock Exchange, and Peter Elumelu, son of celebrant, during the 90th birthday celebration organised for Mrs Elumelu by her children in Lagos, at the weekend.

NAICOM releases Tier assessment advice, guidelines for insurers’ recapitalisation today Modestus Anaesoronye

he calculation formula for the newly introduced Tierbased recapitalisation structure for insurance companies in Nigeria earlier announced last month to commence January 1, 2019 by the National Insurance Commission (NAICOM) will be released today, BusinessDay learnt last night. The Commission according to our source will today August 27, 2018 release the guidelines for the exercise, as well as Tier assessment advice to all operating companies on assessed capital level. NAICOM in the notification letters to be issued to all companies expected today, will let firms know which Tier capital level they fall into based on their 2017 financial accounts. According to industry analysts, this will set the stage for consolidation in the insurance industry, as

companies will have to align and realign their strategies; embark on mergers or acquisitions; or shop for fresh funds to raise their capital level. The development also would end speculation by many analysts of what Tier levels companies fall into based on NAICOM’s approved assessment model. NAICOM, it will be recalled had slated August 3, 2018 as date for release of guidelines; and August 13 to 17th for notification letters for Tier assessment to operators, but had to delay it to accommodate inputs from Board of Directors engagements, which held in Lagos earlier in August. In the new Tier-Based Minimum Solvency Capital, Tier 3 companies are those that fall within existing paid up capitals of N2 billion for life business; N3 billion for non-life business and N5 billion for composite business. Companies in this category will be limited to underwrite only risks

in life business in the following areas - Individual Life, Health Insurance, Miscellaneous Insurances; while for non-life they will be limited to underwrite risks in these areas - Fire, Motor, General Accident, Engineering (only classes covered by compulsory insurance), Agriculture and Miscellaneous Insurances. Tier 2 companies are those whose paid up capital has increased by 50 percent above the existing minimum capital. For life business, their paid up capital will be N3 billion and they are to underwrite all Tier 3 risks and Group Life Assurance (GLA); while for nonlife, their paid –up capital base will be N4.5 billion and they will underwrite all Tier 3 risks, Engineering (All inclusive), Marine, Bonds Credit Guarantee and Suretyship Insurances.

•Continues online at www.businessdayonline.com

Monday 27 August 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 27 August 2018

BUSINESS DAY

Monday 27 August 2018

BUSINESS DAY

Monday 27 August 2018

C002D5556

9 NEWS

BUSINESS DAY

Banks’ suspension of accounts over tax remittance gets criticism HOPE MOSES-ASHIKE

perators of Bureau De Changes (BDCs) have kicked against banks’ suspension of their accounts due to demand for tax remittances on turnover volumes. Aminu Gwadabe, president, Association of Bureau De Change Operators of Nigeria (ABCON), said banks were acting under the directive of the Federal Inland Revenue Service (FIRS) to demand that BDCs pay taxes on funds used to bid

Housing reform: 1,800unit estate project will drive Edo’s economic rejuvenation – Obaseki

overnor Godwin Obaseki of Edo State has described the 1,800-unit Emotan Gardens project being developed in partnership with MIXTA Africa as a project that will stimulate economic growth in the state. The housing project is part of project billed to be showcased alongside other reforms embarked upon by the Governor Obaseki administration at the 27th edition of the Edo National Association Worldwide (ENAW) convention in Canada. He said, “From our strategic vision, we envisage Edo State as that state in Nigeria that offers opportunities to all Nigerians to aspire and attain their aspirations. Specifically, we are creating a society in which people can live in peace and harmony.” On the Emotan Gardens project, he said, “This project is going to be of huge benefit to the economy of the state; almost 80 per cent of what is required or what will be used to build the Estate is going to be sourced from Edo State. From the cement, to the steel and rods that will be used, will be manufactured here. The sand, gravel, granite, and all other such materials will be obtained here. Tiles, sanitary fittings, are all manufactured in Edo State. “The glass, the aluminium profiles, the roofing sheets, the lumber for the roofing are all made here, and of course the labour. So, almost 80 percent of what will be required to build this estate will be sourced locally.” The governor said the estate project, “is going to be a large-gated community with lots of amenities, serviced with electricity 24/7; it is going to have metered water supply, security and entertainment around it.

for their dollar allocations sent to the Central Bank of Nigeria (CBN) on weekly basis through the commercial banks. Many banks have written BDC operators and are implementing a ‘Post No Debit’ order on the operators’ accounts even where there is no evidence of tax default, Gwadabe said. “The BDCs are high turnover sector and their funding cash for dollar collections cannot be subjected to taxes. An average BDC does over N30 million weekly turnover and pay-

ing taxes on such funds will affect their cash flow and ability to meet their statutory role of foreign exchange supply to the retail-end of the market,” he said. According to Gwadabe, many of the affected BDC operators are already facing major funding challenges that need to be addressed immediately by concerned stakeholders. “In fact, we will be writing to the CBN to complain about the illegal policy of the ‘Post No Debit.’ Presently, most of our members funding with the deposit

money banks for their bidding obligations are being trapped in the banks. This scenario, if not checked, will affect our members funding capacity, derail the sustainability of their businesses with the resultant liquidity spikes,” he said. A letter from one of the commercial banks reads: “The bank has pursuant to Section 49 of the Companies Income Tax Act LFN 2004 and Section 28, 29 and 31 of the Federal Inland Revenue Service (Establishment) Act No. 13 of 2007 been appointed by

the Executive Chairman of the FIRS as collection Agent over your accounts. “Please be informed that consequent on this directive, we are compelled by law to place ‘Post No Debit’ on your account pending the receipt of further instructions from the Executive Chairman of FIRS. This is for your information and necessary action as you are best advised to contact the FIRS officials.” The new trend in collecting taxes from BDCs is unacceptable and must

be stopped, he said, saying ABCON will be writing CBN to call the banks and other parties implementing the directive to order. “The banks did not asked the BDCs to bring evidence of tax payment before they act. Value Added Tax - VATexempt for BDCs is applicable in other climes and should also be practiced in Nigeria. The non-implementation of tax exempt in Nigeria is affecting the capacity of BDCs to effectively meet the foreign exchange demands at the retail-end of the market,” he said.

BUSINESS DAY

C002D5556

COMMENT

Monday 27 August 2018

comment is free

Send 800word comments to comment@businessdayonline.com

Join the AfCFTA with grounded expectations! GREGORY KRONSTEN Gregory Kronsten Head, Macroeconomic & Fixed Income Research FBNQuest

s the FGN deliberates on the merits of signing up for the African Continental Free Trade Area (AfCFTA), it will be considering organizational and institutional issues in additional to the economic impact. To paraphrase Bill Clinton’s advisor, “it’s the politics, stupid”. We can draw some tentative lessons from the evolution of the EU over more than 60 years. There are first mover advantages. That way, a government can help to shape the organization from the outset and embed its nationals in its important institutions. At the same time, it should take a view on how far the organization might evolve. For example, the European Coal and Steel Community of six states, established in 1951, is today the 28-member EU (including 19 in the Eurozone). If the FGN is wary of ever increasing integration, it should

ISHAQ KHALID Ishaq Khalid BBC Africa

he vice-president has been praised for the decisive and dramatic - actions he has taken while standing in for MuhammaduBuhari during the president’s recent 10-day holiday. The dynamism of the sprightly 61-year-old have been contrasted to the ponderous nature of Mr Buhari, 75, who has been nicknamed “Baba-Go-Slow”. However, as a southerner he is unlikely to be able to stand in next year’s presidential elections, due to the country’s tradition of alternating power between the mainly Muslim north and largely Christian south. Mr Osinbajo’s most recent intervention was to order the overhaul of the police’s notorious anti-robbery squad, known as Sars, and ask the country’s Human Rights Commission to investigate the numerous allegations of abuses committed by the unit. For more than a year President Buhari has been under pressure to take action against Sars, as stories were shared on social media about extra-judicial killings, arbitrary arrests, torture and extortion allegedly committed by its officers. An #EndSars campaign was launched amid calls for the squad to be disbanded. Mr Osinbajo said he was moved to act because of the “persistent complaints and reports on the activities of the Special Anti-Robbery Squad (Sars) that border on allegations of human rights violation”. He did not disband the unit but said it would get a new commissioner, be intelligence-driven and its

acknowledge the risk of marginalization as the organization races ahead of it. Not all African governments share the same thinking on the management of an economy, one separate strand being the developmental state favoured by Ethiopia and Rwanda. For the AfCFTA to flourish, it requires strong institutions to enforce regulations and prevent the creation of new non-tariff barriers. They are likely to be overstaffed, and develop into a bureaucracy. Without such, however, the area would go the way of many underperforming regional organizations in Africa. We understand that these regional bodies will continue to exist as building blocks for the overarching area, and have concerns about duplication. In a sense, we are more comfortable in making these “political” points than assessing the impact of membership on the economy. If all states signed up for the area, there would be a single market for goods and services of 1.2 billion inhabitants and combined GDP cited as between US$2.3trn and US$3.4trn. This would be easily the largest trade agreement since the WTO in 1994. There are official forecasts in circulation for aggregate area GDP and intra-African exports in 2022 and 2030. We prefer to focus on concrete results. For example, the area, with or without its largest economy, will be a stronger

‘

Nigeria would join from a position of strength: the many small economies had no choice but to sign. By virtue of the size of its domestic market and the development of its many industries, Nigeria should be able to benefit from membership

’

position to negotiate trade agreements than individual countries and regional bodies currently are. Turning to the advantages for Nigeria, its manufacturing sector is relatively developed in an African context, and certainly the most advanced in the West African subregion. A breakdown of intra-African trade shows that 43 per cent consists of manufactures, compared with a share of less than 20 per cent for African trade with the rest of the world.

Nigerian traders are to be found in many African countries, and would be able to make Nigeria their market of choice for imports of finished goods within the area. The area is to bring free movement of labour and investment, which would create new opportunities for Nigeria’s services sector. An example frequently made is that of Nigerian lawyers who would be able theoretically to practice across the continent. On the same basis, Nigerian firms in accountancy, advertising, banking and the creative media would be well placed to take advantage of the new openings in the area. The services sector accounted for 53 per cent of a US$370bn economy in 2017. The FGN was set to sign up in Kigali in March 2017 but changed course and did not sign any of the three legal instruments underpinning the creation of the area. We understand that 49 of the 55 members of the AU have now signed and that the area comes into being with just 22 signatures. Nigeria was not the only large economy not to sign in March. The FGN stepped back, it is said, following pressure from organized labour and the Manufacturers Association of Nigeria (MAN). Labour had ideological objections to “radioactive neo-liberal policies” we read, while MAN felt that the FGN had not completed its homework. The FGN has carried out a lengthy process of nationwide

sensitization and polled 512 firms across the six geopolitical zones, of which 78 per cent supported membership of the area. The MAN has some legitimate concerns but the FGN has to consider all segments of the economy, of which manufacturing represented 9 per cent last year. Doubtless the decision will be taken on the grounds of national interest. We can see why the FGN would not sign an economic partnership agreement with the EU but think that it should join the area. We have conservative expectations of multilateral bodies such as the AfCFTA. Their development is never seamless. The first mover advantage is significant however, and the elimination of 90 per cent of tariff lines over five years is reasonable. Nigeria would join from a position of strength: the many small economies had no choice but to sign. By virtue of the size of its domestic market and the development of its many industries, Nigeria should be able to benefit from membership. Our understanding is that members will be free to exit the area after a trial period of five years. We doubt that the FGN would choose to go down this route but governments in these circumstances should think carefully before holding a referendum.

Send reactions to: comment@businessdayonline.com

YemiOsinbajo: Why Nigeria’s favourite leader won’t become president - yet mandate restricted to combating armed robbery and kidnappings. Members of the squad would also have to wear proper identification while on duty. Nigerians on Twitter celebrated - and many just seemed relieved to have an efficient politician getting things done. The previous week, he took the huge step of sacking the controversial head of Nigeria’s spy agency after a siege of parliament by men in masks, who turned out to be operatives from the Nigerian equivalent of the FBI. It was a mysterious affair - and the reasons for the Department of State Security’s (DSS) invasion of parliament are still murky, though it is thought to be linked to political machinations ahead of elections next year. Nonetheless DSS boss Lawal Musa Daura has long been seen as one of the officials denting the government’s reputation because of the agency’s alleged excesses. Critics have long wondered why President Buhari, who appointed him, has failed to take action against Mr Daura. By contrast Mr Osinbajo did not delay. He took the figurative bull by the horns, calling Mr Daura’s actions “unacceptable” and “a gross violation of constitutional order, rule of law and all accepted notions of law and order”. A former law professor, the vice-president comes across as quiet, unassuming and hardworking. But he is an eloquent and jovial person, who is usually seen with a smile on his face. He was the state commissioner of justice in Lagos between 1999

Yemi Osinbajo is basking in the love of many Nigerians at the moment - not a common experience for politicians in this country where they are generally held in low esteem.

and 2007, where he passed several reforms including a body tasked with protecting citizen’s rights. He was also the pastor in charge of the city’s Redeemed Christian Church of God. He has been vice-president since 2015, when Mr Buhari overcame the odds to defeat the incumbent Goodluck Jonathan. Last year when Mr Buhari went on medical leave, his deputy took some far-reaching economic measures to prop up the country’s currency, the naira. There was a scarcity of US dollars at the time, which is needed by importers. So he asked the Central Bank to inject millions of dollars into the market to help stabilise the naira on the foreign-exchange market. Reviving the economy was one of Mr Buhari’s main campaign pledges but he has failed to pass many of the reforms which economists say are needed. Mr Osinbajo never tries to hog the limelight - and maintains that he does not take any decision without first consulting his boss and getting

his approval. Nevertheless his leadership style is winning him fans as he seems to feel the pulse of public opinion. Some suggest one reason for this dexterity is that with fewer powerful aides, he can act independently. On the other hand, President Buhari, finds it very difficult to punish his erring government officials or make rapid institutional reforms. Some observers say it is unfair to compare the two - stepping in for a few weeks or even months is just not the same as running a country full time. Nigeria, Africa’s most-populous nation, is a complex place and balancing competing political, ethnic, religious and regional interests in a federal state can be difficult. While many Nigerians do not doubt Mr Buhari’s integrity and ambition to solve the country’s myriad problems, they say he is surrounded by selfish aides who do not put the interest of the country first. The health problems he experienced last year are also believed to have hampered his agility and general performance, although he

seems much improved recently. Despite the criticism of the pace of his decision-making, Mr Buhari has been praised for his dogged fight against corruption, tackling the Boko Haram Islamist insurgency and his attempts to diversify the economy. Nigeria is only months away from elections - and it has left some wondering what it would be like to have Mr Osinbajo permanently in the top job. But there is no immediate prospect of this happening - and Mr Osinbajo has never spoken of having presidential ambitions. Mr Buhari has already indicated his ambition to seek re-election in February - with his loyal deputy once more his running mate and unlikely to challenge him. There is also Nigeria’s informal policy of rotating the presidency - after two terms - between the mainly Muslim north and the largely Christian south to consider. Mr Buhari, a northerner, is just completing his first term. Mr Osinbajo, a southerner who was born in the mega city of Lagos, would therefore be an unlikely presidential choice for the governing All Progressive Congress (APC) party. And there is of course, the possibility of an opposition victory which would further remove him from the corridors of power. While it is unlikely that Mr Osinbajo will be Nigeria’s full-time leader any time soon, he is young enough to bide his time until the next poll in 2023, when it might be the turn of a southerner to lead the country.

Send reactions to: comment@businessdayonline.com

Monday 27 August 2018

C002D5556

COMMENT

BUSINESS DAY

comment is free

Send 800word comments to comment@businessdayonline.com

Was the 2016 recession inevitable?

ANTHONY OSAE-BROWN Osae-Brown is the editor of BusinessDay @osaeB

here is a narrative, supported by the Presidency that the 2016 contraction or recession of the Nigerian economy was inevitable. In other words, what this narrative seeks to push is that nothing could have been done by the President Muhammadu Buhari led government to stop the economy from falling into a recession in 2016. Those who push the narrative argue that as at May 29, 2015 when President Buhari was being sworn in, the economy was already in an irreversible decline path. At a first glance, the data seems to support this argument. In the first quarter of 2015, Nigeria’s economic growth stood at 3.96 percent. But this growth dropped to 2.35 percent in the second quarter of 2015 - the same quarter Buhari was sworn in as president. It must be noted that these period covers the pre-election and election period in 2015. Past trends show that the country’s economy tends to slow down around these periods due to rising political risk brought about by political uncertainty.

But immediately after the elections, the trend also show that the economy tends to pick up as the political uncertainty vanishes and businesses start looking forward to the new government and what it has to offer in terms of policy direction. In 2015, this was initially the case also as economic growth picked up to 2.84 percent in the third quarter immediately after the election from 2.35 percent in the second quarter. But growth plunged to 2.11 percent in the last quarter of 2015 and by first quarter of 2016, the economy was effectively in contraction mode. This raises the question, why did the economy pick up in the third quarter, as expected but started plunging in the fourth quarter? One easy answer was the lack of economic direction immediately after the election amidst a plunge in oil prices and production, the country’s main stay. The lack of economic direction was exemplified by the fact that President Buhari did not swear in ministers until November 11, 2015. It is very difficult to argue that this delay in having ministers had no economic consequences especially on the non-oil sector of the economy which soon lost steam. Data from the Central Bank of Nigeria (CBN) shows that economic growth in 2015 was mainly powered by the non-oil sector. Oil growth was negative in the first and second quarter of 2015, positive in the third quarter but grew at a negative rate again in the fourth quarter. Interestingly, the economic growth seen in the first and second quarter of 2015 was driven by non-oil which grew at 5.59 percent in the first

‘ ...the 2016 recession

was not inevitable. It could have been avoided with the right set of policy choices, including an early appointment of ministers, timely adjustment of the exchange rate and less confrontational approach to the issues in the Niger Delta which cost us significant loss of oil production at a time of low oil prices

’

quarter and 3.46 percent in the second quarter of 2015. Non-oil growth remained positive at 3.05 percent in the third quarter and 3.14 percent in the fourth quarter but that growth vanished from early part of 2016, even as oil growth fell into deeper negative territory. So basically, the economy started contracting in 2016, not necessarily because of oil, but because the non-oil sector which has been shouldering the burden of growth lost steam by the first quarter of 2016. This raises the question; why

did the non-oil sector suddenly lose steam at a time it was most needed? Several factors account for why the non-oil sector lost steam in early 2016 and it is largely to do with how the newly elected president Buhari decided to respond to the decline of oil price and consequently revenues coming into the federation account. While oil price had averaged US$98.89 per barrel in 2014, by 2015, the average oil price was US$52.32 and by 2016 it had even dropped further to US$43.74 less than what it was in 2015. With oil accounting for 70 percent of federation revenues in good times and 95 percent of the country’s foreign exchange earnings, the significant drop in oil prices was bad news for the economy. While oil prices dropped, simultaneous sabotage of oil assets in the Niger Delta also resulted in a significant drop in oil production from average of 1.8 million barrels per day to a low of 1.4 million barrels per day. Not surprisingly, gross oil revenues, data from the Central Bank of Nigeria shows, declined from a high of N6.79 trillion in 2014 to N3.83 trillion in 2015 and finally to a low of N2.69 trillion in 2016, the year of economic contraction. Faced with dwindling oil revenues, the country’s external reserves came under significant pressure. But instead of responding with a devaluation of the currency to stem demand and discourage imports, the CBN choose to ration the dollar backed, of course, by President Buhari who on January 28, 2016, while speaking to Nigerians in Nairobi Kenya outlined what was effectively his official position on the Naira when

Directors as shareholders BISI ADEYEMI Bisi Adeyemi is the Managing Director of DCSL Corporate Services Limited. For comments and reactions, kindly contact badeyemi@dcsl.com.ng.

irectors typically – save for Independent Directors - are not precluded from holding shares in companies on whose Boards they serve. Indeed, some companies by their Articles of Association prescribe shareholding qualification for Directors. Section 251 (1) & (2) of the Companies and Allied Matters Act, 2004 (CAMA)provides a basis for this. Where so fixed, the Director is obliged by the provisions of CAMA to obtain his qualification within two months of appointment or vacate the office. In practice, most Directors are shareholders either in their personal capacity or as nominees of corporate shareholders. Many private companiesareowner-managed businessessuch that a majorityif

not all the shareholders also sit on the Board. Typically, Shareholder Agreements and indeed Articles of Association provide for “substantial shareholder” Board representation. Upon reaching a particular threshold (usually 5%) shareholders are invited to make nominations to the Board. A substantial shareholder as contemplated by CAMA is one who holds either directly or through a nominee, at least 10% of the shares of a company. The SEC Code of Corporate Governance for Public Companies in defining an Independent Director, infers that a substantial shareholder is one who holds directly or indirectly 0.1% of the company’s paid up capital. However, the Listing Rules of the Nigerian Stock Exchange requires listed companies to disclose in their annual reports details of persons and entities who hold 5% and more of the company’s shares as these are considered substantial shareholders. The CBN Code of Corporate Governance for Banks encourages the composition of a Board which is independent of individual shareholdersand defines director independence to mean the nonrepresentation of any particular shareholder interest. The exposure draft of the Nigerian Code of Corporate Governance recommends that a majority of Non-Executive Direc-

tors on the Board be Independent. There are arguments in support of the position that a Board made up predominantly of owner-Directors tends to be more hands-on, focused on corporate performance and delivering shareholder value. On the other hand, amore popular global perspective is that separating the role of ownership and governance engenders Board independence which is a sine qua non to delivering value to a wider spectrum of stakeholders and acting in the company’s overall interest. Decisions would not always be influenced by investment objectives of the individual and institutional shareholders but will be better focused on considerations beyond the bottom-line. It is suggested that whilst Directors (save for independent directors) should be free to hold shares, there should be a cap on their shareholding as individual Directors and as a Board. A situation where 95% of the entity is owned by Directors cannot be in the overall interest of the company. Hence the clamor by regulators for more independent Directors on Boards – particularly of public companies. It is conceded that there is no rule of thumb in this regard and examples of successful companies with a preponderance of owner-directors abound. As the clamor for more independence for the Board gathers momen-

tum, a worrisome trend that needs to be addressed is that of the “substantial shareholder Chairman”. The role of the Board Chairman is crucial to the optimal performance of the Board of Directors and by extension the Company. The concept of the separation of the role of the Chairman from that of the CEO implies that the Chairman should be independent of Management and free from any business interest or other relationships which could interfere with his ability to make independent judgment. The return of a former CEO (after the cool-off period as envisaged by the respective Codes of Corporate Governance) as Chairman of the Board raises the question of independence and overbearing influence – particularly where the former CEO is a substantial shareholder. The Chairman is expected to be in a position to create some balance on the Board. It is for this reason that the Codes recommend that the Chairman should not be a member Board Committees. Ideally and as much as possible, the Chairman should be an independent Director. The major implications for Directors of public companies who hold substantial sharesin these companies relate to their independence and the restrictions placed on their freedom to deal with the shares as they pleasebeing subject

he said that ‘he will not kill the naira’ basically referring to devaluation as a ‘killing of the naira.’ The stubborn insistence by President Buhari that the naira will not be devalued in the face of dwindling reserves forced the Central Bank of Nigeria (CBN) to introduce unorthodox methods to reduce pressure on the naira. The dollar was basically rationed to several sectors while some 41 items were identified for which importers could not access official foreign exchange for. Despite the CBN restriction on importers of 41 items accessing foreign exchange in the official window which came into effect on June 24, 2015, the country’s external reserves which was already at a low US$28 billion as at May 2015 declined to a low a US$23.7 billion in September 2016 before beginning to rise again. Earlier on September 8, 2015, JP Morgan had announced that the country will be taken out of its Emerging Market Government Bond Index (GBI-EM) by the end of October that same year due to alleged lack of liquidity and transparency in the nation’s foreign exchange market. Nigeria had been part of the index since 2012. The GBI-EM had US$170 billion tracking it with about US$2 billion of it in Nigerian bonds. The signalling impact of the country’s delisting from the GBI-EM was more than the US$2 billion that was directly at stake.

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

to a number of constraints such as theprohibition of insider trading and compliance withdisclosure requirements under the Rules & Regulations of the Securities and Exchange Commission. Are substantial shareholder Directors able to comply with these restrictions? Are they able to maintain the level of independence required to perform optimally in the overall interest of the company? Diversity of Board composition to include more independent, nonshareholding Directors will ensure the Board independence – a major signpost of Board effectiveness. Upcoming event DCSL Corporate Services Limited will be hosting a Board Effectiveness Masterclass with the following details: Theme: Strategic Leadership The Role of the Board Date: Thursday,August 30th, 2018 Venue: Radisson Blu Anchorage Hotel, Victoria Island, Lagos Topics: The role of the Board in Strategy Formulation, Articulation and Evaluation; Succession Planning – The role of the Board; Board Size & Composition – Striking a Balance; and The role of the Board in risk oversight and business continuity. For enquiries and registration, please contact Nike at 08037699347 or ntaiwo@dcsl.com.ng.

