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news you can trust I ** monDAY 27 january 2020 I vol. 19, no 485

MARKETS

Regulatory headwinds cast a pall on banks’ future dividends BALA AUGIE

n the last eight years, Nigeria’s five largest banks have paid a total of N1.25 trillion in dividends to their owners, but the recent stringent rules by the Central Bank of Nigeria (CBN) has cast a pall on future dividend pay-out. “It will reduce their pay-out ratio as the recent crash in yields on fixed income investment will undermine the top line or trading income,” said Wale Olusi, head of research at United CapiContinues on page 46

₦2,973,687.39

N300

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$-N 357.00 361.00 £-N 470.00 477.00 €-N 392.00 400.00

-1.20

Crude Oil $ 60.55

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Spot ($/N)

I&E FX Window CBN Official Rate

362.75 306.95

Currency Futures

NGUS mar 25 2020 364.46

($/N)

fgn bonds

Treasury bills

3M 0.04 3.55

0.00 3.55

0.20

10 Y -0.01

30 Y 0.01

10.13

11.02

12.49

NGUS jun 24 2020 365.37

NGUS jan 27 2021 367.48

Nigerian workers are biggest losers in FG’s plan to raid pension funds for N2trn PFAs may be forced to buy bonds at 6-9% LOLADE AKINMURELE

Inside

Border closure bites hard as exporters can’t get vessels to ECOWAS P. 2 Oba Adeyeye Ogunwusi (m), Ooni of Ife; Fahad al-Taffaq (3rd l), UAE ambassador to Nigeria; Sunday Dare (3rd r), minister for youth and sports development; Sijibomi Ogundele (2nd r), MD/CEO, Sujimoto Group; Funke Funke Adesiyan (r); Eyitope Kola Oyeneyin (l), and Habeeb Okunola (2nd l), MD of TILT Group of Companies Limited, at the Royal African Young Leadership Forum.

igerian pensioners will be lending to the government at an interest rate well below inflation rate if the Federal government does dip its hands into pension funds. At the end of the National Economic Council (NEC) meeting last week, the council disclosed that the Federal Government had resolved to borrow N2 trillion from the current N10 trillion pension funds to finance the development of infrastructure. It’s not exactly clear how it will work, seeing that over 70 percent of the N10 trillion of pensioners money under the management of Pension Fund Administrators (PFA) are already Continues on page 46

Monday 27 January 2020

BUSINESS DAY

news Border closure bites hard as exporters can’t get vessels to ECOWAS

Halima Aliko Dangote (2nd l), executive director, Aliko Dangote Foundation, presenting the grant to one of the beneficiaries; Aliko Dangote (2nd r), chairman/founder, Aliko Dangote Foundation; Aminu Bello Masari (r), Katsina State governor, at the flag-off ceremony of N10 billion Dangote Micro Grant Scheme for 34,000 women in Katsina, while others look on.

...as manufacturers halt exports to West Africa ODINAKA ANUDU

Customs, police, army using fake document to extort farmers – Federal agency implies ... Following BusinessDay investigation, NAQS probe says “criminal elements” behind border extortions ... Customs pledges investigation of extortion by officers, asks NAQS to prosecute those behind alleged forgery CALEB OJEWALE

ome officers of the Nigeria Customs Service (NCS), Nigeria Police, and the Nigerian Army have been at the centre of extortion suffered by some local farmers to an estimated N1.33 billion, facilitated through what has now been established to be a fake document by the agency whose identity has been used to scam helpless farmers for up to five months. “The supposed receipt used as a cover for the extortion has nothing to do with NAQS,” read a statement sent to BusinessDay by Chigozie Nwodo, head, media, communication and strategies unit, Nigeria Agricultural Quarantine Service. This was part of findings in a probe said to have been launched by the agency, fol-