Send reactions to: comment@businessdayonline.com

BUSINESS DAY

Editorial PUBLISHER/CEO

Frank Aigbogun EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya

EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure ADVERT MANAGER Adeola Ajewole MANAGER, SYSTEMS & CONTROL Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

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

Monday 27 August 2018

C002D5556

Who is really in charge in Nigeria?

ometime in March, it emerged that for two months, the president did not know that the Inspector General of Police disobeyed his direct orders for him to relocate to Benue state to stop the killings by herdsmen in the state. The IGP stayed only one day in Benue state and relocated to Nasarawa. “It is only now that I am hearing this. But I know that I sent him here, Buhari retorted in shock to General Atom Kpera (rtd) who pointedly challenged him that the IG did “not do the work you sent him. He stayed for less than 24 hours in Benue and relocated to Nasarawa.” But even after the president knew and said publicly the IGP disobeyed him, the IGP still retained his position and even dismissed insinuations from some presidency sources that he was ever queried for disobeying the president’s orders. Similarly, last year, the Senate twice rejected the nomination of Ibrahim Magu as substantive Chairman of the Economic and Financial Crimes Commission (EFCC) by Presi-

dent Muhammadu Buhari all on the advice of the Department of State Security (DSS) that he (Magu) “has failed the integrity test and will eventually constitute a liability to the anti-corruption drive of the present administration.” After the first refusal, the president ordered the AttorneyGeneral of the Federation and Minister of Justice, Abubakar Malami, to investigate the validity of the allegations. No report was ever made public on the investigation but the president renominated Mr Magu and the DSS again gave a damning report of Magu leaving the Senate with no option other than to reject Magu’s nomination again. Curiously, both the EFCC and the DSS are agencies under the presidency and they both report to the president. Interestingly, the DSS was then headed by Buhari’s trusted kinsman from Daura, Lawal Musa Daura, recalled from retirement to head the agency. The whole country was baffled that the DSS that constitutionally reports to the president could directly undermine the president and presidential authority so blatantly without any consequence.

Perhaps, it is the boldness gained from overriding the president that emboldened Lawal Daura to order the invasion of the National Assembly by fully armed and hooded DSS operatives earlier in the month to enable a leadership change without any authorisation. Many analysts believed Daura could still have gotten away with it were the president not away in London and Yemi Osinbajo acting as President at the time. With Buhari’s return, there have been reports that he is under tremendous pressure to reinstate Daura to his position. The existence of a strong cabal that controls Aso Rock has been an open secret. Even the President’s wife, at a time, alluded to the existence of such a group who “don’t know our party manifesto…don’t know what we campaigned for…” but who have now hijacked her husband’s presidency and are steering it in the direction of they so decide. So strong were the rumours that his nephew, Mamman Daura, was in charge of his administration that the president, in 2016, had to offer a rebuttal insisting he, and not Daura, was in charge. Analysts

and behavioural Psychologist insist that when a leader is forced to issue such a rebuttal, it is most likely the allegation is true. For what president – and a former military general at that who is well versed in matters of command and authority – will allow his direct appointees to continually defy his authority without consequences? What president will be unaware for two months that his appointee defied him even when the news was everywhere and virtually all citizens knew about it? Does that not tell of a president with limited ability to function and is walled-off from happenings in the country he is supposed to be leading? Nigerians must come to terms with the bitter truth: Nigeria is under the grips of some vicious power-hungry cabal who are desperate to continue to wield awesome powers without responsibility by propping up a president fast diminishing in ability and health. They have to determine whether they will accept this illegal power grab or get back power and hand it to those who would wield it on behalf of the people and be accountable to them.

EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Albert Alos Funke Osibodu Afolabi Oladele Dayo Lawuyi Vincent Maduka Maneesh Garg Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Sim Shagaya Mezuo Nwuneli Emeka Emuwa Charles Anudu Tunji Adegbesan Eyo Ekpo

ENQUIRIES NEWS ROOM 08023165438 Lagos 08169609331 08033160837 Abuja

}

ADVERTISING 01-2799110 08034743892 SUBSCRIPTIONS 01-2799101 07032496069 07054563299 www.businessdayonline.com The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 LEGAL ADVISERS The Law Union

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

OUR CORE VALUES

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

Monday 27 August 2018

C002D5556

BUSINESS DAY

Monday 27 August 2018

C002D5556

In Association With

The inveterate diplomat

Kofi Annan helped define the UN, in success and failure But his vision depended on the support of big powers, which frustrated him

HE secretary-general of the United Nations is sometimes described as a “secular pope”. The position is imbued with moral authority; the holder watches over an enormous flock; but he has no instruments of hard power. The title seemed to fit Kofi Annan, the seventh secretary-general, more than most. Soft-spoken and calm, Mr Annan had the demeanour of a monk. And with popish assuredness he set about trying to establish the UN as the world’s moral arbiter. But he was often frustrated by the countries on the Security Council, which wield the real power. Mr Annan died on August 18th, aged 80. Many will remember him for drawing attention to the plight of the poor, the sick and the victims of war. He took over the UN in 1997, becoming the first sub-Saharan African to lead the organisation, and served two five-year terms. With his neatly-trimmed goatee and well-tailored suits, he was charming and eloquent. Many remarked on how unflustered he always appeared, despite serving during a tumultuous decade that saw al-Qaeda attack America, and America attack Iraq. He was awarded the Nobel peace prize in 2001 (an award he shared with the organisation) for his work to revitalise the UN’s institutions and renew its sense of purpose. For all his efforts, though, these days the UN feels all but marginalised in world affairs. Mr Annan was an unlikely choice for secretary-general. Born in Ghana, he rose through the ranks of the UN, whereas past leaders had been prominent national politicians or diplomats. His four-year stint

Dreaming of new spires

British universities set up shop overseas Middlesex in Mauritius, Westminster in Tashkent: foreign campuses are booming

OHOR BAHRU, a sprawling, gritty city in Malaysia, would once have been an unusual home for a British university. But just off one of the main roads out of town, past signs to Legoland, sits EduCity, a development which is home to three British institutions, each a humid five-minute stroll from the other. The University of Reading is filled with greenery and gleams in the sun. Newcastle transplants the architecture of the university’s Tyneside home to Malaysia. Southampton completes the unlikely trio. These outposts are part of

as head of peacekeeping operations was marred by bloody failures. The most shameful episode occurred in 1994 in Rwanda, where a small UN force was stopped by Mr Annan from taking action to prevent a genocide that left 800,000 people dead. Blame should be shared, said Mr Annan later. The bloodshed would have been difficult to stop and the world was reluctant to intervene. “All of us must bitterly regret that we did not do more to prevent it,” he said. UN peacekeepers were again criticised during the wars of the former Yugoslavia. When Bosnian Serb forces surrounded the UN-protected “safe haven” of Srebrenica in 1995, peacekeepers from the Netherlands handed it over without a fight, leading to a massacre of civilians. European powers opposed backing the troops on the ground with air strikes. In the end, Mr Annan sidestepped his boss, Boutros Boutros-Ghali, and approved a NATO bombing cam-

paign against the Serbs. The forceful action endeared him to America, which was looking to replace Boutros-Ghali. But America would later challenge Mr Annan’s view of the UN as “the sole source of legitimacy” for foreign interventions. When NATO launched a bombing campaign in defence of ethnic Albanians in Kosovo in 1999, Mr Annan said it was “tragic that diplomacy has failed”, while admitting “there are times when the use of force may be legitimate in the pursuit of peace.” A more serious test came in 2003. As America confronted Iraq over its alleged possession of weapons of mass destruction (WMD), Mr Annan pressed Iraq’s dictator, Saddam Hussein, to give UN weapons inspectors access to his facilities and urged America to give them time. Any plans for military action must go before the Security Council, said Mr Annan (who knew that the council would vote against them). When America invaded

without UN approval, Mr Annan said the action was illegal, leading to a torrent of criticism from Republicans, who noted that the firm employing his son had benefited from UN contracts in Iraq before the war. “The attacks [on Mr Annan] reflected the US at its worst, Kofi at his bravest, and the UN at its most vulnerable, trying to maintain international law against a lawless White House,” wrote Jeffrey Sachs, a former economic adviser to Mr Annan. No WMDs were ever found in Iraq. The war, though, also reflected the impotence of the UN. It was helpless in the face of Saddam’s brutality and America’s aggression. Defenders of Mr Annan would often note that the big powers criticised the UN for inaction, then stopped it from acting, depending on their national interest. Little has changed. Mr Annan did not have troops under his command. He relied on America for much of the UN’s budget.

a broader trend. Britain’s 136 universities now have 39 foreign campuses abroad, educating 26,000 students, from Middlesex University’s site in Mauritius to Glasgow Caledonian’s branch in Bangladesh (see map). Only Australia, which has a much smaller higher-education system, can boast a similar ratio of home to overseas campuses. In addition, there are many more students taking British degrees taught by foreign institutions. In these arrangements British universities provide a curriculum, and sometimes teaching staff, training and support, in return for a juicy fee. In all, in 2015-16 there were 703,000 students studying for a British higher-education qualification overseas. Including international students in Britain, British universities have 1.1m foreign students on their books, a number fast catching up with the 1.9m British students they are educating. The universities’ overseas footprint began to grow fast in the 2000s, as they rushed to meet demand in growing economies, mostly in Asia. “Like in any other industry, universities dipped their toes in the water, then took the Continues on page 15

Monday 27 August 2018

C002D5556

BUSINESS DAY

In Association With

Free exchange

What a rising current-account surplus means for the euro area A question of balance

REECE’S third bail-out programme came to an end on August 20th. A look at the causes of the country’s near-decade of crisis illustrates how external imbalances can reflect underlying troubles. Gaps in public finances, as well as investments in property, were financed by borrowing from Germany and other northern European countries. Wages and costs were pushed up, making exports less competitive— within the euro zone, there can be no currency devaluation— and further widening Greece’s current-account deficit. When foreign lending seized up, the government needed bailing out and the banks crumbled. Portugal (chiefly because of its public finances), Spain and Ireland (blame private-sector housing bubbles) have similar tales to tell. s those four countries have stabilised or recovered, they have wholly or partly reversed their currentaccount deficits (see chart). But if the periphery has adjusted, the same is not true of the euro area’s creditor countries. Surpluses in Germany and the Netherlands have grown. As a consequence, the euro zone in total has a substantial current-account surplus. In the year to June it was 3.6% of GDP (the same as the record for a calendar year, set in 2016). Growth is likely to have been hurt. In 2017, according to the IMF’s External Sector Report, published last month, the euro area had the world’s biggest absolute current-account surplus, $442bn. Germany has the largest of any single country. China’s once-vast surplus has narrowed: in the first half of this year, indeed, China reported a deficit. America’s deficit remains the world’s biggest, $466bn last year. Corporate-tax cuts, interest-rate rises and the associated dollar appreciation could widen it further. Current-account imbalances are not always a cause for concern. As a matter of arithmetic, they measure the gap between domestic savings and investment. The euro area is an economy with an ageing population: it should save more than it invests. As a result, it should

have a current-account surplus. America’s deficit partly reflects the more attractive investment opportunities available there than elsewhere in the world. Imbalances become more worrying, however, if they are larger than economic fundamentals might suggest or financed by short-term inflows. The crises in the periphery of the euro zone were reflected in deficits caused by a surfeit of unproductive spending. But excess surpluses, too, can have drawbacks. The IMF reckons that the euro area’s aggregate current-account surplus is now stronger than would be justified by structural factors and the business cycle alone. Growth in the zone relies too much on that of its largest trading partners, including America; worthy investment projects at home—in German infrastructure, say—go unfulfilled. Surpluses also have political consequences outside the bloc. President Donald Trump sees Europe as a “foe” because of its bilateral trade surplus with America. He has slapped tariffs on European steel and aluminium, and threatened them on cars; the European Union has retaliated. The two sides are negotiating, but trade tensions are likely to keep simmering. Internal strife The current-account deficits in the euro zone’s crisis countries were of the worrying kind. That they have shrunk or reversed is comforting. This has happened largely through increases in exports, suggesting

that competitiveness has improved. (Much of Ireland’s huge surplus reflects multinationals domiciling their intellectual property in the country to take advantage of its low corporate taxes, boosting its exports.) In Greece, where eight years of crisis and austerity have squeezed consumption and investment, imports have borne a greater part of the adjustment. They are more than 25% lower than in 2007. The adjustment was particularly painful because, as members of a single-currency bloc with low inflation, crisishit countries had to devalue their real exchange rates by cutting wages and domestic demand and employment. And the zone’s growing aggregate surplus points to another exacerbating factor: Germany’s excess of saving over investment kept rising, as it increased lending and exports to countries outside the zone. If instead Germany had expanded domestic demand, others’ relative price adjustments could have been less painful. A paper by Olivier Blanchard, Christopher Erceg and Jesper Linde, published in 2015, finds that higher German inflation could make other countries’ goods and services relatively cheap, making it easier for crisis countries to adjust. The effect is particularly strong when interest rates have to remain low to stimulate the economy. Some German economists, notably at the Bundesbank, have long argued that this is irrelevant: it is up to profligate southerners,

not prudent Germans, to adjust; and fiscal expansion will not boost demand for euro-area imports directly. Still, this uneven adjustment in the euro area could explain why both demand and inflation, once energy and food prices are excluded, have been stubbornly low. Since crisis countries still need to reduce their stocks of external liabilities (ie, the accumulation of past current-account deficits) and public-sector debt, that looks set to continue. John Maynard Keynes recognised the risk of such asymmetry in the 1940s: “The process of adjustment is compulsory for the debtor and voluntary for the creditor. If the creditor does not choose to make, or allow, his share of the adjustment, he suffers no inconvenience.” Keynes wanted to tax countries that hoarded trade surpluses. In 2011 the European Commission set up a “macroeconomic-imbalance procedure” to tackle the problem. But the process appears to place less weight on surpluses than on deficits and lacks the means to enforce its recommendations. Another way of dealing with imbalances would be to encourage greater risk-sharing through fis cal and (deeper) banking union. The euro zone would become more like America, where inter-state imbalances are not even recorded. But that too seems politically infeasible. The euro area’s long slog will carry on, and debtor countries will bear the burden.

British universities set up shop overseas Continued from page 14

plunge,” says Vangelis Tsiligiris of Nottingham Business School. High-ranking universities were the most likely to set up campuses, in the hope of attracting better staff and more students, both of which would help them up the international rankings. In the early days, less-fancy universities were happier letting local colleges teach their qualifications. Increasingly, the more prestigious universities prefer this approach too. All universities wax lyrical about the benefits of fostering international research links; in some cases it might even be true. The attraction for students is clear. A British degree holds a promise of quality, explains Mark, a local undergraduate at Sunway University, a Malaysian institution just outside Kuala Lumpur. Studying at home allows students to avoid Britain’s increasingly strict visa regime. It is also much cheaper. A joint Lancaster-Sunway degree costs around 28,000 ringgit (£5,300, or $6,820) a year, compared with £9,250 for a Lancaster degree in Britain—which would also involve hefty travel and living costs. In the past five years, Sunway’s student numbers have trebled, to 7,500. The offer of British qualifications has been crucial, says Graeme Wilkinson, its vice-chancellor— although, he adds, having a water park next door did no harm. For countries like Malaysia, importing foreign universities offers a way to build institutional expertise quickly. Two decades ago, Malaysia began to position itself as a hub for higher education, seeking to attract students from around the region, as well as from fartheraway Muslim countries, explains Sarah Deverall, head of the Malaysian branch of the British Council, which promotes British culture abroad. Malaysia now has more students studying for a British qualification than any country bar Britain itself. Others places have courted foreign universities for different reasons. Dubai, for instance, encouraged them to set up shop to cater to the children of its large expat population.

BUSINESS DAY

C002D5556

Monday 27 August 2018 In Association With

One eye on the clock

When will Binyamin Netanyahu call an election in Israel? That may depend on whether he is indicted

HE next general election in Israel does not need to be held until November 2019, but drive down the motorway in Tel Aviv and you will see campaign banners for Moshe Kahlon, the finance minister and leader of a centre-right party. On the radio you can hear Avigdor Lieberman, the defence minister, and Naftali Bennett, the education minister—both of whom lead right-wing parties—tearing into each other. Plainly, members of the government coalition sense that an election is near. For his part, Binyamin Netanyahu, the prime minister (pictured), has been sending mixed signals. In July he told his ministers that he wanted the government to see out its term; a month later he warned of an imminent

ballot. Some point to the rushed passage of a controversial law bowing to Jewish nationalism as proof that he is preparing to go to the polls. The main consideration governing Mr Netanyahu’s decision is his own legal predicament. He is the target of three inves-

tigations concerning his ties to businessmen and media owners. Investigators have questioned him 11 times. The police, armed with the testimony of three of his aides, have already recommended pressing charges against him for bribery and fraud. The last and reportedly final

round of questioning came on August 17th. The attorney-general, Avichai Mandelblit, must now decide whether to indict a serving prime minister for the first time in Israel’s history. (Ehud Olmert, a former prime minister, was indicted and jailed for accepting bribes after he resigned in 2008.) Mr Netanyahu insists he will not resign. But if an indictment is handed down, the Supreme Court might weigh in on whether he can remain in office—that is, if his coalition partners don’t abandon him. Despite his troubles, polls show Mr Netanyahu’s coalition beating the opposition in an election. Holding the vote now might bolster his case to remain in office even if he is indicted. Moreover, it would pre-empt the attorneygeneral’s decision, allowing Mr Netanyahu to run a campaign

that is not overshadowed by his legal affairs. But he has two reasons to hesitate. The first is discord within his coalition. Under Mr Netanyahu, the Likud party has never held more than a quarter of the seats in the Knesset, putting him at the mercy of his partners. He could face a challenge from the right, which is upset by his decision to seek a ceasefire with Hamas, the militant Islamist group that controls Gaza. Mr Netanyahu’s second concern is his legacy. If he hangs on until July 2019 he will become Israel’s longest-serving prime minister (at 13 years and four months), breaking the record of David BenGurion, Israel’s founding prime minister. He is determined not to let his political rivals or the police deny him his place in history.

American politicsIs

Donald Trump above the law? Revelations and convictions will eventually force America to confront a simple question

T WAS the kind of moment that would crown the career of a reality-TV producer. While the president of the United States was on his way to a campaign rally, his former campaign manager, Paul Manafort, was found guilty of eight counts of tax and bank fraud; and his former lawyer, Michael Cohen, pleaded guilty to eight counts of tax evasion, fraud and breaking campaignfinance laws. Cable-news channels needed so many split screens to cover what was going on that they began to resemble a Rubik’s cube. Amid the frenzy, however, something important changed this week. For the first time, President Donald Trump faces a formal accusation that he personally broke the law to further his candidacy. Mr Manafort’s conviction did not surprise anyone who had followed his trial, or his long career as a political consultant available for hire by dictators and thugs. Mr Cohen’s plea was more striking, because he was not just Mr Trump’s lawyer; he was the guy who made his problems go away. This included making payments during the 2016 campaign to buy the silence of two women who appear to have had affairs with Mr Trump. (The president has denied the affairs and now says he learned about the payments later.) But Mr Cohen told a court under oath that the money was paid “at the direction of a candidate for federal office”. In other words, that Mr Trump told Mr Cohen to break the law, then lied to cover it up. Neither Mr Manafort’s conviction nor Mr Cohen’s plea is directly related to the allegations of collu-

sion with Russia that have dogged the Trump campaign, and are being investigated by Robert Mueller, the special counsel. Yet neither case would have been brought without his investigation. This week’s events mean that Mr Mueller now stands on firmer ground. It will be harder for the president to dismiss him without it looking as though he is obstructing justice. And in such cases, convictions often lead to more convictions as those found guilty look for ways to save themselves. The question now is whether, and how far, Mr Manafort and Mr Cohen will turn against their former boss in return for leniency. As the slow drip of revelations and convictions continues, Americans will have to confront a simple question: is Mr Trump above the law? Follow the money Mr Cohen says Mr Trump asked him to make hush-money payments—something that is not illegal for ordinary citizens, but counts as

an undeclared donation when done on behalf of a political candidate, as Mr Trump was at the time. So what? After all, America treats breaches of campaign-finance law much more like speeding tickets than burglary: they are often the result of filling in a form wrongly, or incorrectly accounting for campaign spending. There are good reasons for this indulgent approach. When voters elect someone who has bent the rules, it sets up a conflict between the courts and the electorate that is hard to resolve cleanly. Mr Trump does not stand accused of getting his paperwork wrong, however, but of paying bribes to scotch a damaging story. That is a far more serious offence, and one that was enough to end the career of John Edwards, an aspirant Democratic presidential candidate, when he was caught doing something similar in 2008. There is no way of knowing if Mr Trump would still have won had the story come out. Even so, the possibility

that he might not have done raises questions about his legitimacy, not just his observance of campaignfinance laws. What of the convention, which has been in place since the Nixon era, that the Justice Department will not indict a sitting president? Again, there are good reasons for this. As with breaches of campaignfinance law, such an indictment would set up a conflict between the bureaucracy and the president’s democratic mandate that has no happy ending. The convention would doubtless be void if there were credible evidence that a sitting president had, say, committed murder. But the payment of hush money to avoid an inconvenient story about an extramarital affair falls a long way short of that. The authors of the constitution wanted to allow the president to get on with his job without unnecessary distractions. But, fresh from a war against King George III, they were very clear that the presidency should not be an elected monarchy. If a president does it, that does not make it legal. The constitutional problem that America is heading towards is that the Justice Department’s protocol not to prosecute sitting presidents dates from another age, when a president could be expected to resign with a modicum of honour before any charges were drawn up, as Nixon did. That norm no longer applies. The unwritten convention now says in effect that, if his skin is thick enough, a president is indeed above the law. Drip, dripping down the drain

This means the only solution to any clash that Mr Trump sets up between the courts and the voters is a political one. Ultimately the decision to remove a president is a matter of politics, not law. It could hardly be otherwise, as America’s Founding Fathers foresaw. In “Federalist 65”, Alexander Hamilton explained why it was the Senate, rather than the Supreme Court, that should sit in judgment on the president, for “who can so properly be the inquisitors for the nation as the representatives themselves?” No other body, he thought, would have the necessary “confidence in its situation” to do so.

Monday 27 August 2018

BUSINESS

COMPANIES & MARKETS

Daniel Obi

embers of organised private sector comprising companies, professionals and organisations across different industries have started moves to checkmate the estimated N9 billion post-harvest annual losses of perishable foods in the country. The OPS under the aegis of the Organisation for Technology Advancement of Cold Chain in West Africa, OTACCWA wants to ensure that the nation reduces the huge post-harvest losses through the integration of Cold Chain system in Nigeria’s agricultural value chain. It is also calculated that out of the colossal N9 billion post-harvest losses, about 50 % of it is recorded for fruits and vegetables. It is said that despite remarkable progress in food production in the country, successive governments had not adequately identified and addressed the challenge of post-harvest value chain and the importance of functional cold chain agricultural development.

The determination to ensure food security in Nigeria and reduce agricultural wastages therefore necessitated the formation of OTACCWA which will also cover other West African countries. “We have observed that one of the major causes of post-harvest losses in the agricultural and pharmaceutical sector is lack of adequate cold chain facility and this organization has been put together to ensure that cold chain sector is integral part of the economic and agricultural development agenda of Nigeria”, the President of the organization, Augustine Okoruwa told BusinessDay at the unveiling of the body in Lagos recently. He strongly believed that with cold chain there will be sustainable food security and improved nutrition in Nigeria and the rest of W/Africa. According to Okoruwa, Cold Chain is a sine qua non for handling perishable foods to deliver the nutritious content that is full of nutrients that human being needs. “This encompasses perishable commodities, fresh food and vegetables, berry, meat, poultry, sea food and pharmaceutical products that require cold chain

like vaccines” The president who spoke in company of other stakeholders in the cold chain business, regretted that at the moment, the cold chain sector is nascent and it is latent in terms of deploying its total benefits. “We have therefore put together this association to ensure that all stakeholders and players that are involved in cold chain development system come together in one umbrella body to deliver and render services that will meet specific needs”, he said. Okoruwa said the organization will comprise research and academia, private sector technology providers, cold room builders and insulation panel builders, professional association and there will be alignment with international couching organisations that deliver services to ensure that perishable foods are not wasted. He said the decision to inaugurate the body as advocacy group came after the last Cold Chain Summit in 2017 where it was agreed by all participants that there was need for a coalition to proactively take steps in defining the statistics and proposing the solutions to reduce the staggering postharvest losses in Nigeria.