lowing a two-part investigation published by BusinessDay this month, on the extortion of local farmers after the border closure in August 2019. Vincent Isegbe, directorgeneral of NAQS “flew into Lagos on the next available flight,” according to the statement, “for an-on-the spot assessment of the situation at Imeko, Iwoye-Ketu, Ilara, Idofa and other rural communities in Imeko-Afon Local Government Area of Ogun State where the predators are said to (sic) based.” According to NAQS, an unscheduled visit in the course of its investigations indicated “some criminal elements were at work”. It also said its team found no evidence on the ground on the alleged involvement of any NAQS officer in the extortion. “Rather, the delegation discovered that a loose group

of miscreants had created a means to make farmers run the gauntlet and pay illegal tolls,” states NAQS. The findings of this probe by the agency, however, threw up more questions than answers. This reporter had sighted the NAQS document used to extort farmers, and the said document was requested before vehicles conveying agricultural produce could pass through checkpoints manned by Customs, Police, Army, Immigration, and even NAQS officers. While NAQS says in its statement that “a loose group of miscreants had created a means to make farmers run the gauntlet and pay illegal tolls,” this reporter saw Customs officers, Police officers, Soldiers, Immigration officers, and NAQS personnel, at the checkpoints, and not ‘random miscreants’.

For those conveying tomatoes with a bus, N25,000 was paid to get this ordinary looking document, while N50,000 was paid to convey pineapples. In one community called Ilara, the collection on behalf of security agencies was coordinated by a man called ‘Baba Akere,’ who sources say was a notorious smuggler. In another, the investigation identified the traditional ruler as coordinating the extortion. After the document is sighted at checkpoints by security agencies, bribes of up to N2,000 were still requested, details of which were published in the BusinessDay investigation. The ordinary-looking document was a pass of sort, printed as though it originated from NAQS and was part of a

Continues on page 46

Here’s how you benefit if Nigeria replicates telecoms success story on subsidy regime MICHAEL ANI

igeria may have forgotten so soon the huge success story recorded in the telecommunications industry following the deregulation of the sector. Little wonder it holds on to an age-long subsidy regime that continues to stress the finances of the government. Prior to 2001 when Nigeria’s telecoms sector was deregulated, the country had about 700,000 lines, which could not meet the growing demand for telecoms services by Nigerians. Access to information technology was also limited as a result of failed operations by the Nigerian Telecommunications Limited (NITEL). The liberalisation of the sector, which happened under

former Nigerian president and military head of states, Olusegun Obasanjo, ushered in the first Global System for Mobile Communication (GSM) operator and the award of the first Digital Mobile Licence (DML) in 2001. Since then, the sector has witnessed an unprecedented surge in investments (with over $70bn by end of 2017 in investments from 2001 till date) and growth, according to Nigerian Communications Commission (NCC). The entry of new operators has also deepened the competition in the sector with the teeming subscriber base being better for it. Initiatives like number portability have also enriched consumer experience by limiting hassles to accessing better services on a preferred network.

But it appears that the gains recorded from the privatisation of the telecoms sector have been erased completely as Africa’s largest economy has failed to replicate such successes across key sectors of the economy. On the other side of the coin are the oil and the power sector eating deep into the nation’s lean finances, as the government continues to cap the prices of petrol and electricity over fears of losing popular support from the masses. A lack of reforms in both the country’s oil and power sectors has culminated into deterring private investments and drying up liquidity in both sectors. “The case of the telecoms sector is a clear indication that the government has no business in doing business

if efficiency and productivity are what a country strive for,” one renowned economist and investment banker told BusinessDay. The mind-set in the heart of many Nigerians is that allowing for subsidy is the sole privilege they can get from a government whom they feel has failed in providing basic amenities that will give a facelift to the economy. But keeping a subsidy regime must come with several alternatives that must be foregone. The resultant effect of this is an unemployment rate at a record high of 23.1 percent as at 2018, and some 90 million Nigerians, which data tracked by World Poverty Clock, show are living below the poverty trap.

•Continues online at www.businessday.ng

igerian farmers may be smiling to the bank due to the closure of NigeriaBenin Republic border, but exporters to West Africa cannot find vessels to move their products to the regional market, BusinessDay has learnt. Since the closure of the land border in August 2019, Nigerian exporters have resorted to export by sea, but vessels carrying products bound for West Africa first of all move to and berth in Europe before returning to West Africa. This is because none of the vessels berth in West Africa at the moment owing to the poor level of trade in the region. They, therefore, move to Europe where they can fully load their containers before returning to unload in West Africa. This is a significant cost to exporters who are struggling to compete with China, the European Union and other parts of the world

in the global market. “I do not think there is any vessel that stops in West Africa at the moment,” Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Group (MANEG), told BusinessDay. “It is a challenge to West Africa because of lack of vessels to move the goods. We hope the Sealink Project will start soon,” he said. Due to poor sea linkages in West Africa, the Nigerian Export-Import Bank, Transimex SA Cameroun, Sealink Promotional Company Limited (SPCL) and other partners started the Sealink Project many years ago, but it is yet to commence fully. It is a publicprivate partnership (PPP) arrangement established for the purpose of promoting the development of a regional sealink company that would be private sector driven. Nexim Bank is targeting $1.2 billion export through the project. Abubakar Bello,

Continues on page 46

Banks’ deposit with CBN to rise by 22% on new CRR implementation … Interest rate to adjust to front-end of the curve – analysts HOPE MOSES-ASHIKE, ONYINYE NWACHUKWU, Abuja, & BUNMI BAILEY

t is likely going to be a tough year for the banking sector, following the new Cash Reserve Ratio (CRR) announced by the Central Bank of Nigeria (CBN) on Friday, which will lead to lenders’ deposit with the regulator rising to about 22 percent. With eyes on rising inflation and surging liquidity, the CBN on Friday moved against wide projections by analysts and raised the CRR by 500 basis points to 27.5 percent from 22.5 percent since 2016. According to the CBN monthly economic report in November 2019, total deposit at the CBN stood at N14.35 trillion, of which deposits by commercial banks amounted to N5.15 trillion (35.9% of total deposit). At previous CRR of 22.5 percent, a N5.15 trillion in deposit at the CBN mean total customer deposit in banks stood at N22.89 trillion as at November 2019. With the new increase in CRR to 27.5 percent, given a total deposit in banks at N22.89 trillion, banks would be required to deposit with the CBN N6.29 trillion representing a 22 percent increase in deposit to the CBN. Johnson Chukwu, managing director/CEO, Cowry Asset Management Limited, said this simply means that the banks are now suffering from multiple regulatory headwinds. One is that the

CBN on one hand wants them to lend 65 percent of their deposits and also keep 27.5 percent of their deposits to CBN and 30 percent liquidity, but the CRR does not count as liquid assets. So it is almost impossible for the banks to comply with all these regulatory requirements and still make profits. The amount in cash reserve is completely sterilised, and does not attract interest to the banks, so the banks are going to have 27.5 percent of their deposits with the CBN at no interest, no benefit and they can only lend 65 percent of their money and expected to keep liquidity ratio of 30 percent. “So, if you sum all these, it is clearly above the 100 percent of the deposit. So in effect, the CBN is expecting banks to lend from their shareholders’ fund”, Chukwu posited. Godwin Emefiele, governor of the CBN, who announced the increase in the CRR after the first Monetary Policy Committee (MPC) meeting for the year, said Committee was confident that increasing the CRR at this time is fortuitous as it will help address monetaryinduced inflation whilst retaining the benefits from the Bank’s LDR policy, which has been successful in significantly increasing credit to the private sector as well as pushing market interest rates downwards.