Forte Oil partners GTB on new payment solutions Oghogho Edosomwan & Cynthia Ikwuetoghu

igerias indigenous oil and gas company Forte Oil recently unveiled its new mobile payment solutions which include products and services namely; Order to Delivery (OTD), FO App and an e-Commerce website as well as the re-launch of the FO Advantage Card. The company also announced a partnership with Guaranty Trust Bank Plc, which makes payment for products and cardless withdrawals possible at selected Forte Oil service stations through the bank’s *737# USSD code. According to Akin Akinfemiwa, Group Chief Executive Officer, Forte Oil, the purpose of the this new product and services is to create a new world of convenience and in time services for their numerous customers in a bid to maintain their leading position in the Nigerian

downstream petroleum sector. Explaining each product, the Akinfemiwa stated in a series of tweets that; “The Order to Delivery (OTD) , enables our customers to engage in seamless end -to-end transactions with very minimal or no human interface and provides a step by step tracking of each transaction from order to Delivery” The OTD has been proven to reduce their turnaround times for various Retail and B2B transactions. This APP

was designed to accommodate multiple transactions in a safe and secure manner and without hitches. Akinfemiwa also stated that, “The FO Advantage is a Debit Master Card that works on multiple channels and rewards you to earn points when you buy products at our various retail outlets” “You can also use it for your convenience elsewhere as long as the card is funded via your FO wallet on the FO App. It can also be funded directly from your bank account”

ABC Transport returns to profitability, amid challenges

Pg. 18

C o m pa n y n e w s a n a ly s i s a n d i n s i g h t

OPS moves to reduce N9b annual post-harvest losses in food production

DAY

SA navigates headwinds, grows premium by 14.2% Kelvin Umweni

he financial statement of Standard Alliance Insurance Plc. was finally released to the Nigerian Stock Exchange (NSE) yesterday after months of delay. An examination of the financial statement submitted to the bourse shows that the insurer recorded a stellar performance as gross premium written grew by 14.2 per cent to N4.84bn in 2017 as against N4.38bn in the preceding period. Gross premium income however spiked to N4.99bn compared to N4.34bn in the preceding year. The rise in gross premium income was as a result of an unearned premium to the tune of N152 million. In line with the vision of being an insurer of choice in Nigeria, the management of Standard Alliance Insurance Plc. noted that one of its business objectives has been to lay down well-structured plans and corporate strategies as well as digitalization to drive

growth. “It is the intention of management to continually churn out new products that will satisfy the quest of our numerous customers while deepening the existing ones. To do this, we aim to broaden and align service delivery channels along customer segment, take cognizance of the difference between policy administration product support and customer care to adequately cater for peculiar needs for each segment.” The company’s pre-tax profit drifted away from the negative zone from a loss of N1.21bn in 2016 to N65.6million in 2017. The spike in profit before taxation is attributed to a rise in investment income by 18.9 per cent to N166million including the fair value gain recorded on financial assets to the tune of N18.8million. Profit after tax rose to N58.6million in 2017 from a loss of N1.34bn in the preceding year. A rising pre-tax profit and a drop in income tax by 95 per cent to N6.4million both served to swerve profit after tax away

from the negative zone. Standard Alliance’s claim expenses ratio stood at 37 percent, up slightly by two percentage points from 35 percent recorded in 2016. This means that for every N100 premium income collected, the insurer spends approximately N37 on claim expenses. The total underwriting expenses dropped slightly from N3.5bn in 2016 to N3.04bn in 2017. This together with the increase in net premium income helped to balloon underwriting profit by 409 per cent to N1.38bn in 2017. Total assets of the insurer as at the end of the year 2017 stood at N13.1bn, up marginally by 0.5 percent from N13.02bn. Major drivers of total asset included an increase in investment property from N3.8bn in 2016 to N3.9bn in 2017; a 0.81 percent rise in property, plant and equipment from N6.26bn in 2016 to N6.31bn in 2017. In terms of obligations, total liabilities decreased by 3.5 percent to N8.08bn in 2017 from N8.37bn in 2016.

BUSINESS DAY

C002D5556

Monday 27 August 2018

COMPANIES & MARKETS ABC Transport returns to profitability, amid challenges …posts profit before tax of N105.31 million GODFREY OFURUM

BC Transport Plc, one of the foremost land transport companies in the country, has returned to profitability after recording profit before tax of N105.31 million in 2017, as against a loss before tax of N258.11 million in 2016. In like manner, its profit after tax was N15.78 million in 2017, against a loss after tax of N359.64 million in 2016. This is despite the microeconomic and socio-political variables that affected its operations, which reflected on the firm’s operational efficiency and the result for the year ended December 31, 2017. Olumide Obayomi, chairman, ABC Transport Plc, announced the result at its 2018 (25th) Annual General Meeting (AGM) held at Mayfair Suites and Conference Centre, Egbu Road, Owerri, Imo State. He explained that the firm’s turnover grew by a mere 1.6

percent from N5.63 billion in 2016 to N5.72 billion in 2017, stating that the firm has succeeded in turning around the loss of the previous year. He hinted that the firm’s return to profit was helped by the investment in income of N163.35 million received from its subsidiary Transit Supports Services Limited. Obayomi, however decried the operating environment, which according to him, remained challenging with a myriad of economic, social and political problems, beleaguering its business activities. He also observed that the manacles of the economic recession, which beset the nation in 2016, are still very much with the country, stressing that the key sectors, such as manufacturing, trade and services, from which the transport sector mainly derives her demand are yet to fully recover from the recession. “Also the lack of local oil refining capacity has led to volatilities in the local price of automotive gas oil (AGO). “The rise in the cost of this

key input alongside the rise in the cost of imported spares and consumables, occasioned, by the devaluation of the naira, has placed our operating experience at considerably high levels. “Our road infrastructure has remained in a parlous state, leading to persistent impairment to our buses and trucks, extended journey times and increasing levels of avoidable road mishaps. “The cankerworm of multiple taxation by agents of the 3 tiers of government, still persisted in the year under review, as the country’s transport industry remains largely fragmented and unstructured with no clear defining rules,” he stated. He further observed that unscrupulous operators were encouraged to cut corners to the disadvantage of good corporate citizens, noting that successive governments have failed to see the imperative of intervening in an industry, as critical as road transport and logistics, which has the potential of catalyzing economic

L-R Victor Kalu, Glo regional manager (Secondary) Lagos/Ogun, Virgy Onyene, Head of Dept., education management, UNILAG, Abiodun Adebola , president, Educational Management Students Association, UNILAG, Jide Ibigbami of Glo enterprise sales and Sunday Adebisi, director, entrepreneur and skills development centre, UNILAG, at a Glo sponsored summit on Entrepreneurship held recently at the Faculty of Education Hall, University of Lagos.

productivity to unimaginable heights. The Chairman of the Board of ABC Transport plc, also noted that imbalance in the value sharing and extraction in

MoneyGram revenue up 21% from new customer acquisition SEYI JOHN SALAU

n the first quarter of 2018, digital payments contributed 16 percent to MoneyGram revenue, just as total revenue of the firm rose 21 percent, primarily on ack of new customer acquisitions following the successful business expansion into Spain and France. According to World Bank’s Findex report, digital payments are on the rise. Between 2014 and 2017 the share of adults around

the world making or receiving digital payments increased by 11 percent, to reach 52 percent; highlighting MoneyGram’s investment into new digital platforms to reach more customers in Sub-Sahara Africa with diaspora remittances. The international payments provider recently announced an expansion of its digital platform to five new countries of Australia, Austria, Belgium, the Netherlands and Portugal. With the expansion, customers in these countries can now send money 24/7 directly to

more than two billion bank accounts and mobile wallets or to any MoneyGram location in more than 200 countries and territories. Alex Holmes, chairman/CEO MoneyGram, said the expansion is to provide customers of the brand with more remittance options in an evolving tech-driven world. “Innovative technology is changing the way we meet our customer’s financial needs. In 2018 and beyond, MoneyGram will continue to accelerate our digital expansion around the

globe. We want to give MoneyGram customers more choice when they use money transfer services and to ensure we are well positioned to compete in today’s fast-paced world,” said Holmes. MoneyGram online offers features such as the ability to find a convenient location, check the status of transactions, and estimate online and offline transfer fees. The platform is now available to customers in the U.S., the UK, Germany, France, Spain, Australia, the Netherlands, Belgium, Portugal and Austria.

General Electric to cut over 1,000 UK jobs MIKE OCHONMA

eneral Electric (GE) is slashing 1,100 jobs across its UK operations, mainly in Stafford and Rugby, as part of a global cull that will see the conglomerate’s power business axe around 12,000 positions. GE said that the move would allow it to save $1bn (£750,000) in costs by next year. “This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services,” said Russell Stokes,

president and chief executive of GE Power. “Power will remain a work in progress in 2018. We expect market challenges to continue, but this plan will position us for 2019 and beyond.” GE has been hit hard by dwindling demand for fossilfuel power plants, and the last announcement is the latest effort by the sprawling company to transform itself into a more focused business. The company has previously said it would exit its lighting, transportation, industrial solutions and electrical-grid businesses. It also plans to ditch its 62.5 per cent stake in oilfield services company Baker Hughes.

Globally GE had around 295,000 employees worldwide at the end of 2016. The company also said that it had begun talks with labour-union leaders about the cuts. “General Electric is in danger of cutting too far, too fast and leaving itself ill-equipped to meet the challenges of the changing power-generation market,” Unite national officer Linda McCulloch said in a statement. Linda McCulloch noted the proposals will be a shock for General Electric’s loyal workforce and deal a major blow to the Midlands’ economy which will be deprived of highly skilled, well-paid jobs because of this announcement.

“Unite will also be seeking guarantees from General Electric that there will be no compulsory redundancies and that there will be redeployment opportunities for workers wishing to stay with the business,” she said. Mark Elborne, president and chief executive of GE for the UK and Ireland, said that the company remains “committed to the UK” and that it would continue to be a strategic market for GE. “We have almost 18,000 employees working at 65 sites in UK. Following this proposed restructure, we would remain one of the top five industrial companies in the country,” he said.

the transport sector is punitive and crippling. According to him, “A situation where we pay more taxes to government as corporate taxes than what the shareholders

receive over the same period can only serve as disincentive to new investments and hamper growth in the critical land transport sector in which we operate”.

CIIN urges more youths to embrace insurance

resident of the Chartered Insurance Institute of Nigeria, CIIN, Eddie Efekoha, has called for more youths to embrace insurance as courses in their schools so as to get a proper grasp of the profession and its many benefits to the society. He stated this while addressing participants at the Annual Insurance Family Picnic recently held at the Eleko Beach in Lagos. Efekoha stated that the next generation has a critical role in the development and growth of the insurance industry as a good number of the products and services being offered by insurance companies today are being tailored to fit into the lifestyle of the millennial. He opined that for them to have true knowledge of the key role Insurance has to play in the society, it is only fitting that they learn insurance from their early years so as to be able to equally and efficiently propagate its benefits passionately. The president equally commended the secretariat of the Chartered Insurance Institute of Nigeria and the committee responsible for putting together the Annual Insurance Family Picnic, stating that recreation is a key driver of optimum performance. He said “Being relaxed, at peace with yourself, confident and being emotionally neutral, are the keys to successful performance in almost everything. I urge you to ingrain some form

of recreational activity into your everyday lives. Make it a necessity, not an objective.’.’ Efekoha also pointed out that the institute recognizes the importance of recreation and this has led to it drawing up a calendar filled with recreational activities as well as knowledge sharing sessions. He concluded by urging insurance practitioners present to unite under one umbrella in order to effectively tackle the challenges facing the insurance industry in order for insurance to take its pride of place as a key contributor to the growth of the economy. Richard Borokini, director general of the Institute, stated that the event was just one of the many contributions of the institute to the growth of the insurance industry in Nigeria and that the Institute would continue to churn out more knowledge sharing events as well as recreational activities as part of its commitment to providing world-class manpower for the growth of the international business community. The Highlight of the Annual Insurance Family Picnic, an annual recreational event organized by the Chartered Insurance Institute of Nigeria for the insurance industry for premium relaxation and unwinding with family and friends, saw the PILA strikers triumph over the Eddie Bombers team by five goals to three in a novelty football match.

Monday 27 August 2018

Business Event

L:R: Eze Onyekachi Enyinnaya Ukpabia, Igwe Odenigbo, Eku Obajiubi Ibeku; Eze Leo Nwokocha, Atodire 1 of Umunneato; Eze Osita Bennett Umara III of Amaumara, and Mobolaji Alalade, head of marketing, Intercontinental Distillers Limited presenting Eagle Schnapps to the Ezes from Mbaise during Iri ji Mbaise (New Yam Festival) on Wednesday in Mbaise Imo State

L-R Susie Onwuka, Regulatory Head, Consumer Protection Council (CPC), Lagos Office, Nigeria; George Enema, Assistant Category Manager Skin Care & Deos, Unilever Plc Nigeria; Chigozie Okoro, Admin Officer, National Lottery Regulatory Commission (NLRC) Lagos Zonal Office, Nigeria; Opeyemi Abideen Onifade, Account Officer, Consumer Protection Council (CPC), Lagos Office, Nigeria and Simisola Muniri, Senior Legal officer, Lagos State Lotteries Board (LSLB) Nigeria, at the Live Consumer Draw for the AXE Deodorant 2018, Party of the Year campaign held recently, in Lagos.

L-R: Edwin Igbiti, group managing director, Aiico Insurance Plc & chairman activities Committee, Chartered Insurance Institute of Nigeria(CIIN); Eddie Efekoha, president CIIN; and Oghenenyoreh Efekoha, wife of the president during the CIIN Annual Insurance Picnic held at the Eleko Beach, Lagos, recently

BUSINESS

DAY

BUSINESS DAY

C002D5556

This is M NEY A daily guide to your Personal Finance

Monday 27 August 2018

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

How are you funding your child’s education?

“

ducation is a human right with immense power to transform. On its foundation rests the cornerstones of freedom, democracy and sustainable human development.” - Kofi Annan As parents and guardians, it is our greatest desire to give our children and wards the best possible start in life. The most powerful way to secure a child’s future is to educate them as this opens doors to many opportunities. For the vast majority of parents, funding your children’s education ranks as one of the largest expenses you will ever face. By some estimates, educational costs increase by between 10% and 15% each year. If sound investments are not made early, covering such costs later can jeopardize your financial situation. It must thus be carefully planned and prepared for. Time matters; paying school fees on an ad-hoc basis without any advance planning will cause huge financial strain unless you have significant income and savings. When your child is young, you have the benefit of time to select investments that offer the benefits of compounding and the prospect of higher returns that have the potential to outpace inflation and increases in education costs. What are your options? Once you have an idea of the type of educational

future you would like for your child, don’t feel pressured to send your child to the most expensive school; it is not necessarily the best for your child. The most suitable choice largely depends on your own unique family circumstances and goals. This will be determined by factors such as your income and savings, your child’s age and ability, how soon you will need the funds, and the amount you wish to save. In order to accumulate enough money to finance your child’s education, you need to not only start early, but to invest fairly aggressively. Where you have a very long time frame, you can afford to take more risk.

Think long term. The stock market is generally regarded as a strong option for long-term investing; stocks have historically outperformed other investments over the long term; in the short-term they can be volatile. If your plan is to put money away for your child for say, ten years and more, then it is well worth considering investing directly in a professionally managed portfolio of blue chip stocks or an equity mutual fund. Mutual funds are pooled investments in a wide range of shares. They offer diversification and are easy to liquidate when you need cash. Your fund choice will typically depend on factors such as child’s age, your risk tolerance, and ultimate financial goal. As your child gets closer to starting college, say two to three years before they are due to start, the less risk you can afford to take because preservation of capital takes precedence over earning a high rate of return. If you leave the money in the stock market until just before you need for school fees, you may be forced to sell stocks at a loss. It makes sense to begin to shift your money into more conservative investments reducing your exposure to market volatility. The shift may be to lower-

risk bonds and money market accounts that present a safer option. Carefully considered real estate investing is an outstanding asset class that over time provides three main sources of funding; you can sell the property, earn rental income to pay school fees and other costs, or borrow against a property. If you own property that has appreciated in value, you may be eligible to borrow a percentage of your equity, which is the difference between the market value of your property and the outstanding mortgage loan. Be cautious about going into debt to fund your child’s education; interest expenses significantly increase the education costs; interest rates are comparable to other borrowing options. Consider this option only where you have the capacity to service the loan comfortably, because if you default, you could lose the property. Scholarships and grants are a source of funding that parents often overlook. From your child’s earliest years you ought to have identified a unique skill or talent in a particular area; technology, music, drama, sports or they may be exceptionally gifted academically making them eligible to compete for a scholarship or grant. Identify and nurture their talent but at

the same time, don’t push too hard as you might be demanding a performance level beyond your child’s ability; this can lead to anxiety, or even depression. Scholarships and grants may have strings attached, such as maintaining a certain standard of performance or being tied to a particular field of study. Estimates show that scholarships and grants often cover less than half of all costs so you must still come up with the difference. Have you considered an educational savings plan? Leading insurance companies in Nigeria offer Educational Savings Plans that help parents avoid the sudden huge expenses that come from inadequate planning. An Education Protection Plan ensures the continuation of a child’s education should their sponsor become critically ill, disabled or die. An Educational Trust is another option; it is simply a trust established with the sole purpose of providing funding for education. At the appropriate time, distributions or withdrawals can be made from the Trust to fund the education of beneficiaries. Some private schools allow you to pre-pay school fees several years in advance. The allure of this plan is that by paying today you lock in costs and don’t have to worry about not being able to afford rising costs in the future. A disadvantage, however, is that by tying down your funds, you forfeit the opportunity to invest the money yourself which is in fact what the school is going to do with it. Don’t neglect your retirement plans. Whilst your child’s education is one of your greatest priorities, do not jeopardize your own financial security. Maintaining your own financial independence is key to your children’s stability as well as yours. Try not to be tempted to withdraw money from your retirement savings account other than for your retirement. Encourage your chil-

dren to earn. For many families, it is the norm that children contribute towards their own education costs with part time jobs. It is important to teach economic responsibility at a young age and such income can supplement whatever you are able to provide for their personal expenses. By encouraging your children to contribute to at least a part of their expenses, they will be gaining financial independence. With disciplined, regular investing spread over many years, you should be able to accumulate a significant sum in your child’s education fund. Review your portfolio periodically; and certainly at least once a year to ensure that it still meets with your objectives. As with any other investment goal, time is of the utmost importance; the sooner you start, the better. The key is to start early, contribute regularly, and invest wisely. Do remember that all investing comes with a degree of risk; it is thus important to seek professional advice before you invest. Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

REAL SECTOR WATCH C002D5556

Monday 27 August 2018

BUSINESS DAY

Nigeria’s fruit juice industry: Prospects, competition, challenges ODINAKA ANUDU

igeria’s demography comprises mainly young people who drink a lot of beverages. With over 50 percent of the population below the age of 30, fruit juice makers have an opportunity to keep up with margins’ rise, analysts say. Apart from demography, work pressure in cities and hot weather are also key drivers of the industry. Africa’s most populous country has a huge number of fruit juice makers such as Chi Limited, Dansa, C-Way, Danico, Suntory, Frutta Juice, UAC Foods, CocaCola and Scoa. Others are Fumman Agricultural Industries, Boulos Foods & Beverages, Rite Foods, Jamil, Abel Sell, Acreage Integrated Food, and Amiable Farm Produce, among many others. The Raw Materials and Research Development Council (RMRDC) estimates Nigeria’s annual demand for fruit juice at 550 million litres, while supply by local firms is just 135 million litres, representing 24.5 percent. The country produces 930,000 tonnes of citrus fruits annually from three million hectares of land, according to RMRDC. Fruit juice comes in different packs and sizes. It can be made from orange,

mango, guava and other fruit types. Firms in the industry are expanding rapidly, introducing new products to consolidate competitive edge or stave off competition. Coca-Cola announced 40 percent stake in Chi Limited, one of the key leaders in the industry, in 2016. Coca-Cola, in December 2017, launched the pineapple, mango and apple variants of Five Alive. Suntory took over GlaxoSmithKline (GSK)’s Lucozade and Ribena in 2016. The drinks maker is targeting a double of its N20 billion revenue over the next five years, according to Bloomberg. In 2016, Denna Rossi Limited introduced five brands served as both red

and white cocktail drinks. More so, Rite Foods has made N30 billion investment in Ijebu in Ogun State, raising daily production of its soft drinks to 120,000 packs from 30,000 in 2017, the company said. “We started with one production line in 2016. Now, we have four lines, and by November 2018, we’ll add two more lines,” Seleem Adegunwa, managing director, Rite Foods, told BusinessDay. More investments are going on in the industry as each firm devises measures to deal with an increasingly healthconscious consumer base. Nigerian consumers are seeking products with less sugar and chemicals, prompting some firms to focus on natural drinks. Some

manufacturers say that their products have 100 percent juice content, though this is generating controversies in some quarters. One sceptical consumer wondered how this would be possible when local fruit farmers produce seasonally, rather than all-year round. Another sceptical manufacturer told BusinessDay that 100 percent fruit juice is costly, arguing that Nigeria does not even produce enough fruits to meet local demand. The manufacturer said this is doubtful, given that some firms even import fruits from West African neighbours when they are locally insufficient. Nigeria’s government once mandated firms to ensure they have 40 percent of natural fruit content. Real

Sector Watch cannot confirm how much this directive is being adhered to. Consumers are becoming increasingly conscious, seeking healthier drinks that will nourish their bodies. With this shift in tastes, firms are responding rapidly, emphasising more on health benefits rather than taste. In 2014, Kano-based Myer Industries Limited introduced natural fruits with eight variants. “The health-conscious segment of the Nigerian population is growing rapidly and more Nigerians are in search of fruit juice that will improve their well-being. They are now very conscious of what they eat and drink. Many now opt for less sugar, healthy drinks, which Myer range of fruit juice is made essentially to offer,”Aisha Funsho, sole distributor in Lagos State, said then. In 2015, Dansa, a member of Dangote Group, launched Kally Drink, a blend of natural fruits. Euromonitor International, in March 2018 report on Nigerian fruit juice industry, says that reconstituted 100 percent juice had the worst performance in juice in 2017, with a rapid decline in total volume terms. The report says that products in this category are generally more expensive than in other juice categories and so suffered, owing to the low consumer purchasing power in 2016 and 2017 as a result of economic stagnation.

Chi Limited was the leader in 2017, with the best value share gain in off-trade terms, a recovery from a similar share loss in 2016 when high unit prices led to consumers moving to cheaper brands, according to Euromonitor, an international research firm. “Coca-Cola Nigeria held second place in juice in 2017. It used its strong distribution network within carbonates to position itself well in juice, with its 5 Alive brand being quite popular,” Euromonitor explains. Despite positives, the industry is still hurt by farmers’ inability to farm all-year round, making fruit availability throughout the year difficult, analysts observe. There is still low research and development (R&D) to improve this phenomenon. Production of concentrate is still a major problem in the industry. Key manufacturers want the government to strengthen the National Horticultural Research Institute (NIHORT) and other relevant research institutes to enable them provide appropriate technology for fruit preservation in order to encourage local production of concentrate. In a statement obtained from the Manufacturers Association of Nigeria (MAN) last year, key players in the sector called for the continuation of import prohibition on fruit juice in retail packs to safeguard investments and jobs.

first in Africa. The drug maker recently introduced Lumal dispersible malaria tablets for infants. Moreover, Daily Need Industries has produced Amoxicillin Dispersible Tablets (DT), used for the cure of Pneumonia. Already Swiss Pharma, Evans Medical, ChiPharmaceuticals and May & Baker have all obtained the WHO prequalification and many more are on line to obtain this certification. Nigerian pharmaceutical industry has so far made over N300 billion worth of investments in land, plants, vehicles and other equipment, according to Okey

Akpa, chairman of the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMGMAN). Afrab, Tuyil Pharmaceuticals, Dana Pharmaceuticals, Unique Pharmaceuticals and Pharmatex are among the 15 companies readying their plants for WHO certifications. The industry was recently mired in controversy over the alleged sale of codeine illegally, but key companies mentioned have denied official involvement. Key manufacturers told BusinessDay that they need policy consistency, especially a policy on drug importation.

Highs, lows of Nigerian drug makers

igerian drug makers are pushing on with investments and expansion but key challenges remain unresolved in the industry. Even the acquisition of the World Health Organisation (WHO)’s prequalification has not helped some of them as expected, as exchange rate exposure and policy issues dog the industry. Swiss Pharma, which was the first to get the WHO requalification, divested 95 percent of its stake in its Nigerian operations to a French Company Biogran last year. An Anambra State-based Juhel Nigeria has acquired two Blow Fill Seal’ (BFS) ma-

chines, which cost hundreds of thousands of dollars. The facilities have helped the drug maker manufacture new Oxytocin injection for pregnant women, seen as the first of its kind in Africa. “The innovation we are doing costs a lot of money. The BFS machines are expensive machines and only very few manufacturers have them in Nigeria,” Ifeanyi Okoye, CEO of Juhel Nigeria Limited, said, while unveiling Oxytocin injection in Lagos, earlier in the year. Fidson Healthcare has a new N9 billion ultra-modern factory at Sango-Otta in Ogun State, which enables it to produce affordable drugs that

compete in the industry. The drug maker’s expansion into new products has enabled it to deliver sustainable earn-

ings. Similarly, SKG Pharma has locally produced Amino Acid and Vitamins, seen as

BUSINESS DAY

C002D5556

Monday 27 August 2018

REAL SECTOR WATCH New investments show manufacturers confident in Nigerian economy …amid hiccups ODINAKA ANUDU

number of new investments in the manufacturing sector indicate that real sector players are confident of the Nigerian economy despite age-old challenges that have refused to go. This year alone, new factories and production lines have opened, and many manufacturers are entering into new markets. Age-old problems such as high energy spend, poor infrastructure, low patronage, smuggling and funding gap are still issues dogging the manufacturing sector, but these have not deterred firms from making new investments. Economic confidence measures the degree of optimism by consumers, households or firms in the economy. Economists say the more individuals, households and firms are willing to spend, the more confidence they have in the economy, and vice versa. Nigeria’s President Muhammadu Buhari will tomorrow inaugurate the $250million state-of-the-art International Breweries in Ogun State, seen as biggest in West Africa. About 90 per cent of the

L-R: Ayokunle Adaralegbe, chief risk officer, Central Securities Clearing System Limited (CSCS) Limited; Joseph Mekiliuwa, general Manager, Business Development & Corporate Services, CSCS Limited; Oluwatoyin Akomolafe, president, Nigerian-American Chamber of Commerce (NACC), and Joyce Akpata, director-general, NACC during a courtesy visit to CSCS in Lagos recently.

company’s raw materials are expected to be sourced locally, while 300 people have already been engaged. BUA Group last month commissioned a 1.5 million metric tonnes Kalambaina cement plant in Sokoto State, which cost the firm $350 million to build. The ultramodern cement plant has a 32 megawatts multi-fuel captive power plant and a coal mill, blessed with huge limestone deposits. BUA is also building a $1 billion Obu Cement Complex in Okpella, Edo State.

By the time the Okpella plant is completed by end of the year, BUA’s total production capacity will hit eight million MT and would give 35 percent of the entire volumes produced in Nigeria. Abdul Samad Rabiu, chairman and CEO of BUA Group, said the new plant would be generating more power than is currently generated by the entire Sokoto State. Beloxxi, on February 9 this year launched the second and third phases of its biscuit lines in Agbara, Ogun State. Beloxxi Industries is one of

the largest biscuit makers in Nigeria with a capacity to produce 40,000 metric tons (MT) per annum, amounting to 28 million cartons. The biscuit firm in 2016 closed a $80 million deal with a consortium of 8 Miles (London), African Capital Alliance (Nigeria) and KFW DEG Bank (Germany). The investment is set to raise the company’s capacity from 40,000MT to 80,000MT while the staff strength is over 3,700. Obi Ezeude,CEO of Beloxxi Industries, said during the commissioning of the

lines by Nigeria’s vice president Yemi Osinbajo that the investments were demonstrations that the firm had confidence in Nigeria and Ogun State. On the same day, a N4.1 billion Nestle Milo Ready-toDrink (RTD) beverage plant was also commissioned by Osinbajo in Agbara. The plant manufactures Nestlé Milo Ready-To-Drink (RTD) beverage in 180ml cartons and has a yearly production capacity above 8,000 tonnes. “This new production plant is a true reflection of how Nestlé creates shared value for all, by providing good jobs, sourcing 80 per cent of our inputs with local farmers and investing in the development of rural communities,” said Mauricio Alarcon, managing director and CEO of Nestlé Nigeria. In March, Dangote Group inaugurated a multi-billion Naira rice processing mill in Hadin, Jigawa state. The mill has the capacity to process 16 metric tons of paddy rice per hour as well as N14 billion worth of rice annually directly from the famers in Jigawa at market rate. More so, a new 30,000 metric tonnes per annum cocoa processing plant in Ikom, Cross River State, is over 60 percent completed

and may be commissioned in December, according to BusinessDay checks. “This is the first cocoa processing plant that will process cocoa beans to chocolate,” Ben Ayade, Cross River State governor, said last month. Nigerian manufacturers face high energy as they selfgenerate most of their power needs. Annual self-generating capacity in the manufacturing sector is 13,223 megawatts, according to a survey conducted by Adeola Adenikinju, professor of economics at University of Ibadan, funded by the European Union and German government. Expenditure on alternative energy in the sector totalled N117.38 billion in 2017 and N129.95 billion in 2016, the Manufacturers Association of Nigeria (MAN) said. But for the new Central Bank N10 billion per project financing unveiled last Thursday, manufacturers’ access to finance has been limited, with most of the available funds in double-digit. Absence of a strong infrastructure base is also a major challenge as bad good roads, railway absence connecting cities, poor technology penetration and low broadband are big issues.

EU prosperity points to imminent benefits of AfCFTA

he prosperity of the European Union (EU) is a pointer to the benefits of African Continental Free Trade Area (AfCFTA) . A once disaggregated Europe came together in Maastricht, Netherlands, on November 1, 1993, to form a formidable free trade union made up of 28 countries with a GDP of $18.4 trillion, making it the second largest economy in the world after the United States. A study published in July of 2014 by the Bertelsmann Stiftung, a German foundation, showed that German real GDP jacked up at an average of €37 billion per year since 1993, translating into a yearly income rise of €450 per person. Danish citizens’ yearly income rose by €500 over that same period. One study showed that

over ten years (1993-2003), the single market swelled the EU’s GDP by €877 billion (£588 billion). This represented €5,700 [£3,819] of extra income per household. Free trade and removal of non-tariff barriers have cut costs and prices for European consumers, which is why they are looking for new markets everywhere. Many firms have achieved economies of scale. More than 52 percent of UK exports are linked to the EU. Trade within the EU has increased 30 per cent since 1993, andinward investment from outside the EU rose from €23 billion (£15.4 billion] in 1992 to €159 billion [ £106.5 billion) in 2005. Despite Brexit moves by the UK, studies show that up to 10 percent of all employment opportunities in that country are directly linked

to the EU. Checks show that EU member states own the estimated second largest net wealth in the world after the United States. They own 25 percent ($72 trillion) of world’s wealth as of 2016 against United States’ 33

percent. Twenty-seven out of 28 EU countries have a very high Human Development Index (HDI), which is rated by performances in education, health and income, according to the United Nations Development Pro-

gramme (UNDP). The euro is today the second largest reserve currency as well as the second most traded currency in the world after the United States dollar. On the flipside, the recent poor economic situation in Greece and other EU countries hit big countries like Germany hard and almost dragged them into debts. There are issues like loss of sovereignty of member countries as well as sharp practices but experts say there are more upsides of a strong union than downsides. “Trade leads to increased prosperity for all, but there is a short-term interest always to protect the gains that come. And this is how we need to understand the plight of manufacturers in Nigeria because many of the things they are dealing with

are compounded by factors somewhat beyond their control,”Pat Utomi, political economist and faculty at Pan Atlantic University, said at the NBA-SBL. “But the question is, what track would we be travelling as a people if we were to give increased prosperity to this incredible population that is growing out of which we can reap a huge demographic dividend or from which we can create a time bomb that can threaten the whole region in a way that Robert D. Kaplan has predicted in his book, ‘The Coming Anarchy’? “There will be winners, there will be losers. The challenge is to make sure that we encourage those who see themselves as immediate losers to rethink and have a win-win abundance kind of mentality,” Utomi said.

Monday 27 August 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 27 August 2018

C002D5556

BUSINESS DAY

Monday 27 August 2018

Access Bank Rateswatch Market Analysis and Outlook: August 24 - August 31, 2018

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

1.95

Q1 2018 — lower by 0.16% compared to 2.11% in Q4 2017

Broad Money Supply (M2) (N’ trillion) Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion) Inflation rate (%) (y-o-y) Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor) External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

24.81 22.28 1.90 11.14 14 14 (+2/-5) 46.26 70.86 1.67

Decreased by 1.41% in June 2018 from N25.17 trillion in May’ 2018 Increased by 0.34% in June 2018 from N22.21 trillion in May’ 2018 Decreased by 1.56% in June 2018 from N1.93 trillion in May’ 2018 Decreased to 11.14% in July’ 2018 from 11.23% in June’ 2018 Raised to 14% in July ’2016 from 12% Lending rate changed to 16% & Deposit rate 9% August 20, 2018 figure — a decrease of 1.73% from August start August 24, 2018 figure— a decrease of 2.90% from the prior week July 2018 figure — an increase of 4% from June 2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr) Volume (bn) Value (N’bn)

Friday

Change(%)

24/08/18

17/08/18

35,426.21

35,266.29

0.45

12.93 0.53

12.87 0.27

0.45 93.83

4.53

2.72

66.25

MONEY MARKET NIBOR Tenor

Friday Rate

Change (Basis Point)

(%)

24/08/18

17/08/18

6.75

7.33

O/N CALL 30 Days

7.92 8.25 12.06

90 Days

12.70

OBB

Friday

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

YTD Change

(%)

(2.90) 1.02

9.93 (3.14)

2348.00 102.40 82.11 10.31 537.50

9.51 (2.24) 0.88 0.19 (5.66)

21.28 (21.35) 5.95 (32.75) 23.99

1191.47 14.67 269.80

1.22 0.14 3.31

(9.57) (14.66) (17.69)

8.33 8.13 12.41

(41) 12.5 (35)

Tenor

24/08/18

17/08/18

13.28

(57.6)

1 Mnth 3 Mnths

10.32 11.50

10.42 11.67

(10) (17)

Friday

1 Month

6 Mnths 9 Mnths 12 Mnths

12.93 12.95 13.12

13.05 12.93 13.24

(12) 2 (12)

(N/$)

Rate (N/$)

17/08/18

24/07/18

Official (N) Inter-Bank (N)

306.10 355.22

306.10 353.77

305.90 349.01

BDC (N) Parallel (N)

362.00 360.00

361.00 360.00

360.00 360.00

Indicators

Friday

Change

(%)

(Basis Point)

17/08/18

3-Year 5-Year

0.00 14.24

0.00 14.41

0.0 (17.4)

7-Year 10-Year 20-Year

14.70 14.49 14.90

14.74 14.52 14.79

(4.1) (3.7) 10.3

(Basis Point)

Change

(%)

(Basis Point)

24/08/18

17/08/18

2632.36

2637.04

(0.18)

Mkt Cap Gross (N'tr) Mkt Cap Net (N'tr) YTD return (%)

8.46 5.39 7.16

8.48 5.40 7.35

(0.19) (0.22) (0.19)

YTD return (%)(US $)

-48.22

-48.03

(0.19)

Index

TREASURY BILLS (MATURITIES)

Disclaimer

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

Change

(%)

Friday

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

Friday

(%)

Friday

AVERAGE YIELDS Friday

Friday

ACCESS BANK NIGERIAN GOV’T BOND INDEX

BOND MARKET

24/08/18

70.86 2.96

1-week Change

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

24/08/18

Tenor

24/08/18

(58.0)

FOREIGN EXCHANGE MARKET Market

Indicators

Amount (N' million)

91 Day

3384.18

182 Day 364 Day

10,000.00 20,000.00

Rate (%)

Date

15-Aug-2018

10.4 11.22

15-Aug-2018 15-Aug-2018

Global In the Eurozone, annual inflation rate was confirmed at 2.1% in July 2018, higher than 2% recorded in June and highest seen since December 2017, latest data from the European Statistics Agency (Eurostat) show. The main drivers of the rise in consumer prices were from energy and services, while food rose at a slower pace. Annual core inflation which excludes volatile prices of energy food, alcohol and tobacco was also confirmed at 1.1% in July, slightly above the previous month's rate of 0.9%. Elsewhere in Japan, the Cabinet Office revealed that the Japanese economy expanded by 0.5% in the second quarter, higher than 0.2% recorded in the first quarter of the year. It is the highest rate of expansion since quarter three 2017 and came on the back of strong rebound in household consumption and a faster rise in business spending. Year-on-year, the economy expanded by 1.9%, higher than the upwardly revised contraction of 0.9% in the previous quarter. In a separate development, the United Kingdom consumer prices edged higher to 2.5% in July from 2.4% in June. According to the Office for National Statistics, the rise in the prices of transport, recreation & culture, housing utilities and food & non-alcoholic beverages were largely responsible for the higher inflation print. Core inflation which excludes prices of energy, food, alcohol and tobacco, stood at 1.9% in July, the lowest since March 2017, while month-on-month inflation rate remained the same as the previous month. Domestic A recently published report by the National Bureau of Statistics revealed that the total value of capital imported in Q2’18 was estimated at $5.51 billion from $6.30billion in Q1’18. This was a decrease of 12.53% compared to Q1’18 but a 207.62% increase compared to Q1’17. The slump in capital importation was a result of a decline in Portfolio and other investment, which decreased by 9.76% and 24.07% respectively. Portfolio investment which remained the largest component of capital imported, recorded $4.12 billion in Q2’18, contributing 74.7% to total capital imported. Foreign Direct Investment (FDI) recorded $1.13 billion in Q2’18, accounting for 20.5% of total capital and Other Investment recorded $261 million. In a separate development, the Federation Accounts Allocation Committee (FAAC) disbursed the sum of N821.86 billion among Federal, States and Local Governments in July 2018 from the revenue generated in June 2018. The amount distributed was from the statutory account, value added tax (VAT) and excess bank charges comprising of N687.35 billion, N85.34 billion and N 7.32 billion respectively. A breakdown of the sum disbursed among the three tiers, revealed that the Federal Government received N315.01 billion, states received N194.51 billion and the local governments received N147.05 billion. The oil producing states received N42.85 billion as the 13% derivation fund. Revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N4.82 billion, N12.21 billion and N5.42 billion respectively as cost of revenue collections. Stock Market The hunt for a bargain in value counters halted the erstwhile unrelenting negative

performance of the benchmark index as the NSE All Share index (ASI) rose 0.45% to close at 35,426.21points. Similarly, market capitalization advanced 0.45% to settle at N12.93 trillion.week, the direction of the market is likely to be guided by the anticipated release of the country’s Q2 GDP figures. Money Market Money market rates declined for the second consecutive week as inflows from maturing Open Market Operations (OMO) exceeded outflows by N264 billion. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates decreased to 6.75% and 7.92% from 7.33% and 8.33% respectively the previous week. Similarly, the 30-day and 90-day NIBOR closed lower at 12.06% and 12.70% from 12.41% and 13.28% the prior week. This week, rates may remain around prevailing levels due to reduced OMO activity. Foreign Exchange Market The naira-dollar exchange rate at the interbank window depreciated marginally by N1.45 to close at N355.22/$ from N353.77/$ the previous week. At the parallel market, the local currency closed at N360/$, unchanged from the previous week’s rate. Similarly, the local unit was stable at the official market at N306.1, same as the previous week. The relative stability of the local currency continues to be supported by the intervention of the apex Bank. This week, we expect the naira to hover around current levels, as the CBN continues to support the currency. Bond Market Bond yields trended downwards due to increased demand by both local and foreign counter parties as they sought to cover their positions after the sell-off witnessed last week. Yields on the five-, seven-and ten- year debt papers settled at 14.24%, 14.70% and 14.49% from 14.41%, 14.74% and 14.52% respectively the previous week. The Access Bank Bond index declined by 4.67 points or 0.81% to close at 2,632.36points from 2,637.04 points the previous week. This week, we expect little movement in the market as investors appear comfortable trading at the current yield level. Commodities Oil prices moved higher last week on expectations Iran oil sanctions will tighten global supplies. The US government has introduced financial sanctions against Iran which, from November, will also target the petroleum sector of OPEC’s third largest producer.OPEC crude oil price, rose $3.54 to settle at $73.01 per barrel, a 5% gain. In a similar vein, precious metals prices edged up after the US President criticized the Federal Reserve for tightening the monetary policy., gold settled up 1.22% at $1191.47 an ounce, while silver climbed 0.1% to finish at $14.67 an ounce. This week, oil prices are likely to remain buoyed by a tight supply outlook. For precious metals, the failure of trade talks between the US and China to produce any visible sign of progress, may weigh on prices. MONTHLY MACRO ECONOMIC FORECASTS Variables

Aug’18

Sept’18

Oct’18

Exchange Rate (Official) (N/$)

346.90

347.02

348

Inflation Rate (%)

9.34

9.00

Crude Oil Price (US$/Barrel)

76.75

76.00

77.00

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

Monday 27 August 2018

Stocks

Currencies

C002D5556

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

BUSINESS DAY

Watchlist

economy

NNPC’s new model a boon for Total and Mobil as margins improve BALA AUGIE

he decision of Federal Government (FG) to allow the Nigerian National Petroleum Corporation (NNPC) to be the sole importer of petroleum products is a boon for Total Nigeria Plc and Mobil Nigeria Plc as it helped underpin their margins. The move to the current model has allowed the two downstream oil and gas giant leverage on their brand and wide service stations to distribute product while at the same time increasing volumes and growing profit. “Since the change of template, NNPC dictates your margins, and the only way to make money is to increase your volume,” said Jubril Kareem - Acting Head of Energy Research – Ecobank

P.E

SHORT TAKES 56.8 The Purchasing Managers Index (PMI) of the manufacturing sector slowly expanded to 56.8 index points in the month of July with 13 out of 14 sub-sectors reporting growth. A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.

0.50

“These two firms have high number of service stations pushing out volumes,” said Kareem. For the first six months through June 2018, Totals

and Mobil’s earnings before and interest and tax (EBIT) otherwise known as operating profit increased by 93 percent and 37 percent to N6.93

billion and N7.76 billion in June 2018 from N3.59 billion and N5.67 billion the previous year. Some analysts use the EBIT as a measure

Overnight inter-bank rate rose by 0.50 percent to 4.25 percent on Thursday, from 3.75 percent after the Central Bank of Nigeria (CBN) auctioned the Nigerian Treasury Bills worth N215.5 billion on Wednesday August 1.

of profitability because it is less susceptible to manipulations and accounting shenanigans. For instance, Forte Oil The CBN auctioned OMO recorded a 23 percent

Market bears ignore strong earnings performance since 2009 Emeka Ucheaga

nvestors seem to have taken their eyes off fundamentals in the last decade. The stock market today is trading at one third the price to earnings (PE) ratio it did in 2009 despite company earnings per share being up almost 407 percent during the nine year period. At year end 2009 after the market index had dropped 64 percent from its

on Thursday last week where it sold an additional N348.6 billion leaving liquidity level at negative N 75.9 billion as at close of market on Friday.

N5bn A rights issue and public offer for N5bn is FMDQs current plan to boost its operations and the shareholders who were at Annual General Meeting approved the plan alongside a new name.

2007 year end level, the stock market PE was still as high as 30.28. Today, with

NSE All Share Index PE at 10.12, the stock market is the cheapest it has been since

2015 as rapid earnings per share growth has been met with unrestrained market

The approved name change simply involves removing the OverThe-Counter (OTC) tag which may have constrained its reach selloff this year due to as Nigeria’s foremost political uncertainty debt capital, currencies and derivatives securiContinues on page 28 ties exchange.

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

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

BUSINESS DAY

C002D5556

Monday 27 August 2018

Markets Intelligence Economy

16 Insurance firms’ claims up 25.38 percent to N40.52 billion in HY’18 BALA AUGIE

he Nigerian Insurance Industry continues to record increased claims payment even after the country exited a recession in 2017. For the first six months through June 2018, net claims paid by 16 operators quoted on the floor of the bourse amounted to N40.52 billion, a 25.53 growth over the preceding year. This mean that these firms are meeting obligations to policy holders as at when due, but they should try by all means to grow premium income in order to achieve an appropriate mix between claims and premium incomes. Mounting 0bligations can be attributed to awareness on the part of customers, incidence of fire, flood, theft, accident and macroeconomic shocks. However, insurers are spending less on claims expenses to generate each unit of premium as average cumulative loss ratio otherwise known as claims ratio fell to 44.68 percent in June 2018 from 45.60 percent the previous year. The claims ratio is the percentage of claims costs incurred in relation to the premiums earned. Loss ratio help assess the health and profitability of an insurance company. Favourably, a business collects premiums higher than amounts paid in claims. High loss ratios may indicate that a business is in financial distress. Drilling down the figures of insurers shows Mutual Benefits Plc’s net claims expenses grew by 71 percent to N4.05 billion in the period under review from N2.37 billion the previous year. The firm is paying more to generate each unit of premium income as loss ratio increased to 55.89 percent in June 2018 from 35.60 percent the previous year. Aiico Insurance Nigeria Plc’s net claims expenses increased by 29 percent to N11.43 billion in the period under review from N8.87 billion the previous year. However, loss ratio fell to fell to 79.38 percent in the period under review from 82.95 percent the previous year.

AXA Mansard’s net claims expenses rose by 39.0 percent to N6.31 billion in June 2018 from N4.55 billion the previous year while loss ratio reduced to 66.0 percent in June 2018 from 69.62 percent the previous year. Cornerstone insurance’s net claims

fell by 21 percent to N1.78 billion in June 2018 as against N2.26 billion the previous year. Loss ratio reduced to 60 percent in the period under review as against 80 percent the previous. Experts are of the view that there could be a reduction in claims expens-

es since inflation rates are falling and the economy is gradually recovering. Rising claims expenses and acquisition and maintained costs have continued to erode profitability, hence resulting in lower stock price on the floor of the exchange.

Market bears ignore strong earnings performance since 2009 Continued from page 27

and slow economic growth. Between 2009 and 2018, total market earnings per share have averaged an annual growth of 142 percent. Earnings per share grew from N687.2 per share in 2009 to N3,485.42 today despite Nigeria’s economic growth averaging just 4.1 percent during the nine year period. The market has not been short of drama since it crashed in 2008. From the oil price boom between

2010 and 2014 which helped lift the stock market index to levels last seen since 2008, to a market bust between 2014 and 2016 due to an oil price crash in 2015, a currency crisis in 2016 and the first economic contraction in 25 years which literally brought the market to its knees in 2016. Market rebounded in 2017, returning 42 percent off the back of an oil price rally and a return to positive economic growth in the country. However, 2018 has been a pain for investors as selloffs which

began in February this year has still continued to trading decisions in the market parlance today. Today the stock market trades at a 66.67 percent discount to its 2009 level and 50 percent discount to its 2013 prices. Earnings per share on the other hand are now up 5x since 2009 and 1.3x higher since 2013. Although the index is up more than 15,000 points since 2009, the 70 percent rise in the All Share Index pales greatly behind the 407 percent expansion in the bottom

line of publicly listed companies on the NSE. Fundamental investors must have felt a lot of pain investing in the market during this period as stock price performance has tremendously lagged earnings growth. If this earnings performance continues into the next decade, it won’t be surprising to see an astronomical rise in equity prices over the coming decade as stock prices adequately reflect underlying strong earnings performance by the quoted companies.

BUSINESS DAY

Monday 27 August 2018

Start-Up Digest

In association with

How two Nigerian entrepreneurs created African-inspired brand in France Stories by ODINAKA ANUDU

alt Disney, pioneer of the American animation industry, once said that all dreams would always come true if people had the courage to pursue them. This is true of Jolaade Alao and Adeleye Adetona, who are currently working to realise their dreams of a world-class brand that showcases the ingenuity of the Nigerian people and, more broadly, Africans to the world. Though living in France, the entrepreneurial spirit believed to be characteristic of Nigerians is still very much part of them. To live up to their dreams, Alao, 30, and Adetona, 27, in December 2017 founded Oh! NG, a lifestyle brand that creates and curates African designed/inspired products— from food to literature, technology and arts for a global market. Both founders are graduates of Covenant University. Alao is a mobile financial services consultant and budding entrepreneur, while Adetona is a tech entrepreneur, French tech ticket laureate and founder of France-based ed-tech company known as AiBuddy. A pilot of their first product, the Mama-Put box— a carefully curated box of finely produced Nigerian staple food items that can be used to cook at least a two-course Nigerian meal— was launched in January this year. The product was exhibited and sold at a professional networking event organised by Friends of Nigeria, a group of Nigerian professionals and students based in Paris as well as the Nigerian stand at the 2018 edition of the ‘Salon Internationale de l’Agriculture’ held in Paris. Alao says the Mama Put Box was created to not only enable Nigerians abroad enjoy the plea-

Alao and Adetona

sures of a good home-grown meal anywhere in the world but also to introduce people of other cultures to Nigerian cuisine. The product gained more visibility on Twitter when Obiageli Ezekwesili, social critic and Nigeria’s former education minister, replied a tweet from the founders in response to a need for a ‘global gourmet market of food for travellers’ on the platform early in the year. She expressed her delight for Oh! NG’s Mama-Put box calling it brilliant and particularly useful for travellers who lodge in short stay facilities. “Even though I have always appreciated the Nigerian culture, living away from home highlighted the need for me to introduce people of other cultures to ours and to find ways to make it even more valuable to us - Nigerians living at home and abroad,” Alao tells StartUp Digest in an interview. “I am glad our first product is proving useful to quite a number of people and we cannot wait to unveil the final look of the product by the last quarter of 2018. Alao, who was raised in Nigeria and only moved to France four

years ago for graduate studies, has run a couple small businesses while in the university— a fruit mart and a business designing paper journals right after school in 2010. She thinks that even though Nigeria’s business environment is less structured than that of France, it leaves room for innovation and quick starts. “Not so much here in France, which is so much more structured and hence may appear more restrictive, especially for nonnatives,” she discloses. Adetona, also born and raised in Nigeria, was a tech entrepreneur based in Lagos until early 2017. He believes Nigeria probably offers a bigger market for entrepreneurs. “Getting the product right leads you to an immense opportunity to scale with the market,” Adetona says, in reference to Nigeria. “It’s also easy to experiment and try new things, unlike in France where the systems commit you to a single path. The entrepreneurial/business community is more regulated and runs by a system that needs to be strictly adhered to which may seem limiting in some ways,” he explains.