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Osinbajo tasks private sector to assist in addressing poverty Daniel Obi

igeria’s Vice President, Yemi Osinbajo, has tasked the private sector to assist government in addressing income inequality and alleviating majority of Nigerians in the poverty net. Over 80 million Nigerians, about half of the country’s population, is said to live in extreme poverty, and according to Osinbajo, government has introduced social safety nets to improve lives of the poor and farmers. While speaking at 5th edition of ‘Airtel Touching Lives’ annual programme, Saturday evening in Lagos, the Vice President acknowledged that government was yet to touch the lives of majority of Nigerians. “To do so will require far more resources. We need help and that is why we welcome the contributions of organisations like Airtel to bridge the huge gap between what government can do and what is left to be done,” he said. He linked the Airtel initiative of touching lives to APC mandate of alleviating the poor which he described as fundamental pillar of the party. “We are convinced that the government owes a duty to Nigerians, the weak and the vulnerable. Social safety nets are sovereign obligation and responsibility of the government”. According to Osinbajo, the social safety net scheme is in the fore of government’s social investment programmes where the government is today feeding 9.4 million children in public schools across Nigeria. In his speech at the evening programme, the Vice President of Ghana, Mahamudu Bawumia, commended Airtel initiative to uplift the poor and bridge the gap between the rich and poor. Represented by Ghana’s monetary regulation official, Anthony Osei, Bawumia encourage Nigeria’s willingness to move up to 70 position from 121 in Ease of Doing Business ranking. He also challenged Nigeria to boost job and security of Nigerians. Also speaking, the managing director of Airtel, Segun Ogunsanya, said when he was appointed to the position seven years ago, his mandate was to deliver value to his stakeholders including the community. According to Ogunsanya, Airtel Touching Lives is about improving lives, as “we expect nothing in return.” He believes that the rich should support the poor and vice versa, saying, “What makes the rich is how much he/she gives stressing that the size of the wallet does not matter when it comes to giving.”

Finally, NPA decides to divert vessels from Apapa to other ports over congestion AMAKA ANAGOR-EWUZIE

n response to the recent increase in waiting time of vessels calling at the Lagos Port Complex, Apapa, the Nigerian Ports Authority (NPA) says it will from Monday, January 27, 2020, begin to divert vessels that have waited for too long to berth at any terminal within the Lagos Pilotage District, to other terminals with capacity to berth vessels within the district. Jatto Adams, general manager, corporate and strategic communications of NPA, states in a statement sent to BusinessDay,

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saying the authority has met with shipping companies and terminal operators, and has arrived at decisions aimed at immediately resolving the congestion in the Lagos Pilotage District. “In the event that all terminals in Lagos cannot discharge any vessels within four days, such vessels will be diverted to the Eastern Ports (other pilotage districts) for immediate berthing,” Adams says. According to Adams, the Authority will liaise with other relevant government agencies on behalf of stakeholders to expedite the clearance of vessels

and cargoes, where necessary. “These actions have been taken to promote the Ease of Doing Business Policy of the Federal Government and curtail the negative economic impact that the long turnaround time of vessels has on stakeholders,” he states. Recall that shipping companies such as Hapag-Lloyd and others have raised alarm over the latest congestion situation at the Port of Lagos, which has created cost and delays for the shipping lines and their customers. According to Hapag-Lloyd, current waiting times for berth

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in APMT terminal (Apapa) is more than 20 days, while for TICT terminal (Tin-Can Island) it exceeds 10 days. “These operational delays heavily affect its two services, MIAX and MWX, which contain both terminals in their longterm schedules. In order to overcome this challenge and to minimise the negative effect on all of our Customers using these services, we are continuously evaluating the situation and taking schedule integrity measures for each vessel approaching Port of Lagos,” Hapag-Lloyd states. According to the announce-

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ment, in case a decision is made to omit APM Terminal, the cargo would be discharged at TICT terminal and further transferred to Kribi Containers Terminal (KCT), by dedicated barge service on Hapag-Lloyd account and arrangement, where Custom clearance of Apapa cargo is possible (this is in particular occurring on MIAX service). “We continue to work on long term solutions to provide more stability and service reliability for our Customers in managing their supply chains through Port of Lagos,” HapagLloyd adds.