So what motivated these two founders to start their company while living in a country where they are still learning to adapt to? “I have always felt very strongly about Nigeria. I am totally in awe of our culture (food, fashion, music, and art), but I also feel disappointed at how much of it we have lost or are ignorant of due to colonisation. In today’s globalised world, it is very important that we participate not only as consumers but as creators. Hence with Oh!NG, we are joining the movement of other forward thinking Nigerians working to establish African culture and excellence globally,” Alao says. France is a culturally inclined country and living there also inspires her to appreciate the culture she grew up in, Alao further explains. She says the long-term vision of Oh!NG is to be a global lifestyle and cultural brand—one that first conquers the hearts of Nigerians and Africans across the world. “Oh!NG is aimed at becoming a global lifestyle brand that not only provides a reference point for all that it means to be Nigerian and

indeed African, but one that also inspires creativity, pride and love largely by (re)telling our narratives in ways that are authentic and reflective of our ingenuity, timeless traditions and aspirations,” Alao explains. “Our plan is that within three to five years of our launch, Oh!NG will be the face of Nigerian/African culture—the first brand a Nigerian/ African will reference when trying to introduce other people to her culture.” She adds that Oh!NG will be creating digital experiences for online consumption, providing a platform to discover locally produced items and also collaborating with tech companies on the continent to produce niche products with a very global appeal. “We will be collaborating with artisans to produce items as well. Tech is not restricted to what we may call hi-tech or even apps these days. It is a whole range of savoirfaire—from little hacks to simple tools,” she elucidates. Both founders currently have no plans to raise money from outside in the first year. Recently, Emmanuel JeanMichel Frédéric Macron, French president, visited Nigeria and met with a number of entrepreneurs. Alao believes that the visit was significant as entrepreneurship is a top priority to the French government. “There are a number of initiatives coming up to simplify the process of starting businesses in France and also efforts are on to facilitate international collaboration with young talents from around the world. President Macron’s visit to Nigeria is a testament of that. Also, Nigerians living here in France are keen on creating business opportunities and leveraging French government and private sector initiatives to build business relationships between the two nations,” she adds.

Diamond Bank disburses N1bn under cash flow-based SME lending scheme

iamond Bank Plc has announced the disbursement of over N1 billion to the micro, small and medium enterprises (MSMEs) under the cash flowbased lending scheme. Launched in January 2017 in partnership with the Women’s World Banking (WWB), the scheme features the Cash Flow-based MSME Lending Methodology, which has a strategic focus on cashflow, net asset capacity, character and business proficiency of MSMEs as a means of determining their eligibility to access credit. Commenting on the remarkable achievement, Uzoma Dozie, CEO, Diamond Bank Plc said, “This milestone is a demonstration

of our resolve to develop innovative ways of advancing financial inclusion in Nigeria and a signal to many more successes to come as we push through our technologydriven retail-focused strategy, designed to position Diamond Bank as the most profitable and fastest growing retail bank franchise in Nigeria by the year 2020.” Under the lending scheme, the bank was able to disburse N267 million during the pilot phase, while it disbursed N750 million between June and August 2018. Remarkably, all the loans disbursed under the scheme to the 550 small businesses are performing despite the recipients of the facilities being first-time borrowers. “We are confident that the fu-

ture of retail banking belongs to banks with disruptive business models and solutions that deliver superior customer experience through strategic alliances, as well as create life-style-focused products, processes and channels. We pride our financial inclusion strategy as the most robust and customer-centric in the Nigerian banking industry and will achieve more milestones through databased initiatives that are simply, Beyond Banking,” Dozie said. Diamond Bank Plc is Nigeria’s lead driver of financial inclusion, providing enhanced customer experience through innovation and technology. Regarded as supporter of MSMEs in terms of lending, capacity building, business seminars

and workshops, the bank’s mobile banking app—Diamond Mobile— currently has over three million active subscribers on its platform. Diamond Bank has over the years leveraged its underlying resilience to grow its asset base and to retain its key business relationships. It has also played a leading role in partnering with domestic and international bodies such as The Gates Foundation, MTN, Medical Credit Fund (MCF), and Entrepreneur Development Centre (EDC), among others, to create easy access to financial services for the unbanked, a statement by the bank said. The bank has cultivated banking relationships with well-known international banks, allowing it to provide a range of banking services

to suit the business needs of our clients, the statement added.

Start-Up Digest Team ODINAKA ANUDU Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Angel James Joel Samson Graphics

BUSINESS DAY

C002D5556

Monday 27 August 2018

Start-Up Digest Transforming micro businesses with BoI-managed Trader Moni ODINAKA ANUDU

ll over the world, responsible and res p o n s i v e g ove r n ments initiate financial packages targeted at transforming the micro, small and medium enterprises (MSMEs), otherwise known as emerging businesses. In 2015, for example, China created a 40 billion yuan ($5.84 billion) national venture capital fund for emerging businesses. Last year, China also initiated a national development fund for small and medium-sized enterprises and another national fund for transforming technological achievements. Similarly, Ghana set up a $100 million fund for small businesses and innovation in 2017. The East Africa is not left out as Kenyan government established Biashara Kenya Fund in 2017 to provide loans for small businesses in the country at six percent interest rate. The schemes may differ in structure but they have the same objective, which is to make money available for small businesses to enable them unleash their potential. In line with this spirit, the Federal Government of Nigeria few weeks ago launched a new

initiative under the Government Enterprise and Empowerment Programme (GEEP). The scheme, known as Trader Moni, is primarily focused on empowering two million petty traders between this month and the end of the year. Trader Moni is targeted at helping micro businesses, especially petty traders, expand their trade by providing collateral-free loans of N10,000, repayable within a period of six months. The scheme is structured in a way that beneficiaries can get

access to a higher facility ranging from N15,000 to N50,000 when they repay N10,000 within the stipulated period. No documents, no PVC Contrary to claims in some quarters that micro enterprises must present their permanent voters’ cards (PVCs) before they can access the newly launched Trader Moni, Start-Up Digest gathered that traders do not need PVCs for the scheme. Also, no document or property

is needed to collect N10, 000 loan. Traders willing to access the fund only need to register, get captured and receive the money through their phones. Beneficiaries who collect N10,000 have six months to pay back the sum of N10, 250 in order to qualify for a bigger loan. Under Trader Moni, beneficiaries can access N10,000 and pay back N10,250 to qualify for N15,000. Once they pay back N15,375, they will qualify for N20,000 loan. Also, paying back N21,000 qualifies them for N50,000. Repayments can be made to BOI-GEEP loan account under PayDirect at banks. Impact Lucy is a pepper seller at Ojuwoye Market, Mushin, Lagos. Lucy said she had been hearing about Trader Moni for a while but did not believe that government would be giving people like her loans. The woman never thought it would be easy to get a loan until Trader Moni berthed. This is basically because her loan applications have severally been turned down by banks when she needed to expand her business. However, when she saw her fellow traders singing and dancing on stage talking about how they received alerts on their phones and gift items from government’s Trader Moni, she too decided to try it for herself. Right there in the market, without having to leave her wares, a Trader Moni agent came to enumerate her. The agent took down her details, captured her photograph and within 48 hours, she received a credit alert on her phone. With only N430 to pay back every week at selected banks for a period of six months, Lucy has obtained the loan and is now part of the financial system. She stands the chance of accessing a higher loan if she repays N10, 250 within the stipulated time period. BoI and financial inclusion Lucy is just one of the two million

people Muhammadu Buhari-led government is targeting across Nigeria through Trader Moni. Lucy could have been excluded from the financial system had there not been this scheme. A number of Nigerians are still excluded from the financial system, according to several surveys. A study conducted in Nigeria in 2008 by a development finance institution showed that 53.0 percent of adults in the country were excluded from financial services. The number has dropped to 23 million today, thanks to the activities of several institutions, including the Bank of Industry (BoI). The BoI is in charge of disbursing Trader Moni, just like it has judiciously managed and disbursed many others such as Cotton, Textile and Garment (CTG) Fund, Cement Fund and Cottage Fund, among others. Toyin Adeniji, executive director, BoI, said the goal of Trader Moni was to take financial inclusion down to the grassroots. “The President Muhammadu Buhari-led administration recognised the contribution of petty traders to economic development and identified the fact that some of them may not have what the commercial banks may require to grant loan, hence, his support for this initiative to help them grow their businesses,” Adeniji said. Uzoma Nwagba, chief operating officer, GEEP said, this initiative was aimed to expand financial inclusion “because we have over 23 million Nigerians that are financially excluded, this administration aimed to reach them so that they can grow their businesses.” In addition to Trader Moni, GEEP has ‘Farmer moni’ for farmers, which avail them the opportunity to access up to N300,000 loan each, as well as ‘Market Moni’ targeting market women, traders and artisans to get between N50,000 and N100,000. Trader Moni was launched in five markets in Lagos: Ketu, Mushin, Ikotun, Agege and Abule Egba. Mufliat Adewunmi, Iyaloja of Ojuwoye Market, was full of praise for the government for this laudable initiative. “We are happy about Trader Moni because it is a thing we have been expecting. The government should assist the masses, especially the traders. We thank Trader Moni. We thank the Federal Government for bringing this programme to us. It will help a lot, especially us traders, because we all know what we have been facing to get loans.” Lucy, who never believed the government could do anything for her, now believes that something good can indeed come out of the country. She says the money will not just benefit her business but help to provide for her family. Regarding the repayment, she said, “Before the six months, I will have repaid the N10, 000.”

BUSINESS DAY

Monday 27 August 2018

Start-Up Digest

Olarenwaju and Kenechukwu: Footwear champions Stories by JOSEPHINE OKOJIE

or decades, Nigerians have turned to European, United States and Asian designs for their shoes. But now, all that is fast changing, thanks to a generation of trendy and creative designers such as Arilomo Olarenwaju, chief executive officer of Arilane Limited, and Kenechukwu Chibuikem Okafor, CEO of Ezra Footwear. Arilomo Olarenwaju Arilomo Olarenwaju is the chief executive officer of Arilane Limited. Arilomo is an entrepreneur with vast experience in footwear industry. The Law graduate of the University of Lagos was inspired to set-up Arilane Limited out of his desire to be financially independent and to provide solutions to challenges faced by students in terms of quality, size and designs of footwear. His desire and passion prompted him to learn shoemaking at a very young age and, in 2013, as an undergraduate, he established Arilomo on campus with a view to producing shoes for students. Arilomo started his business with N50, 000 in 2013 and the business is now worth more than N800, 000. “The business has really gained so much ground from inception till date, all thanks to God,” he says.

Arilomo Olarenwaju

The young entrepreneur says that he is targeting clients in corporate bodies, academic institutions and anyone that appreciates fashion and has a good taste for shoes. When asked the biggest challenge the business faces, Arilomo says Nigerians’ high preference for imported shoes remains the biggest challenge confronting his business, noting that this has limited his market. “The major challenge I am currently facing is access to the market. Nigerians prefer foreign footwear to locally produced ones. It is only those customers that have patronised our products before that are still patronising them, but some would not even buy because they are locally made,” Arilomo says. “Finance is another major challenge confronting my business. I really want to

Kenechukwu Chibuikem

expand because demand for our products is increasing daily, but finance is limiting our expansion plans for now. “In an environment like Nigeria where funding is a huge challenge, we have a lot of great ideas but the funds to pursue them is lacking,” he adds. The lawyer-turned-entrepreneur tells Start-Up Digest that his business currently employs six staff members who work mostly on contract basis. When asked the advice he will give to other entrepreneurs, Arilomo says, “You have to define your goals as to why you are going into the business. You have to know the price that has to be paid to achieve this goal and you must be willing to pay the price.” “You must be determined to stay undefeated when all hope seems to be lost. Always put God first,” he adds.

Kenechukwu Chibuikem Okafor Kenechukwu Chibuikem Okafor is a Mechanical Engineering graduate of Landmark University, Ilorin, Kwara State. He is the founder and CEO of Ezra Footwear, a start-up shoe manufacturing business. Kenechukwu was inspired to establish his business by his parents and his love for leather products. The achievements of his parents motivated him on a daily basis and, in 2016, he decided to establish Ezra Footwear to realise his dream and prove that locally-made shoes can compete with imported ones. He is also the founder of Ezra farms. He started his business with his entire savings. Fortunately, things have panned out well for him, as demand for his products grows by the day. He tells Start-Up Digest that he sources his raw ma-

terials from local markets across the country and also imports some. “We source for most of our materials from local markets most times and also import from Indonesia,” the footwear maker says. Kenechukwu is the current winner of the Entrepreneurs Organisation, Global Students Entrepreneurship Awards (EOGSEA) in Nigeria and he represented the country at the global finals in Germany. Answering questions on the challenges facing his business, Kenechukwu says that rising cost of raw materials has remained the major issue, adding that prices of materials needed for production of footwear have doubled within the 18 months. He says that this has increased his production cost with customers not wanting to pay more despite the rise in costs. He further states that his inability to meet with

huge demand for his products is a big issue, calling for funds for expansion. The young entrepreneur calls on the government to improve the ease of doing business in the country so that cost of production can decline and the country’s products will become more competitive. Kenechukwu notes that the footwear industry has the potential to diversify the country’s economy away from oil and earn huge foreign exchange for Nigeria. The young entrepreneur believes that the country has what it takes in terms of raw materials and the needed skills to become a footwear manufacturing hub in Africa. When asked about his expansion plans, Ekenechukwu says, “I have scheduled a lot of expansion plans which I have already started working on through the help of my parents who have been supporting me from the beginning. Currently, I am making efforts to secure more machines for production and also expand the factory space.” “I also intend to start training other youths on footwear manufacturing. I am saving towards achieving all these within the shortest possible time,” Ekenechukwu adds. On his advice to younger entrepreneurs, he says, “My advice for other entrepreneurs out there is that we all go through bad days. I have been through a lot of bad times. What matters is not how hard you fell but how fast you rise.”

Skoll Foundation, Acumen offer support for entrepreneurs to tackle social issues

koll Foundation, an international nonprofit investment organisation, has partnered with The Aspen Network of Development Entrepreneurs (ANDE) to actively engage social entrepreneurs and local organisations supporting entrepreneurs who are working in Nigeria to help end poverty and other social challenges in the country. This meeting also featured Acumen, a non-profit impact investment organisation. Claire Wathen, community and convening manager, Skoll Foundation, made this known while addressing a forum of social entrepreneurs at an event tagged, ‘Connecting with Local and International Opportunities’, put together by the Aspen Network of Development Entrepreneurs (ANDE) in Lagos recently. According to Wathen, the Skoll Foundation drives large-scale change by investing in, connecting and celebrating social entrepreneurs and innovators who help in solving the world’s most

pressing problems. “The Skoll award for social entrepreneurship is given by Skoll Foundation and we give between 4 and 6 awards in a year to innovators within organisations that are addressing most pressing issues and invest directly in the promise of even greater impact at a scale,” she said. “The awardees that are selected and supported by Skoll are at the growth stage and are organisations that activate skills and are looking to further their impact. We bring them into our portfolio and we accompany our investors with a storytelling component. So we are really interested in not only scaling your impact but sharing in a way that the audience will appreciate,” she said. Ben Pyne, portfolio and investment, Skoll Foundation, stated that Skoll Foundation already has several active members in Nigeria who are beneficiaries of the award. Pyne explained that awardees receive a $1.25 million core support grant over three years to scale their work

and increase their impact. He added that they also gain leverage through their longterm participation in a global community of visionary leaders and innovators dedicated to solving the world’s most pressing problems. Wathen (earlier quoted) noted that the award process is by referral and not by open application process. “Award process is by referral; we do

not have open application process. We leverage on network to identify new entrepreneurs, which is one of the reasons we are so excited to be here in Lagos to connect with new community and bring our new voices to our network.” She also encouraged participants to endeavour to apply and participate in the annual Skoll World Forum.

Also speaking during the entrepreneurs meeting, Meghan Curran, West Africa director, Acumen, highlighted the group’s interest in companies that create sustainable solutions in local ecosystem. Curran said Acumen raises charitable donations to invest in companies, leaders, and ideas who tackle poverty in developing countries.

Ben Pyne, portfolio and investment, Skoll Foundation; Joshua Adedeji, West Africa senior program coordinator, ANDE; Olawale Ajiboye, associate director, Acumen West Africa Fellowship; Claire Wathen, community and convenings manager, Skoll Foundation and Olatunji Ajani, West Africa regional manager, ANDE during the ANDE West Africa entrepreneurs forum.

She stated that Acumen in the last 15 years has invested over $110 million in breakthrough innovations with 102 countries, serving lowincome customers within 13 countries in Africa, Asia, Latin America and the U.S. with a major focus on postseed to scale opportunities especially in the agriculture and renewable energy space. Olawale Ajiboye, associate director of Acumen West Africa fellowship, also shared opportunities in the Acumen’s West Africa fellowship and why entrepreneurs should take advantage of it. The Aspen Network of Development Entrepreneurs (ANDE) is a global network of organisations that propel entrepreneurship in emerging markets. ANDE members provide critical financial, educational, and business support services to small and growing businesses (SGBs) based on the conviction that SGBs will create jobs, stimulate long-term economic growth, and produce environmental and social benefits.

BUSINESS DAY Harvard Business Review

C002D5556

MondayMorning

Monday 27 August 2018

In association with

What’s the purpose of companies in the age of artificial intelligence? Julian Birkinshaw

ecent advances in artificial intelligence and computer technology are causing us to think again about some really basic questions: What is a firm? What can firms do better than markets? And what are the distinctive qualities of firms in a world of smart contracts and artificial intelligence? While there has been a lot of discussion about “what’s left for humans?” as AI improves at exponential rates, I think we now have to ask: “What’s left for firms?” In many ways this is an old question, because it takes us back to the arguments of Nobel laureates Ronald Coase and Oliver Williamson

— that firms exist to coordinate complex forms of economic activity in an efficient way. I would argue that it is just one among many reasons that firms exist. And as computer technology simplifies and reduces transaction costs further, it is these other things that firms do uniquely well that will come more to the forefront. Here are four areas where firms excel. 1. MANAGING TENSIONS BETWEEN COMPETING PRIORITIES. In today’s parlance, firms have to exploit their established sources of advantage (to make profits today) while also exploring new sources of advantage (to ensure their long-term viability). However, getting the right balance between these two sets of ac-

tivities is tricky because each one is to a large degree self-reinforcing. Hence the notion of organizational ambidexterity — the capacity to balance exploitation and exploration. 2. TAKING A LONGTERM PERSPECTIVE. As a variant of the first point, firms don’t just manage trade-offs be-

tween exploitation and exploration on a day-today basis, they also manage trade-offs over time. My former colleagues Sumantra Ghoshal and Peter Moran wrote a landmark paper arguing that, unlike markets, firms deliberately take resources away from their short-term best use, in order to give

themselves the chance to create even more value over the long term. 3. PROVIDING A MORAL OR SPIRITUAL CALL TO ACTION. There is a second dimension to long-term thinking, and that is its impact on individual and team motivation. We typically use the term purpose here, to describe what Ratan Tata calls a “moral or spiritual call to action” that leads people to put in discretionary effort — to work long hours, and to bring their passion and creativity to the workplace. 4. NURTURING “UNREASONABLE” BEHAVIOR. There are many famous cases of mavericks who succeeded by challenging the rules, such as Steve Jobs, Elon

Musk and Richard Branson. With apologies to George Bernard Shaw, I think of these people as unreasonable — they seek to adapt the world to their view, rather than learn to fit in. And if we want to see progress, to move beyond what is already known and proven, we need more of these types of people in our firms. One of the distinctive qualities of firms is that they nurture this type of unreasonable behavior. No matter how powerful the technology, sometimes a little human judgment is necessary to keep things moving in the right direction.

(Julian Birkinshaw is a professor of strategy and entrepreneurship at London Business School.)

How to avoid loneliness when you work entirely from home Dorie Clark

orking from home can cut you off from the spontaneous interactions that can spark new insights. And, at times, the solitude may lead to isolation or the feeling that you’re left out at work. How can you combat loneliness and create positive relationships with colleagues when you work from home full-time? First, since you’re not physically interacting with co-workers, it’s important to seek

out an online community of like-minded practitioners. Discussion groups allow you to share successes

and challenges and ask sensitive questions that, especially because participants are geographically

ly useful for at-home workers to leverage video technology. Instead of phone calls, I’ll almost always book Skype or Zoom meetings so that I can see the other person. Finally, make a concerted effort to learn more about the personal lives of your colleagues. When you work from home, there’s a natural tendency to avoid “wasting time” with small dispersed, can be an- talk; it may seem like swered honestly and a better move to focus without feelings of exclusively on workcompetition. related conversaSecond, it’s especial- tions. But that may be

We have you covered through CBN’s special intervention for speciﬁed retail invisible transactions.

Are you travelling abroad for vacation

Visit any of our designated branches nationwide for your following invisible trade transactions: School Fees Pilgrimage & Other Travel Allowances (PTA and BTA) Medical Allowances

or studying abroad?

We are here to serve you. *Terms and conditions apply

www.ﬁrstbanknigeria.com

FirstBankofNigeria

@FirstBankngr

Firstbankngr

FirstBankofNigeriaLtd

@ﬁrstbanknigeria

+FirstBankNigeria

a mistake. So before a meeting starts, ask your colleagues about their recent vacation, their daughter’s sports matches, or their upcoming nuptials. These small details can create bonds that enable you to build deeper relationships that are both personally gratifying and professionally beneficial.

(Dorie Clark is a marketing strategist and professional speaker who teaches at Duke University’s Fuqua School of Business.)

Monday 27 August 2018

C002D5556

BUSINESS DAY

Monday 27 August 2018

BUSINESS DAY

36 BUSINESS DAY NEWS

C002D5556

2019: Nigeria’s healthcare system unprepared for mass political casualties - NMA ANTHONIA OBOKOH

he Nigerian Medical Association (NMA) has alerted the nation on the potential implications of negative political developments on the healthcare delivering as the country prepares for the 2019 elections, saying Nigeria’s healthcare system cannot accommodate mass causalities from political upheavals. The association therefore call on all politicians, political parties and aspirants, and other relevant stakeholders to play by the rules, even as it urges law enforcement agents to demonstrate unambiguous loyalty to their calling and the Constitution of the country. “They should be strin-

gent in dealing with defaulters objectively and without hindrance,” according to a statement jointly signed by Francis Faduyile, national president, and Olumutiwa Odusoteth, national secretary, NMA. According to the association, Nigerians should be law abiding and resist the lure of politicians as ready tools to destroy human lives and property in the name of political support and loyalty. We are deeply concerned about certain developments in the political circles in Nigeria in recent times. Of note, majorly are the overtly inflammatory statements by top ranking political leaders, which have the real potentials of incensing partisan conflicts that could degenerate into communal clashes

and attendant mass casualties worsening the already cheerless level of insecurity and violent conflicts in the country, the association notes. “Our worry is based on the fact that the country’s health system is still bedevilled by various incapacities ranging from chronic under funding, poor governance, very poor service delivery to lack of political will to implement extant laws, regulations and policies,” the association says. The association discloses that these have manifested in poor health worker: population ratio with escalated emigration of medical and health workers, low carrying capacity of existing health facilities, absence of basic equipment, consumables, reagents, modern effective drugs and

other tools needed to deliver efficient, effective, prompt and culturally acceptable medical care to the people of Nigeria. NMA as a foremost professional association and the custodian of the health of the Nigerian people sees this as a patriotic duty to call politicians and some state operatives to order, it says. The association encourages the spirit of politics without rancour and bitterness, and one that is strictly based on constructive engagements, factual debates and constitutionality. “If by acts of omission or commission the nation is thrown into serious political chaos, the poor and vulnerable including women and children will bear the greatest brunt,” it warns.

NIRSAL develops transport model to curb cost of agric products ONYINYE NWACHUKWU, Abuja

he Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) is finalising an innovative transportation system designed to tackle the bottlenecks in the national haulage system for agricultural products.

The model is currently undergoing a comprehensive and rigorous process of internal testing before its formal deployment, authorities at NIRSAL said on Sunday. The Secured Agricultural Commodity Route (SACR) is a targeted multi-pronged system anchored on a dedicated national transporta-

tion network, and targets a significant reduction in the prices of agricultural commodities by curbing the astronomical losses that occur post-harvest. The route will cut across the 11 states in the Lakaji corridor including Katsina, Jigawa, Kano, Kaduna, Niger, Kwara, Oyo, Osun, Ogun, Lagos, and

is expected to take three months to implement beginning this month. As seen in the document that explains the new initiative, the SACR is built around four complementary components: the first is the Agro Runner - a “Uberised” system that will enable farmers call and book for their produce to be picked up at the farm-gate and transported either to the designated aggregated zones or commodity markets. The second is the Secured Commodity Aggregation Zones, which are areas to be designated for specified produce aggregation - but there will be tax and regulatory checks on haulage vehicles that will operate in these zones. There is also the Specialised Haulage Services under which logistic companies whose specialised vehicles are tailored to transport agricultural commodities around the country will be allowed to offer this service. “Example is the Crating system that reduce wastage of fresh fruits and vegetables, live fish haulage tanks, etc,” according to NIRSAL. The fourth component is the Dedicated Commodity Route that will be designated for commodity haulage, and all security agents will be informed of the movement of the specialised trucks so as to facilitate movement and timely delivery. To ensure success, the model will rely both on the functionality and adoption rate of these components as well as the synergy between the relevant stakeholders to ensure commodities move efficiently from production areas to commodity/consumer markets.

Monday 27 August 2018

USAID increases support for good governance, health in Nigeria to $26.5m HOPE MOSES-ASHIKE

he US Agency for International Development (USAID) has announced additional development assistance to support development goals outlined in the bilateral Development Objectives Assistance Agreement between the US and Nigerian government signed in 2015. Of the new funding, $25 million will strengthen good governance by supporting state governments’ efforts to bolster Nigeria’s Open Government Partnership commitments to improve transparency and fight corruption. An additional $1.5 million will support a healthier, more educated population in targeted states through the US President’s Emergency Plan for AIDS Relief (PEPFAR), for

a total of $26.5 million in additional assistance. USAID is also partnering federal and state health ministries to build stronger health systems with the aim of guaranteeing equitable access to quality healthcare services nationwide. The additional new funding brings the total US government assistance provided under the five-year development objectives agreement to $1.1 billion. “The US believes that as the most populous country in Africa, with the largest economy on the continent, Nigeria holds tremendous influence over the future of Africa,” Erin Holleran, acting Mission Director, said, noting, “USAID is committed to partnering with the government and the people of Nigeria to address its development challenges.”

John McCain loses battle with brain cancer at 81

S Senator John McCain, a former prisoner of war in Vietnam, who ran unsuccessfully for president in 2008 as a self-styled maverick Republican and became a prominent critic of President Donald Trump, died on Saturday, his office said. He was 81. According to a monitored Reuters report, the senator for Arizona for more than three decades, McCain, had been suffering from glioblastoma, a brain cancer, and had not been at the US Capitol this year. His family announced on Friday that McCain was discontinuing further cancer treatment. He died on Saturday afternoon with his wife Cindy and other family members at his bedside. “At his death, he had served the United States of America faithfully

for 50 years,” said a statement from his office. McCain will lie in state in both Phoenix, Arizona, and in the Capitol Rotunda in Washington, D.C., and will receive a full dress funeral service at the Washington National Cathedral before being buried in Annapolis, Maryland, his family said. McCain was born on August 29, 1936, at an American naval installation in the Panama Canal Zone - US territory at the time - where his father was stationed. He acknowledged he was a “smart ass” during his years at the US Naval Academy and graduated fifth from the bottom of his class. McCain divorced his wife Carol after 15 years of marriage in 1980 and weeks later married the former Cindy Henley, daughter of a wealthy beer distributor in Arizona.

Monday 27 August 2018

C002D5556

Anxiety as FIRS moves to ‘manage’ defaulting... Continued from page 1

accounts of the relevant tax authorities (RTAs) to the credit of the

taxpayers, in full or partial settlement of the tax debts. Also, the FIRS asked banks to inform the relevant tax authorities of any transaction –that is transfer of funds offshore or locally –on the tax defaulter’s account and obtain the relevant tax authorities approval prior to execution of such transaction. This development has triggered interesting comments from tax experts lately, including those among the “Big Four” accounting firms. Most of the tax experts believe that while Section 49 of the Companies Income Tax (CIT) Act, 2007 (as amended), Section 31 of the FIRS (Establishment) Act, and Section 50 of the Personal Income Tax Act (PITA) empower the FIRS to appoint agents for the recovery of tax liabilities; this power should be cautiously exercised and in harmony with the law to avoid negative impact on Nigeria’s business environment and ease of paying taxes. For instance, for taxpayers, their taxes are required to be paid either based on self-assessment, administrative or audit assessments. For the agent banks, they owe their customers (the taxpayers) the contractual obligations which require protection of their confidentiality or privacy. Tax experts at Lagos-based Andersen Tax said in their August 17, 2018 ‘Tax Alert’ that, “While Section 31 of FIRS (Establishment) Act empowers the FIRS to appoint agents of tax collection, it is imperative to evaluate the

actual extent of such powers.” “Section 31 (2) of the FIRS (Establishment) Act provides that the appointed agent may be required to pay any tax payable by the taxable person from any money which may be held by the agent of the taxable person (emphasis ours). However, there is a valid question as to when tax can be deemed payable,” Andersen Tax noted. “Notwithstanding, the powers granted to the FIRS to collect taxes from individuals and companies, the FIRS new approach to recover unpaid taxes may not be consistent with the relevant provisions of the legislative framework in Nigeria. The exercise of control over of taxpayers’ account without regard to due process could lead to distrust on the sanctity of contracts in Nigeria and scare potential investors,” Andersen Tax further stated. Likewise, tax experts at Deloitte in their August 24, 2018 note believe that the above directive by FIRS and the underlying legal bases appear to permit relevant tax authorities to appoint an agent and request for payment. They however noted that the development raises a myriad of concerns, “especially from banks and taxpayers”. Deloitte tax experts are concerned about this development leading to “potential violation of banks’ privacy and confidentiality obligations”. The implications of the directives on business operations of the banks and taxpayers, according to them is that it may result in disruption of businesses, consequential damages for businesses, other regulatory backlashes and perhaps lawsuits. Deloitte also warned that the alleged defaulting

taxpayer may be unaware of any pending liability prior to the appointment of the bank as agent of collection. “Where the directives of the RTAs are effected by banks, it may lead to a breach of confidentiality obligation to the customers. Understandably, this obligation is to the exception of valid legal requirements, thus it becomes important to ascertain the extent of the RTAs’ powers in this regard,” Deloitte tax experts noted. As a way forward, Taiwo Oyedele, Tax Leader for PwC West Africa said in an August 24, 2018 note that the power of substitution is a very important tool for the tax authority in recovering unpaid taxes especially from tax evaders. “It is similar to a ‘garnishee order’ in many countries where the court may direct a third party (the agent) that owes money to the judgment debtor (the defaulting taxpayer) to instead pay the judgment creditor (the tax authority)”, he added. According to him, “This power must however be exercised with caution and in accordance with the law to avoid negative impact on the business environment and ease of paying taxes. Even where the tax authority has powers to deem tax payable under certain conditions as specified in the law, this power is not to be exercised arbitrarily.” “On the part of taxpayers, it is extremely important to attend promptly to all tax matters including assessments and keep appropriate records of their tax affairs. The days of tax matters being neglected without consequences are over for good,” Oyedele warns.

•Continues online at www.businessdayonline.com

L-R: Pius Olarenwaju, national treasure; Bayo Olugbemi, 1st vice president, both of Chartered Institute of Bankers of Nigeria (CIBN); Denni Olisa, executive director, Zenith Bank, and Seye Awojobi, registrar/CEO, CIBN, at a press conference on the forth-coming 11th Annual Banking and Finance Conference in Lagos at the weekend.

processors will spend an average of N1.34 million ($3,685) to produce

a ton of concentrate, excluding other production cost. It cost about $900 to produce a ton of tomato concentrate in China and other Asia countries that are major suppliers of tomato paste to Nigeria, industry data show. The low price has continued to fuel the influx of tomato paste and concentrates into the country, making more difficult for local processors to favourably compete. “We are not globally competitive in food production in a way that allows the processors take fresh produce and process to sell at internationally competitive price,” Prince Samuel, chairman and managing director, Vegefresh Group, told BusinessDay in a telephone response to questions. “Farmers are not producing at the price processors are willing to buy to be able to compete favourably with imported tomato paste. This is why there is high importation of paste and concentrates into the country,”

As Venezuela’s oil-based economy collapses... Continued from page 1

trated private capital by nationalising virtually everything under its

so-called socialist-driven Bolivarian Revolution, which demonised private capital. Today, the economy is in doldrums after steady economic growth and declining poverty rates in the last decade gave a false belief that the policies were effective. Caracas’ journey to this point shows Nigeria that deep petropockets cannot mask bad economic policy making for long. Some of the triggers of Venezuela’s economic collapse are currently observable in Africa’s largest economy, albeit on a smaller scale, whether it is the government’s lavish spending on petrol and electricity subsidies or a penchant for distorting markets. “Venezuela shows that even countries with far more oil (per capita) than Nigeriacanstillruintheirowneconomy with bad policies,” Charles Robertson, the chief economist at investment firm, RenaissanceCapital,saidinanemailed response to questions. “The lesson is to spend wisely, not borrow too much and never rely on your central bank to fund your spending,” Robertson added. Backed by oil revenues, Nigeria has fuel and electricity subsidises in place and although lower oil prices in 2016 called for a need to embark on sweeping reforms, the country has managed with business as usual, as oil prices rebound to as high as $70 per barrel. The economy narrowly exited its first recession in 25 years in 2017 after the oil price downturn exposed structural imbalances which saw the economy contract five straight quarters between the 2016 ad the first quarter of 2017.

The economy however continues to underperform with growth of 1.95 percent in the first quarter of 2018, less than the population growth rate of 3 percent. To boost economic growth the country has turned to raising spending, racking up debt at a frantic pace to cover for lower government revenue. But the worry is that most of that borrowing has gone to funding consumption subsidies and maintaining an over bloated civil service rather than badly-needed infrastructure. The FGN’s domestic debt stock amounted to N12.15 trillion (US$39.7bn) at end-June 2018, according to the Debt Management Office (DMO). That is equivalent to 10.7 percent of 2017 GDP. External debt obligations at endJune amounted to US$22.08 billion, equivalent to 5.9 percent of 2017 GDP and is up by 136 percent from 2014 levels of $9.4 billion. There has been a surge in warnings aboutthesustainabilityofNigeria’spublic debt stock, some of them influenced by regret that commercial borrowings come without policy conditionality. “There is a more useful conversation to be had about the pace at which the FGN’s borrowings are funding an overhaul of the infrastructure and transformation of the economy from a rent-seeking to a producing mode,” Gregory Kronsten, head of research at FBN Quest said in an August 24 note to clients. A larger chunk of government expenditure has been recurrent spending, typically accounting for 70 percent, while capital expenditure and debt servicing take up what’s left.

•Continues online at www.businessdayonline.com

Halfway into a pre-election year, Nigeria’s... Continued from page 1

percent growth rate over period years, a sub-two percent growth only

Nigeria’s tomato processing stalls on lack of... Continued from page 1

37 NEWS

BUSINESS DAY

Samuel said. Processors need to pay at most $200 pertonoffreshtomatoestobecompetitive, BusinessDay calculations shows. Africa’s biggest economy produces 1.5 million tons of tomato per annum, with 0.7 million metric tons post-harvest loss. Tomato demand in Nigeria is put at 2.2 million metric tons per annum, leaving a gap of 700,000 metric tonnes, according to official data. Nigeria is the 13th largest producer of tomatoes in the world and the second after Egypt in Africa, yet the country is still unable to meet local demand because about 50 percent of tomato produced is wasted due to lack of adequate storage facility. The major issue hindering the sector remains the massive importation of paste into the country, according to Abdulkarim Kaita, managing director, Dangote Tomato. “This kills the initiative of the farmers to grow more and the local manufacturers to be able to buy, process and sell,” Kaita said. “It is cheaper to buy from China than buying locally because the

imported tomato pastes are not 100 percent tomatoes; it is usually filled with body fillers like starch,” he added. According to Kaita, most pastes found in the market have less than 28 percent minimum tomato fruit content whichisthespecificationoftheCODEX Standards and the Nigerian Industrial Standards (NIS), as confirmed by the National Food and Drug Administration and Control (NAFDAC). He said that the Dangote Tomato Processing factory that has been shut down for over two years is planning to re-open in January 2019. BusinessDay investigations found that no tomato processors are currently operating in the country, despite farmers increasing production to meet up with off-takers agreements entered into with various processing factories. Since the Federal Government imposed a 50 percent import tariff, alongside an additional levy of $1,500 per metric ton on imported concentrates into the country while out-rightly banning the importation of tomato paste 16 months ago, the policy is yet to fully take effect.

•Continues online at www.businessdayonline.com

tends to deepen poverty in the long run especially with a higher population growth rate. It is estimated that the country’s share of population living below US$5.5 a day currently stands at 92.1 percent, the worst performance of any country globally. Ahead of the release of the figures, the nation’s stats Chief, Yemi Kale, expressed surprise at the slow pace of growth. “Surprisingly, I expected the numbers to be much better but it is looking very similar to the first quarter. I think the economy is struggling out of recession and that is what the numbers are showing,” kale said in a statement. In the first quarter, the country’s economy had only managed to 1.95 percent growth down from the 2.11 percent in fourth quarter of 2017. Even though growth in the oil sector has recovered significantly, thanks to relative peace achieved in the Niger Delta and higher oil prices in the international markets, the non-oil sector continues to struggle. Non-oil sector grew at a paltry 0.8 percent in the first quarter and that growth is not much different in the second. To get the non-oil sector firing again, the federal government must go beyond the cosmetic populist reforms touted in a pre-election which does not aid productivity even if it tends to win votes. Consumer confidence has been hit badly by two years of double digit inflationandconsequentlymanymanufacturing companies are struggling. Growthintheagriculturesectorshasalso beenconstrainedbytheherdsmencrisis. But instead of devising solutions the engineer faster economic growth, the country’s politicians

are engaged in a ‘do or die’ battle of politics without policies. Even though the International Monetary Fund (IMF) expects the country’s economy to expand positively by 2.1 percent for 2018, chances are high that the country could fall below the threshold considering it is a pre-election year and focus has shifted from engineering economic growth into winning votes. Speaking on how the election fever affects economic growth, Yemi Kale notes that the political season could be bothpositiveandnegativeforeconomy. “Positive in the sense that if the atmosphere is not too toxic, then there will be increase in economic activities; people will be spending, politicians will be spending and there will be a bit more money in the hands of consumer and the economy tends to benefit from that,” Kale said. On the other hand, when the political season is toxic, “foreign investors will get scared, they will be taking their money, I think that is what is happening in the Nigeria stock Exchange (NSE), and for the local investors, they will apply the wait and see approach,” kale explained. Comparing Nigeria with the United States, kale said unlike in the U.S where investors know that despite the election uncertainties, the economy is structured to work in a particular way and the system continues to work. “But in Nigeria we understand that the system and the virtual system are tied to whoever wins, so everybody is nervous; who is going to win? Will the person change the policy? And so when it gets toxic it has a way of squeezing the economy,” kale concluded.

•Continues online at www.businessdayonline.com

38 BUSINESS DAY NEWS

C002D5556

Ready market created for produce supply as Naira gains as CBN injects $543m, Buhari inaugurates $250m brewery in Ogun CNY 63m into forex markets RAZAQ AYINLA, Abeokuta

assive supply opportunities are being created for farmers who produce major raw materials - sorghum and maize grits being used by the largest brewery plant in West and sub-Saharan Africa, as the firm pledges to give preference to a very larger percentage of locally sourced raw materials as against imported malt barley. The intention of International Breweries plc, a subsidiary of AB InBev Group, which inaugurates its largest plant at Flowergate Industrial Scheme, Sagamu-Abeokuta expressway, Obafemi-Owode Local Government Area of Ogun State, is to create job opportunities for Nigerians through supplies of raw materials, production of beer and malt brands and distribution of finished goods. Speaking with BusinessDay ahead of the official inauguration of Gateway brewery plant, Tony Agah, the plant manager, noted that the plant would be instrumental in empowering farmers as most

of the raw materials required would be sourced locally, thereby, reducing post-harvest losses that affect farmers as a result of poor storage technology and lack of adequate supplies of produce. Agah, who described the plant’s brands such as Trophy, Grandmalt, Castle lite, Betamalt, Hero, Eagle, Budweiser, Pabod malt as national treasures, said the company had embarked on series of strategic moves to produce high-quality drinks locally, adding that the firm would spare no expense in ensuring that Nigerians were treated to the best tradition in brewing. He however said Carlos Brito, the global CEO of AB InBev, would be on ground at the Gateway Plant in the state on Tuesday, to receive President Muhammadu Buhari and his entourage, who include Governor Ibikunle Amosun, Okechukwu Enelamah, minister of industry, trade and investment; Udo Udoma, minister of budget and planning; Oscar Onyeama of Nigerian Stocks Exchange, among others, for the official inauguration of the plant.

HOPE MOSES-ASHIKE

he nation’s currency on Friday traded strong after the Central Bank of Nigeria (CBN) on Thursday, August 23, and Friday, August 24, 2018, injected a total of $543.22 million and CNY 63.21 million into the inter-bank foreign exchange market. Naira gained N0.25k against the dollar as it closed at N362.35k per dollar compared with N362.6k traded on the previous day at the investors and exporters forex window, data from the FMDQ show. At the Thursday’s trading, the bank offered $100,000,000 as wholesale interventions and allocated the sum of $55,000,000 to the Small and Medium Enterprises (SMEs) forex window. Also, the invisibles window, which caters for customers requiring forex for Business/Personal Travel Allowances, tuition and medical fees, among others, received $55 million. Similarly, on Friday, the bank injected $323.22 million into the interbank retail Secondary Market Intervention Sales and sold a total of CNY 63.21 million in the spot and

short-tenored forwards, arising from bids received from authorised dealers. CBN spokesperson, Isaac Okorafor, who confirmed the figures, said the bank remained committed to maintaining the country’s external reserves to safeguard the international value of the naira in line with the bank’s mandate. According to Okorafor, the bank’s management of the forex market had entrenched transparency in the market and continued to strengthen the value of the naira against other major currencies of the world. On the sale of Chinese Yuan (Renminbi), Okorafor disclosed that it was in line with the CBN guidelines, which stipulate that it would be for the payment of Renminbi denominated Letters of Credit for agriculture as well as raw materials. While also noting that availability of the Chinese currency would ease pressure on the Nigerian foreign exchange market, he attributed the relative stability in the foreign exchange market to the intervention of the CBN as well as the sustained increase in crude oil prices in the international market.

Monday 27 August 2018

Nigerian Navy promotes interfaith dialogue at Navy Town TELIAT SULE

n a bid to promote peaceful coexistence among adherents of different religions in Nigeria, the Naval Directorate of Islamic Affairs (NDIA) of the Nigerian Navy held its maiden edition of her interfaith dialogue weekend at the Navy Town Central Mosque, Satellite Town, Lagos. The one-day programme had as its theme “Advocacy, interaction and share,” was an initiative aimed at achieving a purposeful platform for a harmonious relationship and nation building, with a view to concentrating on the areas of our shared values, particularly goodwill to mankind. “With this programme, we hope to expand the coast of our shared spiritual space as we extend the hand of fellowship to transcend our individual religious domain. This is because, no matter how much we value our respective core values, when we look closer and rise beyond our primordial human weaknesses, we will begin to appreciate what others do, who they are and why they do whatever is it that they do,” NDIA said. In attendance were Nigerians from different religious backgrounds, as participants

had the opportunities to interact across religious lines and share ideas. On what motivated the NDIA to organise the programme, the keynote speaker, T. M. Gidado, a commander in the Navy, said it was meant to educate Nigerians about the core and shared values of different faiths so that Nigerians could enjoy peace, particularly when we remember that whether white or black, Jew, Christians or Muslims, we are all from Adam and Eve. “Religious leaders don’t interact and it is through interactions that we can understand our core and shared values. Muslims should not see Christians as enemies and vice versa. Religious leaders should not interpret verses from their holy books out of context. We should promote peace because if we don’t have peace the country cannot develop,” Gidado said. “Religious leaders and people of different faiths in this country should talk more about things Christians and Muslims share in common. Both Bible and Quran encourage goodness to our parents and neighbours. We all discourage stealing, fornication, adultery, killings of our fellow human beings, among others”, Commander Gidado said.

Monday 27 August 2018

C002D5556

Manufacturers move from Delta to Edo, cite growing investor confidence, reforms

he positive disposition of the Godwin Obaseki-led administration in Edo State towards a private sector-led economy and the elimination of barriers to business through reforms are pulling businesses from neighbouring Delta State. According to manufacturers, the exodus of companies to Edo from Delta is happening on the back of the growing investor confidence, which in turn is a factor of the ease with which business owners are conducting their activities in Edo, devoid of manmade encumbrances that impact their bottom line in Delta State. Speaking at the 32nd annual general meeting of the Manufacturers Association

(MAN), Edo/Delta branch, with the theme: “The Nexus of Science, Technology and Industry,” Alofoje Unuigboje, the MAN branch chairman, decried the challenges manufacturers face in doing business in Delta State. According to Unuigboje, manufacturers in Delta contend with infrastructural challenge and all manners of charges and fees collected on roads by those he described as urchins. “Ease of doing business has experienced considerable improvement in Edo, premised on the empirical evidence of free movement of goods on Edo State roads and the absence of innumerable urchins from industrial premises, who impose arbitrary and ex-

tortionate demands,” Unuigboje said. “The ready access of ministries and other government establishments up to summit, to Manufacturers Association of Nigeria (MAN), has engendered a mutually rewarding partnership between Edo State Government and MAN. This cannot be said of Delta State from where companies have moved to Edo State,” he said. The major consumer in any society is government, he said, saying there is a sense in which government supports industries in its geographical zone, through patronage of local products. “It makes good business sense as it is necessary internal dynamics that boost

the economy of the state. Supporting local industries through patronage of local products is not a favour but a reflection of enlightened self-interest,” he said. Frank Jacobs, national president of MAN, said the manufacturing sector was adversely affected by the recession the country had exited. He urged the federal and state governments to work in synergy to carry relevant stakeholders along in designing appropriate strategies to improve and stabilise the country’s economy. The MAN president charged Delta and Edo states to intensify efforts at attracting more investment as both states still lag behind in industrial development.

Traffic and security officials maintain the closure of Third Mainland Bridge in preparation for maintenance in Lagos. Pic by Pius Okeosisi

overnor Godwin Obaseki of Edo State says the state has lost over 400,000 hectares of its forest to deforestation fuelled by illegal felling of trees and agricultural activities. Obaseki made the disclosure during a two-day stakeholder workshop on sustainable palm oil development organised by the state government in partnership with Tropical Forest Alliance 2020 (TFA 2020) initiative of Proforest in Benin City, recently. “We must do something about our forest to reclaim and preserve it from total depletion. On assumption office as governor, I was worried

Government reopens Third Mainland Bridge before schedule DIPO OLADEHINDE with agency report fter undergoing Investigative Maintenance Test, the government has announced the re-opening of the Third Mainland Bridge, which was temporarily closed for three days. The reopening ceremony had in attendance top officials of Lagos State government delegation led by Commissioner for transportation, Ladi Lawanson and Federal Ministry of Works delegation led by Director, Highways, Bridges and Designs Adetokunbo Sogbesan. Director at Federal Ministry of Works Adetokunbo Sogbesan told journalists that the bridge was opened earlier than schedule because the test was completed on time due to favourable weather. “We were to open the bridge at midnight today, we are going ahead of schedule,’’ Sogbesan told journalists. The director at Federal Ministry of Works said the result from the test would be sent to Italy and that it was an opportunity for technology transfer, as local engineers would join in the analysis of the result from

the expansions joints. “Underwater inspection of piers of the bridge would be done later in November when the water level would have gone down,” Sogbesan told journalists The Federal Controller of Works, Lagos State Adedamola Kuti said that about 32 expansion joints were tested, adding that the results needed analysis before further action. “We expect that the result would be out by next month,’’ Kuti added. One of the contractors handling the project, Gainrranco Albertazzi, Joint Managing Director of Borini Prono said digital machines were used to get accurate readings from the expansion joints. The Deputy Commissioner of Police in Charge of Operations, Ali Mohammed, said the Police were able to effectively manage the traffic and security during the period of the closure. According to Mohammed, “policemen were stationed at every 100 metres along the diversion routes, adding that there were no complaints relating to the bridge closure. “We deployed over 1,000 policemen to take charge of these points until the bridge is open,’’ he said.

Mshelia commiserates with Borno indigenes over Bayo Long Bridge damage IFEOMA OKEKE

Edo loses 400,000 hectares to deforestation IDRIS UMAR MOMOH, Benin

39 NEWS

BUSINESS DAY

over the spate of illegal logging that occurred between the late 1990s and early 2000s. “We inherited over 600,000 hectares of forest from the colonial masters, but in the recent audit in the state we now have less than 200,000 hectares of it representing about 6 percent,” the governor said. The governor who lamented the negative social and environmental impacts of deforestation, however, called for technological approach to address the menace in the state. He explained that on assumption of office in 2016, the number of applications received for agricultural activities were more than land available in the state. While calling on Profor-

est to help audit the forest in the state, he said because of inadequate forest, the state government had decided to give land to responsible investors and individual to develop areas that were already deforested. He listed efforts towards the preservation of forest for the benefit of the people in the state to include sending of bill of forest commission to the Edo State House of Assembly, setting up of forest commission, among others. Obaseki, who opined that oil palm demand was on the increase globally, urged oil palm industries to help build and protect forests in the state. Earlier, Abraham Baffoe, Africa regional director of

Proforest, said Tropical Forest Alliance (TFA) 2020 was a Private Public Partnership (PPP) that brings together government, private sector and civil society organisations to eliminate deforestation from the supply chain in the production of palm oil, beef, soya, pulp and paper. Baffoe posited that as a global challenge, deforestation related to agricultural plantation development, subsistence farming, bushfire and wild fire, charcoal production, illegal and unsustainable logging and population and development pressure. He said the participants were gathered to deliberate on tackling the challenges of deforestation, which was a global trend.

ubernatorial aspirant under the Labour Party, Ibrahim Mshelia, has commiserated with the people of Borno State over the damage of one end of the Biryel Long Bridge in Bayo Local Government, which has isolated the people of the state. Consequently, Mshelia has appealed to the federal and state government to swiftly attend to the damaged bridge that hitherto was the only motorable link between Southern Borno with other parts of the state and Gombe State, emphasising that the current dysfunction would inflict more hardship on the people. No lives were reportedly lost when the bridge collapsed, and Mshelia expressed joy at that fact but insisted that certain parts of the state had been suffering economic hardships for nearly 20 years as a result of dilapidated roads and other infrastructural deficits and neglect. He, however, called for calm and patience, stating that those infrastructural deficits would be strategically handled as there would be investment in infrastructure and people-oriented programmes once the people look beyond party names and vote right for those de-

termined to get the state working again. “My heart goes out to the people of Borno State, particularly the areas whose movement and economic activities are now affected as a result of the damage to the Biryel Long Bridge in Bayo Local Government due to the heavy down pour resulting in the flood yesterday which damaged the bridge. “We understand the hardship it is going to cost especially for those who have to traverse between those points to meet up their daily economic and social needs. That is why we are calling on the Federal Government of our able President Buhari and indeed the governor of the state, Kashim Shettima to rush to the scene and fix the link bridge without further delay so as to forestall further hardship to the people. “Personally, I am also calling for calm as things are silently being done under the President Buhari-led administration, this is my personal believe and conviction because things have improved a lot security-wise in the state and the president is silently achieving certain goals, all he needs is the right support, our support as a people not just voting him but insisting he and those he appoints do what is right to get us out of the doldrums,” he said.

Monday 27 August 2018

BUSINESS DAY

Monday 27 August 2018

BUSINESS DAY

Monday 27 August 2018

C002D5556

A5 NEWS

BUSINESS DAY

Egina FPSO sails to 200,000bpd oil field DIPO OLADEHINDE

L-R: Orinayo Ayodele, community manager, Impact Hub Lagos; Ndukuba Akachukwu, member, Smart City Group; Erute Joshua, member; Popoola Oluwadamilare James, member; Yemi Keri, CEO, Heckerbella; Yusuf Al-ameen, team leader, Smart City Group; Collins Onuegbu, founder/ executive vice chairman, Signal Alliance Limited, and Tosin Durotoye, director, Greenhouse Lab, during the presentation of cheque to the Smart City Group winner of 2018 BusinessDay CEO Apprentice in Lagos, at the weekend. Pic by Olawale Amoo.

Why Nigeria’s external debt flat in Q2 2018 MICHEAL ANI

igeria’s total debt portfolio as of June 30, 2018, stood at N22.38 trillion ($72.2bn), according to data obtained from the Debt Management Office (DMO). This stock composition comprises both external and domestic debt (FG+States+FCT) at $22.08 billion and N15.63 trillion ($51.12bn) as of Q2 2018. However, while the country’s total domestic debt stock saw a decline of 2.1 percent from N15.96 trillion in Q1 2018 to N15.63 trillion as of Q2, the external debt was flat at $22.08 billion all through the Q2. This is because, unlike in Q1 when it raised $2.5 billion to supplement the $3 billion it raised November last year, the Federal Government did not tap into the Eurobond market.

The FGN’s external debt obligations at end-June amounted to $22.08 billion, equivalent to 5.9 percent of 2017 GDP. This includes the external borrowings of the state governments, which are necessarily guaranteed by the FGN. In 2017, the DMO came up with a debt restructuring strategy aimed at increasing external debts from 23 percent to 40 percent, and cutting down on domestic debts from 77 to 60 percent so as to free up capital for the private sector. In line with this externalisation strategy, the N1.95 trillion deficit in the FGN’s 2018 budget is to be covered by external and domestic borrowings of N850 billion ($2.8bn) and N790 billion, respectively, as well as unspecified privatisation proceeds of N310 billion. The debt office said the Federal Government had so far borrowed a total of N410 billion locally to fi-

nance the N9.12 trillion 2018 budget, which was assented to on June 19 by President Muhammadu Buhari. According to the DMO director-general, Patience Oniha, there had been no foreign borrowing so far to support the 2018 budget. The debt office also said it had sent the request for a proposal to banks for an international bond offering that would see it raise as high as $2.8 billion Eurobond to finance the 2018 budget, but it was waiting for the legislative arm of government to give a nod for the new borrowing. The ratio of the domestic debt to external debt is inching towards the target of 60:40, and the target of 75:25 between long-term domestic debt and shortterm domestic debt. The ratio between domestic and external debt stood at 70:30 compared to 72:28 in December 2017.

OPS, scholars urge government to retool school curriculum to address growing unemployment HARRISON EDEH, Abuja

oncerned members of the Organised Private Sector (OPS) and scholars have expressed worries over the weak link between university education and the industry despite various government interventions, and have heightened calls for curriculum review for higher education students in Nigeria. The parties say the education sector’s curriculum, which has several pitfalls, makes it difficult to address the rising unemployment bedevilling the country.

Nigeria’s higher education sector still favours pre-colonial curriculum, which largely prepares candidates for civil service work, rather than handson skills that is the currency of the 21st Century. “I think there are visible deficiencies in the curriculum of our institutions vis -a-vis how they impact on the industrial sector,” said Frank Jacobs Udemba, president, Manufacturers Association of Nigeria (MAN) told BusinessDay. “We think that there is urgent need for synergy between the Academic and the industry. The Industrial Training Fund is

there but their impact is not that deep enough in addressing these concern,” he said. The MAN president suggested a deeper discussion that would ensure the industry and the academia work out a model that would ensure that the school curriculum addressed industry needs. “Our suggestion is that there ought to be some level of discussion between the industry and the academia, so that the academia would know the needs of the industry, and tailor their curriculum in line with those needs of the industry,” he said.

fter two months behind schedule, the $3.3 billion Floating Production Storage and Offloading (FPSO) vessel built by Samsung Heavy Industries of Korea (SHI), which has been docked at LADOL since January, began sailing to the Egina Deepwater Oilfield Sunday morning, August 26. Reputed as the first of its kind in Africa, the FPSO is headed to the Egina oil field; with a capacity to produce 200,000 barrels of crude oil per day (bpd). It is located about 130km off the country’s coast at estimated water depths of more than 1,500 m. Total Nigeria describes “the Egina oil field is one of our most ambitious ultra-deep offshore projects,” developed at the cost of $16 billion by the French oil major, Total. However, information from SweetcrudeReports alleged that Samsung Heavy Industries of Korea (SHI), the company responsible for the fabrication of the FPSO convinced with some corrupt Nigerians to ship jobs meant for Nigerians to South Koreans. According to SweetcrudeReports,’ the fabrication which Nigerians were made to believe would be done

in Nigeria, is actually being shipped into the country from South Korea, leaving just the copulation to be done here, thereby creating jobs for the South Koreans with Nigerian resources while impoverishing the Nigerian labour force. “We learnt that Samsung is still bent on collecting an extra $300m before finally releasing the vessel to Totalone of the reasons the trio had dragged one another to court for breach of contract,” it said. The FPSO, which arrived in Nigeria from South Korea in January have been undergoing a detailed engineering of its topside at LADOL by Samsung and a consortium of Nigerian engineering companies. The FPSO was billed to sail to the Egina field located in OML 130 in late July. But the Egina FPSO departure to the deep-water field was delayed by a controversy over a demand the Global Resources Free Zone Management Company (GRFZMC), a subsidiary of LADOL that Samsung Heavy Industries (SHI) of Korea pay a US$33 million in connection with its operations at the Ladol free trade zone in Lagos. Vice President Yemi Osinbanjo had to intervene to resolve the dispute. It is not clear if the fee was eventually waved.

Ahmadu-Kida Musa, deputy managing director for Deep Water at Total Exploration and Production Nigeria, disclosed at the 2018 edition of the Nigeria Oil and Gas Conference and Exhibition (NOG) that Egina will achieve 77 percent of local content by the time it gets to production stage. He also said, “In addition to the oil, the Egina field will produce gas. Associated gas will be partly re-injected into the reservoir to maintain reservoir pressure, and partly channelled to supply the domestic gas market.” Even though the FPSO has a daily production capacity of 200,000, initial production will be 100,000 barrels per day with peak production expected to be reached by 2020. Egina is expected to start full production in the fourth quarter of this year, though no specific date has been set. The country’s current production capacity ranges between 1.7 million barrels per day to 2.0 million barrels per day often disrupted by vandalism of oil assets and the resultant shut in of production. The disruption on oil flow from Nigeria’s fields has tended to make buyers wary in demanding for the country’s crude oil.

BUSINESS DAY

Monday 27 August 2018

BUSINESS DAY

Monday 27 August 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES The London Report: Mining stocks climb back

Erdogan’s conspiracy claims strike chord in Turkey

Page A10

Page A11

World Business Newspaper

McCain’s death sparks mourning across political divide

Death of war veteran and statesman robs Congress of its most powerful Trump critic Courtney Weaver

eaders from around the world on Sunday celebrated the life of John McCain, hailing the late senator’s legacy as a war hero and statesman who was willing to breach partisan barriers. Republicans and Democrats alike praised McCain as a political maverick who had forged relationships and friendships with his political opponents while still fighting for his ideals. His death leaves a divided and deeply partisan country, and removes one of the most influential Republican critics of President Donald Trump. McCain’s chairmanship of the Senate Armed Services Committee will now go to James Inhofe, a Republican from Oklahoma who is unlikely to challenge the president’s agenda, particularly on the contentious issue of Russia, in the same manner as his predecessor. His death tips the scales of power in Congress further in Mr Trump’s favour, as it coincides with the forthcoming retirement of fellow Republican critics senators Jeff Flake and Bob Corker, the chair of the Foreign Relations Committee. In a sign that McCain was a rare bipartisan figure in the US, former presidents George W Bush, Bill Clinton and Barack Obama offered ringing tributes to him following his death on Saturday. Israel’s Benjamin Netanyahu referred to him as a friend. “Few of us have been tested the way John once was, or required to show the kind of courage he did,” Mr Obama said. “But all of us can aspire to the courage to put the greater good above our own. At John’s best he showed us what that means.” Both he and Mr Bush, who competed against McCain in the 2000 Republican presidential primary,

are expected to speak at the senator’s funeral. That McCain would ask former rivals whom he fought in two bitter political contests to speak in his honour was emblematic of his capacity to see the bigger picture, said Jeff Flake, his former colleague and fellow Arizona senator. “He was quick to forgive — certainly put the good of the country above himself and the fact that his former opponents will be there speaking says all we need to know,” Mr Flake told CBS News in an interview. McCain will lie in the Arizona Capitol in honour of the state he represented in the Senate for more than three decades. He will then lie in the Capitol Rotunda in Washington. His funeral will be at the Washington National Cathedral and he will be buried in Annapolis, Maryland, where he graduated from the US Naval Academy. Chuck Schumer, the Senate Minority Leader, said he will put forward a bill renaming the senate’s main office building in McCain’s honour. One notable person who will not be at McCain’s funeral: President Donald Trump, who mocked the senator’s war record during the 2016 election, saying that McCain was “not a war hero”, because he had been captured — a reference to the five and a half years he spent as a prisoner of war in Vietnam. The president, who never apologised for the remark, tweeted a brief note of condolence on Saturday. McCain’s independent streak was never more on display than during the Trump presidency. During a crucial 2017 vote on the repeal of Obamacare, McCain broke with his Republican colleagues and sided with Democrats to derail the bill — a critical setback for Republicans and Mr Trumps’ White House.

US, Mexico near breakthrough on key trade issues A resolution could help clear the way for Nafta renegotiation James Politi

S and Mexican officials are close to ending a monthslong stalemate on thorny bilateral trade issues ranging from cars and agriculture to energy, which could pave the way for a broader agreement — including Canada — to renegotiate Nafta. As negotiators from both countries met at the office of the US trade representative a block from the White House on Saturday, US President Donald Trump said the country’s relationship with Mexico was “getting closer by the hour”. “Some really good people within both the new and old government, and all working closely together . . . a big trade agreement with Mexico could be happening soon!” Mr Trump wrote in a tweet.

US student debt balloons past $1.5tn

Politicians and policymakers fear rising burden is a long-term drag on US economy Robin Wigglesworth

he US student loan burden has swelled past $1.5tn despite actual lending volumes falling for more than half a decade, as struggling students fall behind on their payment plans and debt relief programmes fail to offer sufficient succour. The overall size of US student debt has grown by $500bn since the 2010-11 academic year, according to a report by S&P Global, but the credit rating agency notes that loan origination has declined every year since then. That has been caused by payment adjustment schemes that offer some short-term relief but add to the overall long-term burden by reducing the minimum payment without lowering the interest rate, according to John Anglim of S&P. “By reducing the payments, they allow borrowers to stay current, but the balance keeps growing. That’s what we’re seeing now,” he said. “If the government

Continues on page A10

a bar chart showing US student debt pile swells past $1.5tn mark The decline is largely thanks to the strong economy and robust jobs market. The unemployment rate for graduates with a bachelors degree or higher now stands at just 2.2 per cent in the US, compared with 5.1 per cent for those with less than a high-school degree and 4 per cent for high school graduates who spent no time in college. The size of the pool of bonds backed by student loans has also gradually declined, from $242.6bn a decade ago to $175.6bn at the end of the second quarter, according to data from the Securities Industry and Financial Markets Association. Nonetheless, student debt remains the worst-performing area of consumer credit. Brookings, the think-tank, warned in a January report that according to the default trends of past age cohorts, as many as 40 per cent of borrowers could default on their student loans by 2023.

Mnangagwa pledges ‘radical economic reforms’ at inauguration Zimbabwe president promises to publish report into post-poll crackdown Joseph Cotterill

A possible breakthrough on trade with Mexico would ease some of the fears about US protectionism even as the Trump administration escalates its trade dispute with China, with little sign of progress. But any deal between Mexico City and Washington would not be complete unless Canada — which has been carefully following the talks — joins a full agreement to revamp Nafta. “Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,” Chrystia Freeland, Canada’s foreign minister, told reporters on Friday. “And will be happy to do that,” she added. According to people close to

is serious and concerned about growing student debt, then we need to come up with a broader plan rather than one that just helps a select few.” Student debt has emerged in recent years as a big concern for American households, politicians and policymakers, who fret that the rising burden is a long-term drag on the US economy by stymieing the ability of people to buy a home or start a business. “A significant portion of the millennial generation has gone bankrupt before it could start building wealth, which is a — stillunaddressed — threat to the longterm health of the US economy,” Vincent Deluard, a strategist at INTL FCStone, said in a report. The US student loan delinquency rate — how many loan balances are overdue by 30 days or more that were not delinquent in the previous quarter — fell to a 12-year low of 8.8 per cent in the second quarter of 2018, according to New York Federal Reserve data.

mmerson Mnangagwa pledged “radical economic reforms” as he was sworn in as Zimbabwe’s president following the southern African nation’s bitterly contested elections. Mr Mnangagwa’s inauguration came days after the country’s highest court rejected an opposition challenge to his victory in the July 30 poll. The 75-year-old former security chief first took power after the military forced Robert Mugabe, the veteran leader, to resign in November. Many had hoped the elections would mark the beginning of a new era for Zimbabwe after years of international isolation and economic malaise. But the vote was marred by a postelection crackdown in which soldiers shot at least six people and opposition allegations of fraud. The violence has left Zimbabwe divided and has tarnished Mr Mnan-

gagwa’s bid to attract much-needed foreign investment. The military crackdown drew condemnation from international election observers whose verdicts could be critical towhetherwesterngovernmentsagreeto helpZimbabwecleardebtsandobtainan International Monetary Fund loan. In his inauguration speech, Mr Mnangagwa said that “what unites us is greater than what divides us” as he promised to make public the findings from an official inquiry into the army shootings. The inquiry is yet to be set up. Mr Mnangagwa said the country now needed “radical economic reforms to attract investment” and to settle its debts. Harare needs to clear about $2bn in debt arrears to multilateral institutions, most of which is owed to the World Bank, to be able to borrow new loans. Negotiations over financing to tackle the debt have been in limbo for years, with the government cash-strapped and grappling with a dire shortage of

US dollars. Mr Mnangagwa’s challenge will be to convince donors he is serious about genuine reforms after the disputed election. A joint mission of US election observers on Saturday said the vote was “seriously marred”. “Zimbabwe has not yet demonstrated that it has established a tolerant, democratic culture that enables the conduct of elections in which parties are treated equitably and citizens can cast their vote freely.” The opposition refuses to accept the election results. Zimbabwe’s constitutional court on Friday rejected a challenge to the presidential poll by the Movement for Democratic Change, the main opposition. The party claims that the ruling Zanu-PF party doctored votes to secure Mr Mnangagwa’s narrow victory over Nelson Chamisa, the MDC’s candidate, in the presidential poll. The court said the claims were unsubstantiated.

A10

BUSINESS DAY

C002D5556

NATIONAL NEWS

FT US, Mexico near breakthrough...

Zimbabwe court rejects opposition challenge to Mnanangagwa victory

Continued from page A9 the talks, US and Mexican negotiators have at least reached a consensus on the treatment of Mexican car exports to the US, which has long been a subject of tension between the countries. The deal would involve tariff-free access to the US market for cars produced in Mexico as long as 75 per cent of their components were made in North America — compared to 62.5 per cent now. The Trump administration had long insisted that level should be set at 85 per cent, in a bid to force production back to the US. A small tariff would apply to cars entering the US market from Mexico that do not meet those standards. In the bilateral negotiations — spearheaded by Robert Lighthizer, the US trade representative, and Ildefonso Guajardo, the Mexican economy minister — other main sticking points have been the treatment of farm products and access to Mexico’s energy market. The current Mexican government, led by president Enrique Pena Nieto, opened up the country’s energy sector with a series of reforms, although the incoming administration, led by Andrés Manuel López Obrador, has been sceptical, making a deal more difficult. However, Jesus Seade, an aide to Mr López Obrador, has joined the talks in Washington, and people close to the discussion insist the incoming and outgoing administrations are closely coordinating their positions. If Mexico and the US do strike a bilateral deal in the coming days, there would likely still be some major sticking points to resolve with Canada before a full pact to revamp Nafta, which was originally signed in 1994, could be clinched. The biggest obstacle remains the insistence by the US on a “sunset” clause that would see the trade deal expire after five years, forcing a new renegotiation. That provision is staunchly opposed by both Canada and Mexico, as well vast swaths of corporate America, because it make it hard for companies to make long-term investment plans. The fate of Nafta has been in doubt ever since Mr Trump won the presidency in 2016, after a campaign in which he attacked the agreement for shifting production to Mexico and shrinking employment in the US. Many economists, however, have warned that scrapping Nafta, which Mr Trump has threatened to do in the absence of a renegotiation, could deal a major blow to the US economy, as many companies are dependent on supply chains stretching across North America. If a deal is concluded between all three countries in the coming weeks, it would still have to be ratified by the countries’ respective legislatures, which could prove challenging. In the US, this would most likely happen with a new congress in 2019, after the midterm elections in November. People close to the talks said that if the Democrats reclaim the House of Representatives, the path to congressional approval of any new Nafta deal would be especially perilous.

Monday 27 August 2018

International observers from the EU and US expressed reservations over July 30 vote

Joseph Cotterill

Erdogan’s conspiracy claims strike chord in Turkey Framing US dispute as ‘economic coup’ plays on historical mistrust of outside powers Laura Pitel

he White House insists that a bitter dispute between Washington and Ankara will dissolve if Turkey releases a detained American pastor, but Omer Kilic is having none of it. From behind the counter of his pastry shop in Ankara, the 43-yearold says he believes deeper motives are at play in the Nato allies’ dispute. “America doesn’t want powerful states in this part of the world,” he said. “They don’t want Turkey to be strong.” Recep Tayyip Erdogan, Turkey’s tub-thumping president, has encouraged such conspiratorial views, suggesting that US president Donald Trump’s decision to impose sanctions on his country is an attempt to “bring Turkey and the Turkish people to their knees, to take us captive”. Yet they are not confined to his supporters. From the rightwing newspaper that has clamoured for the closure of a US air base to the leftist MP who this week claimed that the demands over Andrew Brunson, the detained pastor, were an excuse for “imperialist countries” to take over Turkey, anger and mistrust are rife across the political spectrum. It is easy for outsiders to laugh at such talk, but it has deep roots in Turkish history. Asli Aydintasbas, a columnist with the opposition newspaper Cumhuriyet, said suspicion of outside powers was ingrained in the Turkish national narrative.

“Suspicions run very, very deep about US motives, not just among the population but also among officials,” she said. “People keep asking me: surely this isn’t about Brunson, so what are they really trying to do? To explain that it’s not so simple — and that the US doesn’t run the world — is almost impossible because of the historical and cultural baggage that comes with being a citizen of Turkey.” Modern-day Turkey is a regional power with a population of 81m and the second-largest military in Nato. But every Turkish citizen is taught that their country almost never came to be. At the end of the first world war, European powers planned to carve up the defeated Ottoman Empire. It was only because of a war of independence, led by army officer Mustafa Kemal, that Turkey emerged in its current form. The mistrust of foreign powers is so deeply instilled in the national psyche that it even has its own name — Sèvres Syndrome, named after the treaty that planned the Ottoman dismantlement but was never enacted. Turkish suspicions fall on a rotating cast of countries. But analysts cite two key factors behind growing public mistrust of the US. The first is the decision by the Pentagon to arm and support Kurdish forces in the civil war in neighbouring Syria in order to fight Isis jihadis. US officials say the move was borne of Turkish reluctance to provide a viable alternative. But in Ankara, the move was seen as a betrayal.

The American proxies have intricate ties to the Kurdistan Workers’ party (PKK), which has waged a bloody insurgency on Turkish soil for more than 30 years and is widely seen by the public as an existential threat. “It used to be a conspiracy to argue that the PKK receives military support form the US,” said Omer Taspinar, a professor at the National War College in Washington. “Now . . . it is a fact that the US is in bed with a branch of the PKK in Syria.” The second source of Turkish anger is the violent coup attempt that convulsed the country in July 2016. There has long been a widespread belief in Turkey that the US had a hand in at least some of the four military coups between 1960 and 1997. The fact that Fethullah Gulen, the cleric accused of masterminding the 2016 putsch, lives in the mountains of Pennsylvania, has fuelled the view of American involvement in the failed attempt. Nicholas Danforth, a historian based at Washington’s Bipartisan Policy Center, a think-tank, said there was no evidence that the US government had actively supported any Turkish coups, but added that “it certainly went along” with those that were successful in the past. Many officials in Mr Erdogan’s ruling party are convinced that, had the president been overthrown in 2016, the US would have gone along with that, too. So are the wider public.

Ryanair to cut hand luggage allowance Non-priority customers will be allowed to travel with only one small bag for free Camilla Hodgson

ow cost airline Ryanair has cut its hand luggage policy for the second time in a year, restricting customers to a single small bag unless they pay €6 for priority boarding in a move it said would cut delays. From November, non-priority customers will be permitted to bring only “one free (small) carryon bag”, as opposed to the small bag and additional bigger bag of up to 10kg currently permitted for free, the airline said. The policy will apply to all bookings made from September 1. The airline said the move would

“cut check bag fees and reduce boarding delays,” and that the volume of free second non-checked bags “has been causing flight delays”. Last year the airline said it planned to crack down on carryon wheelie bags because the number being taken per flight was stalling take-offs while passengers tried to cram their luggage into overhead lockers. From November 2017, passengers that had not paid for priority boarding were restricted to a single piece of hand luggage. Ryanair has also suffered a series of problems this summer, with hundreds of flight cancella-

tions prompted by cabin crew and pilot strikes and the company now facing large passenger compensation bills. On Thursday, the airline said a new, cheaper fee for checked bags would also be introduced, of £8 per 10kg bag, compared to the current £25 per 20kg bag option. Priority boarding customers, which currently account for 30 per cent of passengers, will continue to be allowed a second free bag of up to 10kg. Ryanair said it expected around 40 per cent of its customers to be affected by the change, since 30 per cent currently travel with only one free small bag.

imbabwe’s constitutional court has rejected an opposition challenge to the presidential poll result and endorsed Emmerson Mnangagwa as victor. The Movement for Democratic Change of Nelson Chamisa, Mr Mnangagwa’s main challenger, failed to substantiate claims that last month’s vote was rigged to favour the ruling Zanu-PF, the court said on Friday. The appeal was a last-ditch effort by the MDC, whose activists were subjected to a crackdown by security forces even before the result was announced on August 2, to rerun the election. But the crackdown has tarnished Mr Mnangagwa’s own bid to use the election to bolster his international legitimacy. He was installed as president following an army coup that overthrew Robert Mugabe after nearly four decades in power last year. Mr Mnanangagwa will be inaugurated within days of the ruling. Zimbabwe’s election commission “strongly debunked” allegations that a 50.5 per cent result for Mr Mnangagwa was inflated with “ghost” votes, the court said in its ruling. The court added that the MDC failed to supply primary evidence from ballot boxes — and opposition claims that it could not do so because of post-vote tampering by the authorities were “bold and unsubstantiated”. Analysts say that Zanu-PF exerts a tight grip on the judiciary and Zimbabwe was unlikely to follow the example set by Kenya’s supreme court last year when it ordered a presidential contest to be rerun over irregularities. “As a party we accept the rule of law and the verdict of the courts,” the MDC said in a statement. “The sombre mood in the country following the court’s verdict is itself a telling statement.” Billions of dollars in international investment, including IMF loans, are riding on the election result being seen as credible. But international observers from the EU and US expressed reservations over the July 30 vote. Although peaceful on the day, the poll was preceded by intimidation and state domination of the media, and was followed by a delay in announcing results. Opposition protests were quelled by army troops using live ammunition, which left six dead, and drew international condemnation. There have been reports that the government is split over the army crackdown. Mr Mnangagwa announced an independent inquiry into the military response but it has yet to be set up. Military officers involved in last year’s coup now occupy senior positions in Mr Mnangagwa’s cabinet, such as Constantino Chiwenga, the vice-president. Civil-society activists who collated reports of beatings and post-election intimidation said Mr Chiwenga appears to control Mr Mnangagwa’s own presidential guard.

Monday 27 August 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES

A11

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

The London Report: Mining stocks climb back Wider sell-off in metals stocks draws bargain hunters while housebuilders rally falters year results from Persimmon, Michael Hunter the biggest UK housebuilder, he sectors that moved the eased concern at the impact of FTSE 100 this week made rising UK interest rates on the an about-turn on Friday sector. But the mood changed with housebuilders looking ex- on Friday. The resource sector reboundposed after a wider rally while resources bounced back from ed, coming back into demand after a wider run lower. The sellheavy selling. Residential developers domi- ing, sparked by worries about nated the list of biggest fallers. the outlook for global growth Berkeley Group led the sector and falling metals demand, lower, down 1.8 per cent, with looked to have gone too far. Antofagasta, the Chilean Barratt Developments down 0.8 per cent and Persimmon weaker copper miner, was among the biggest gainers on the FTSE, up by 1.4 per cent. The selling came after data 3.6 per cent. On the list of the showed a decline in the the top 10 risers, five were miners number of mortgages approved by mid-session. Following this trend was BHP Billiton, up 2.2 in July, at just under 40,000. Earlier in the week, half- per cent.

Digital therapeutics show potential for healthcare disruption Big pharma faces choice of whether or not to embrace revolutionary tech start-ups Sarah Neville

t the world’s biggest annual cancer conference earlier this summer, pharmaceutical companies lined up as usual to trumpet their breakthroughs to a receptive audience of medics and investors. But one of the companies showcasing its clinical trial results at the American Society of Clinical Oncology meeting in Chicago had a different story to tell: of algorithms rather than antibodies. MoovCare, developed by Israeli company Sivan Innovation, describes itself as “a web-based patient-reported follow-up solution”, and it is part of a new generation of digital medicines that rely on software as a key component in managing or curing a disease. Distinct from the kind of wellness apps that help people maintain a healthy lifestyle, “digiceuticals”, as these digital therapeutics are sometimes dubbed, are generally validated through clinical trials, like conventional medicines, and are increasingly catching the attention of cost-conscious health systems looking to cope with a rising number of patients. But as these digiceuticals increase in number, should pharma be worried — or, on the contrary, look to partner with this new breed of digital innovator? Digital health overall is an increasingly hot area for investment. In the first half of this year, close to 200 digital health deals closed in the US for a total of $3.4bn invested. Rock Health, which collated the data, said that if funding continued at this pace, “2018 will surpass 2017 for both dollars raised and number of investments”. “[Digital therapeutics] can be something that adds significant value to patients, and assuming we find that [holds true] in the real

world it could open up a new area,” said Vas Narasimhan, chief executive of Novartis. In the case of MoovCare, patients suffering from lung cancer who agree to the programme enter information each week — such as their weight as well as more subjective measures of wellbeing including pain, energy levels and appetite. Algorithms measure the significance of the findings, and the aim is to allow far earlier detection of recurrences. Its latest trial showed that patients with advanced lung cancer, a group that generally has a poor prognosis, saw a gain of 7.6 monthsin overall survival, when followed up after two years of using the system. One of the few large pharma companies to have bet on the potential of digital therapeutics is Novartis. It has entered into a partnership with Pear Therapeutics, which broke new ground in 2015 when its software-only treatment for substance abuse, called reSET, designed to help addicts modify their behaviour, was approved by the US Food and Drug Administration. In January, Pear closed a $50m Series B financing. Mr Narasimhan said what distinguished Pear’s work from other kinds of digital therapy, such as devices supporting patients to manage their diabetes, was that “they’ve actually done clinical trials to demonstrate that the reSET methodology was able to add additional benefits for patients beyond the drug alone”. Novartis is preparing to launch the reSET app in the US over the next six months and Mr Narasimhan said it was “working with Pear to develop additional digital therapeutics that would support our mid-stage [drugs] pipeline in a range of different neurological conditions” such as multiple sclerosis and schizophrenia.

Ireland’s central bank deputy joins race for top ECB bank regulation job Arthur Beesley

ublin has joined the race to secure the top bank regulation job in the eurozone, declaring the candidacy of Ireland’s deputy central bank governor Sharon Donnery to become chair of the ECB’s single supervisory mechanism. Paschal Donohoe, finance minister, said he has been notified that Ms Donnery has applied to succeed Danièle Nouy at the helm of the SSM, a watchdog set up in

2014 to oversee eurozone banks. “Ms Donnery is an exceptional candidate and minister Donohoe is pleased to have a person of her stature going forward for the role,” said the finance ministry in a statement. There was no comment from Ireland’s central bank on Ms Donnery’s application for a post that was advertised in July. The nomination of Ms Donnery, seen in some quarters as the favourite for the post, is said to have support in Berlin, Paris, The Hague and Vienna. Other potential

candidates include Elisa Ferreira of Portugal. Ireland has long had designs on a top seat in the ECB. In January Mr Donohoe backed the unsuccessful nomination of Philip Lane, central bank governor, for the post of ECB vice-president, which went to Luis de Guindos of Spain. A successful application by Ms Donnery for the SSM could end up blocking Mr Lane, her current boss, in the race to fill a looming vacancy for the post of ECB chief economist.

S&P 500 hits record and dollar falls after Powell speech Fed chief strikes dovish note at Jackson Hole Edward White, Dave Shellock and Michael Hunter

S stocks are rallying — with the S&P 500 hitting an intraday record peak — while the dollar is in retreat as participants digest a keynote speech by Federal Reserve chairman Jay Powell at the annual Jackson Hole gathering of central bankers. Mr Powell said the central bank was not seeing risks of the US economy overheating or of signs that inflation was accelerating above its target, as he defended the Fed’s gradual approach to lifting interest rates. “Mr Powell was probably a lot more dovish on inflation than the market had really expected, saying there is ‘no clear sign of an acceleration above 2 per cent, and there does not seem to be an elevated risk of overheating’,” said Neil Wilson at Markets.com. “It doesn’t mean that the Fed won’t hike twice more this year, but it does suggest that the Fed is taking a very symmetric view to inflation and will not seek to push monetary policy into restrictive territory. The implication is that the Fed won’t be seeking to preemptively hike rates and the outlook for 2019 hikes now becomes more complicated.” On Wall Street, the S&P 500 hit 2,873.77, surpassing Tuesday’s record intraday high, before easing back to 2,871, up 0.5 per cent on the day.

The dollar index extended an early fall to trade 0.5 per cent lower as the euro advanced 0.8 per cent to $1.1630. The dollar reversed course against the yen to stand 0.1 per cent lower at ¥111.17. The weaker dollar helped gold regain the $1,200 mark. The yield on the 10-year US Treasury was flat at 2.82 per cent, after standing about 3bp higher before Mr Powell’s speech. The two-year yield was up 1bp at 2.62 per cent, with the 2/10 yield gap below 20bp at a fresh decade-low. Earlier in the day, global markets paid only scant heed to news that trade talks between the US and China had ended in deadlock. The renminbi is weaker after a move to inject liquidity into China’s banking system followed action to boost credit flows in China’s economy. European bourses are higher, with the region-wide Stoxx 600 up 0.1 per cent, London’s FTSE 100 up 0.3 per cent and Frankfurt’s Xetra Dax up 0.2 per cent. The CSI 300 index of major Shanghai and Shenzhen went on a winding run before closing up 0.2 per cent, having been down by as much as 0.9 per cent from the previous session’s close. Hong Kong’s Hang Seng ended down 0.4 per cent. ING China economist Iris Pang said the “real concern” was how China might respond to Washington’s proposed next round of tariffs on a further $200bn of

Chinese imports. “China has repeatedly stated that it can retaliate qualitatively,” Ms Pang said. “[That] could include placing administrative measures on US companies operating in China or following the US lead and leveraging ‘national security’ to prevent some American companies operating in the country.” The PBoC injected Rmb149bn ($21.6bn) into the banking system through loans to commercial banks on Friday, signalling the government’s latest move to encourage stronger credit flows to companies and local governments. Hong Kong’s de facto central bank has been forced to support the local currency after it slipped to HK$7.85 against the dollar. The Hong Kong Monetary Authority sold $255m and bought HK$1.76bn to prop up the weak local currency. Forex The Australian dollar was up 1.3 per cent at US$0.7334, as the political drama in the country calmed with Scott Morrison replacing Malcolm Turnbull as Liberal party leader and new prime minister. The currency had tumbled 1.4 per cent on Thursday. The pound was 0.4 per cent higher against the dollar at $1.2868. Commodities Brent crude was up 2 per cent at $76.24 a barrel while gold was 1.9 per cent higher at $1,206 an ounce.

A12

BUSINESS DAY

Monday 27 August 2018

Live @ The Exchanges Insurance stocks top Lagos Bourse laggards list …as investors lose over N600bn year-to-date Stories by Iheanyi Nwachukwu

t the Lagos Bourse, investors who took positions in some insurance companies, particularly the penny stocks have seen the value of their shares deplete remarkably this year, recording value loss in excess of 40percent year-to-date (ytd). The price list of stocks listed on the Nigerian Stock Exchange (NSE) shows Cornerstone Insurance Plc closed at 23kobo as at Friday August 24, 2018, representing 54percent decline this year; Sovereign Trust Insurance Plc at 25kobo per share has lost 50percent of its value; while Sunu Assurances Nigeria Plc at 20kobo per share has lost 60percent of its value this year. These and other insurance stocks became worseoff after the Nigerian Stock Exchange (NSE) on January 28, 2018 implemented the rules on par value and share price methodology. Analysts had expected the policy to result in sharp depreciation of up to 37 listed securities which has not trade above 50kobo for a long time, especially insurance companies. Insurance subsector had warehoused many 50kobo stocks when the price floor for listed companies was 50kobo, but with the implementation of the Par Value Rule in January the price floor became one kobo.

Since the new pricing methodology and per value, the price of every share listed on the Exchange is now determined by the market, except that no share trades below a price floor of one kobo. Regency Alliance Plc at 22kobo has lost 56percent of its share price at the beginning of this year; Royal Exchange Insurance Plc at 22kobo is down by 50percent; Union Dicon Salt Plc at 26kobo has declined this year by 48percent; Veritas Kapital Assurance Plc (28kobo) has declined by 44percent; while Lafarge Africa Plc at N26.25 is down this year by 41.5percent. Other stocks that recorded over 40 percent price decline this year include Forte Oil Plc which closed at N23, after losing 47.1 percent of its year-on price; Japaul Oil Plc has also lost 48percent

of its year-open share as it closed last Friday at 26kobo; Tantalizers Plc at 21kobo has lost 58percent of its value this year; while Thomas Wyatt Nigeria Plc at 26kobo per share has lost 48percent of its yearopen price. Also, Consolidated Hallmark Insurance Plc at 29kobo has lost 42percent of its share price this year; International Breweries Plc at N32 has lost 41.3percent of its year-open value; Mutual Benefits Assurance Plc at 29kobo has lost 42percent of its value this year; The value of listed Nigerian stocks at N12.933trillion and the All Share Index (ASI) at 35,426.17 points as at the close of trading last week implies a negative return of 7.37percent for Custom Street stock traders. The value of listed Nigerian equities had opened the year 2018 at

N13.609trillion. Stock investors who held their equities till date have lost about N676billion. “The Nigerian equities market pared its gains from early 2018, reeling from profit-taking and interest rate hikes in the US. Recent developments in the political space bespeak uncertainty and this has cast a shadow on the overall mood in the equities market,” according to Omonegho Imoagene-led team of research analysts at Lagos-based CardinalStone. Currently, some other analysts maintain their bearish case scenario for the Nigerian Bourse, on the assumption that uncertainties surrounding the build-up to the 2019 election and dynamics in the global space may be overwhelming.

Equity transactions drop by 41% in June …as foreigners pull N420bn off market

he total transactions at the Nigerian Stock Exchange (NSE) declined by 41percent in June 2018, from N318.27 billion recorded in May 2018 to N187.78billion. Though, the cumulative transactions from January to June (H1) increased by 70.78percent, from N935.26 billion recorded in 2017 to N1.597 trillion in 2018. Foreign investors who brought in N380.65billion, succeeded in pulling out N419.06billion out of stock market in the half-year period ended

June 30. In H1’2018, stocks transactions by foreign investors were value at N799.70billion (50.07percent) while the transactions by domestic investors were valued at N797.47billion (49.93percent). According to NSE data on domestic and foreign portfolio participation in equity trading for June 2018, foreign investors continued to outperform domestic investors on the Nigerian Bourse by 9.07percent recorded in June 2018. Month-on-month (mo-m) the total domestic transactions reduced by 31.87percent from

N125.32 billion in May to N85.37 billion in June 2018. Foreign transactions also reduced by 46.92percent from N192.95 billion to N102.41 billion within the same period. There was a 22.71percent decrease in foreign inflows from N62.06 billion in May 2018 to N47.96 billion in June 2018. However, there was also a significant reduction in foreign outflows which reduced by 58.40percent from N130.89 billion to N54.45billion within the same period. On a monthly basis, the Nigerian Stock Exchange polls trading figures from major custodians and

market operators on their Foreign Portfolio Investment (FPI) flows. Highlights of the domestic composition of transactions on the Exchange between January and June 2018 show the institutional composition of the domestic market reduced by 38.88percent, from N92.03 billion in May to N56.24 billion in June 2018. The retail composition also decreased by 12.52percent from N33.29billion to N29.12 billion within the same period. This indicates a significantly lower participation by retail investors over their Institutional counterparts.

Breakfast meeting: Corporate Treasurers partners SWIFT

he Association of Corporate Treasurers of Nigeria (ACTN), in collaboration with the Society for Worldwide Interbank Telecommunication (SWIFT), will next week hold its Breakfast Meeting. The breakfast meeting holds on Thursday September 6 at the Wheatbaker, Lagos. The Association of Corporate Treasurers of Nigeria is a professional Association of Corporate Treasurers of the buy side (Oil and Gas sector, Telecommunications, Trading and Manufacturing, Service, Food and Beverages, Hospitality etc.) of the Nigerian financial markets. The membership of the association cuts across Financial Directors, CFOs, Corporate Treasurers, Financial Controllers or Treasury/Finance Manager Financial controllers, Risk Managers and Chief Accountants of various organizations who form the key players in the Nigerian financial markets and are affected by the quality of monetary policies of the Central Bank of Nigeria. Increasingly, the treasury function is playing a crucial and strategic role in today’s corporations.

Not only does treasury support the day-to-day financial objectives of a company (cash management, banking, investment, among other), but it also provides crucial information helping business leaders make riskinformed strategic decisions. “Treasury departments are usually regarded as high-risk environments due to the large amount of funds they manage, and for their involvement in controlling bank accounts, the window through which funds leave and reach the company. Having the right controls in place for managing risks, protecting oneself from cyber-criminals, and creating a solid treasury operation is of key importance. Simultaneously, the availability of big data is providing value-added insights to treasurers. From payment processing, to managing balances, transaction costs, usage of cash across subsidiaries and FX exposures – data and business intelligence can help treasury make better informed strategic decisions”, said Patrick Ajunwoko, Executive Secretary/CEO, Association of Corporate Treasurers of Nigeria.

BUSINESS DAY

C002D5556

NEWS YOU CAN TRUST I MONDAY 27 AUGUST 2018

fivethings

Insight Buhari is the Donald Trump of Nigerian politics GLOBAL PERSPECTIVES

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

t first sight, President Donald Trump and President Muhammadu Buhari couldn’t be more different in their wealth, lifestyle and taste. Yet the similarities between them are significant in terms of personality, politics and rhetoric. And it is these similarities that make them enigmatic; unpopular yet unperturbed and winning! Both leaders’ seeming originality and unconventional, norm-shattering personality have successfully, if deceptively, cast themselves in the minds of their core supporters as anti-politician, anti-establishment and, therefore, pro-people. When you have populist and demagogic politicians like Buhari and Trump, you should not underestimate the strength of their appeal among those who are beguiled by their populism or demagoguery. Donald Trump once said that his base would still vote for him “even if I shot someone on 5th Avenue”. And, let’s face it, that is also the attitude of Buhari’s supporters. Both leaders are interested in appealing only to their support bases, whose loyalties are unwavering and immovable. Their behaviours defy conventions and norms, and are idiosyncratic, arrogant and unresponsive. Which brings us to the similarities between them. Well, let’s start with their style of governance, shall we? One of the criticisms of President Trump is that he is not in charge of his government. In his damning book, Fire and Fury, Michael Wolff said that President Trump is only marginally involved in the business of governing the country. Omorosa Manigault Newman, the sacked senior Trump aide, said the same thing in her equally damning book, Unhinged: An Insider’s account of the Trump White House. In a recent interview with the London Times, she said “There are several people who are calling the shots in the White House. But not Donald Trump”. That, of course, will resonate with observers of Buhari’s shambolic administration. I mean, here is a government whose security agencies are at daggers drawn and the president can’t rein them in, a government in which the Inspector General of Police defied the president’s order and remained in office. What about the Cabals that allegedly call the shots in Aso Rock? When a president has to say publicly that he is in charge, as Buhari once said – “Daura is not in charge, I am” – then you know he is not! Another similarity is regard-

ing the intellectual curiosity and depth of both leaders. In the Times interview, Omorosa said that Trump “is not someone who reads”,adding that “even if he tries to read, he is not the one who is able to comprehend complicated policy issues”. Haven’t you heard that said of President Buhari? A Buhari ally, Junaid Mohammed, once told Vanguard that “Buhari doesn’t read”.He said he gave him a book on economics and two years’ later Buhari hadn’t read two pages of it! Of course, a leader who doesn’t read can’t be an intelligent customer to experts, which’s why Buhari dislikes experts, once disdainfully referring to economists as “the so-called experts”. The president said recently that he hadn’t signed the African Continental Free Trade Area (AfCFTA) agreement because “I am a very slow reader”. Whether he said this in jest or in earnest, he trivialises the art of governance with such display of lack of intellectual acuity. Of course, the absence of intellectual depth also manifests in lack of articulacy and thoughtfulness. Like Trump, Buhari is unfiltered, he shoots straight from the hip. But well-informed leaders are circumspect; they carefully consider every statement, indeed every word, they utter. But not Buhari. His penchant for faux pas is legendary. For example, in an interview after he returned from his London trip recently, he said: “Most Nigerians expect me to jail more of the thieves that brought economic problems to this country, and I will do it”.Really? Is it the president that jails or the court? Was he talking as a military leader or a civilian president, subject to the dictates of the rule of law and

due process? Does he tell judges who to jail? But Buhari was addressing his base, those who see him, as his social media aide, Lauretta Onochie, recently said in a tweet, as “the nightmare of the corrupt”. Take another similarity between Trump and Buhari: their sensitivity to criticism. Trump describes any criticism, however factual, as “fake news”. Yet, the Washington Post reckons that President Trump has, as of 31 May, made 3,251 false or misleading statements, while the New York Times has started to detail “factual errors and exaggerations” uttered by Trump. The Buhari government views media

critics as “wailers”, and indulges in exaggeration, dissembling, concealment, distortion, even outright lies. As BusinessDay recently catalogued in a brilliant editorial entitled “When a government adopts falsehood as policy”,the Buhari administration frequently attacks and discredits international organisations, such as Transparency International, the Brookings Institution and the United Nations, whose unfa-

‘

When you have populist and demagogic politicians like Buhari and Trump, you should not underestimate the strength of their appeal among those who are beguiled by their populism or demagoguery

vourable, albeit evidence-based, reports it doesn’t like. This shows that Buhari, like Trump, is more interested in image laundering than in running a transparent and honest government. Okay, enough of the rhetoric and style of government, what about the substance? What do Buhari and Trump have in common? Well, for a start, we know that both are illiberal, anti-free trade populists, who shun in-

ternational trade agreements. Buhari refuses to sign AfCFTA; Trump is tearing up NAFTA! Both are protectionist; for them export is good, but import is bad. Trump blasted politicians who pursued globalisation; Buhari described those importing goods that compete with domestic ones as unpatriotic. What about their approach to fighting corruption. Trump campaigned on a promise to “drain the swamp” in Washington, but, as The Economist put it recently, Trump “presides over a staggeringly fetid administration”. His former campaign chairman, Paul Manafort,was recently convicted of corruption charges and

his one-time personal lawyer, Michael Cohen, indicted the president in a plea bargain. Allegations of unethical behaviour have been made against some members of his cabinet. Yet President Trump, who prioritises loyalty over anything else, often defends law-flouting but loyal aides, as he did Manafort. Similarly, despite Buhari’s anti-graft rhetoric, corruption allegations have swirled around his government. Yet when the president talks about jailing thieves, it is thieves in the opposition, not those in his party, that he has in mind. In a recent article in the Financial Times, a former President of Brazil, Fernando Cardoso, defending the imprisonment of former President Lula da Silva on corruption charges, said: “In Brazil there are politicians from every party in prison”. Is that the case in Nigeria? The Economic and Financial Crime Commission (EFFC)said in May that there had been 603 corruption convictions since Buhari came to power in 2015. Fine, but how many of them are from, or associated with, the president’s party, All Progressives Congress (APC)? Why is it that opposition politicians, such as Godswill Akpabio and Orji Kalu, accused and harassed by EFCC, and ridiculed by APC, for allegedly being corrupt, suddenly become the president’s allies once they joined the APC? It’s morally nauseating. Recently, Professor Itse Sagay, President Buhari’s anti-graft adviser, said that the Finance Minister Kemi Adeosun, who allegedly forged a certificate to cover up her avoidance of the mandatory national youth service, could not be sacked because “she’s doing a brilliant job” adding: “We can’t afford to lose Adeosun”. Really? So, if you are “brilliant” you can forge certificates and still serve in government. The professor has an elastic view of corruption; he is an apostle of moral relativism, adjusting principles and values to suit his party’s and government’s interests! But, despite all the above, Trump and Buhari can win reelection because they are extremely popular among their support bases. For Trump, these are the white working-class men, who hate globalisation, immigration and diversity, as well as the evangelicals, who like Trump’s pro-Israel and anti-abortion stances. For Buhari, they are the Fulani and those who believe he is fighting corruption. Trump is pandering to his core base, just as Buhari is pandering to his. For instance, the reason President Buhari has never publicly condemned the atrocities of the Fulani herdsmen, who kill farmers with impunity, is because he doesn’t want to alienate his Fulani base. And to appeal to the sentiments of those who believe he is the scourge of the corrupt political elite, he is increasing the decibels of his anti-corruption rhetoric, with words like “I will jail more thieves”! Note: the rest of this article continues in the online edition of Business Day @ https://businessdayonline. com/

for your new week

Fascinating business facts

here is celebration around financial circles in Europe after Greece exited the European and IMF championed economic bail out last week but it is not out of the woods. The cost of the years of economic contraction on the people appears quite heavy. Of every 100 deaths recorded in Greece, there are only 52 births according to official statistics. The next crisis in Greece appears just around the corner.

$40trn

hina has removed the limitation on the holding of foreign parties in its banking and asset management sector thereby paving the way of foreign groups into the $40trn business.

$900m

outh Africa’s competition watchdog has approved Glencore’s roughly $900m bid for Chevron’s local and Botswana assets, bolstering its chances of scuppering a rival bid from China’s Sinopec. Chevron agreed last year to sell its stake to state-owned Sinopec before miner and commodities trader Glencore swooped in after reaching a deal with minority shareholders, who backed it and exercised preemptive rights on the sale.

890,000 barrels

hipments of West African crude to Asia are set to reach a record high in August, driven by a surge in demand from Indian refiners, who will take more oil from the region than at any time since mid-2015. According to a Reuters survey of shipping fixtures and traders, some 890kbbl/day of West African crude will sail to India, compared with 600kbbl/day in July and almost double last August’s 460kbbl/day.

$3.7bn

hina’s state owned oil firm, CNOOC Ltd has reported that its profits climbed 57% year-onyear in the first half of 2018, boosted by higher crude prices and robust gas sales. Net profit at the listed arm of state-owned CNOOC hit $3.71bn in the first half, its best half-year performance since the first six months of 2015, filings to the Hong Kong exchange showed. Are the folks at NNPC listening?

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