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Fidelity Bank presents prizes to winners in ‘Get Alert in Millions’ promo SEYI JOHN SALAU

n deepening the financial inclusion narrative in Nigeria towards bridging the saving culture of Nigerians, management of Fidelity Bank plc recently presented prizes to winners in the ongoing ‘Get Alert in Millions’ promo at the Saka Tinubu branch of the bank for Lagos regional winners, to reward customers who operate savings account with the bank. The promo, which is the ninth in 13 years by the bank produced two millionaires and some consolation prizes of refrigerators, television set and generator from the Lagos regional branch, while similar actions took place in other branches of the bank nationwide. According to Chinwe Iloghalu, the regional head for Victoria Island, the objective of the promo is to deepen the savings culture among Nigerians, as the promo is aimed at improving financial inclusion in Nigeria, and in turn rewards customers of the bank. “… Part of the objectives of this draw is to deepen the savings culture and at the same time improve local businesses and drive the culture among them. This is the season four of the get alert in million promo, which is the first for the decade in the year 2020. So, we just spread the joy for the New Year by creating millionaires in 2020, and I think it is a big win for Fidelity Bank,” said Iloghalu. Obiajulu Okafor, the head, savings and promo, Fidelity Bank, said this phase of the promo was to present prizes won to winners across the regional zones of the bank in Nigeria. To her, customers are already used to the initiative of the bank towards encouraging the savings culture and in turn reward consumer through the promo. “We expect to give out N120 million; so far, we have given out a total of N50 million in cash and 54 consolation prizes to over 93 winners. We expect more winners to emerge at subsequent draws because the promo is still on and in addition to the N50 million that we will be giving out, we still have N70 million and several consolation prizes yet to be won,” Okafor said. Onolade Olatawura from Admiralty branch , Isabela Chekwube from Iyana Ipaja branch were both credited with N1 million. Joseph James Abah from Boundary Market and Oghenetega Emmanuel Erus were presented with consolation prizes of refrigerator each, while Blessing Chidinma Okafor from Oshodi branch of Fidelity Bank was presented with a generator set. Similarly, Loveline Uche Okonkwo from Ejigbo branch of the bank got a Panasonic plasma TV set.

Imo rural electrification boss eyes solar power, compressed gas Ignatius Chukwu

… says only cooperative system can bail out rural communities

Series took place. The dialogue looked at leveraging funding options for off-grid development in the Niger Delta, anchored by Emeka Okpukpara of Nextier. The IPOREA boss insisted that the solution to Nigeria’s power problem lies in getting the rural areas powered because that is where he said between 70 and 90 per cent of Nigerians dwell. Individuals can come together to fund mini-grids and nanogrids, he said, saying, “Many people are tired without action. There is something everybody can do. Few persons can light up their

o deliver alternative energy system with solar energy and mini-grids, cooperative system and a convoluted process must be adopted, according to Albert Okorogu, the director-general/CEO, Imo State Power and Rural Electrification Agency (I-POREA). The foreign trained expert, who has been invited twice in Nigeria to reposition the alternative energy sub-sector of the power industry, spoke in Port Harcourt, Rivers State, last week, at the Novotel Hotel where Nextier Power Dialogue

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village. Cooperative processes exist whereby some people can build ‘I-pass-my-neighbour’ mini-grids or inverters.” For systems, Okorogu, who says he is not a politician but an energy expert of global relevance, said in financing renewable energy problem in Nigeria, there should be use of what he called convoluted process. He said the government must be involved with banks and offgrid or solar inverter developers to create the instruments of funding. “The banks do not seem to be tailored to helping businesses. Microfinance banks appear to be useless. They lend with the inten-

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tion to take over your business because of the interest rate they charge. They seem to be aware that no business can pay it and remain viable. You have to rise up and develop yourself. I tell it to their face in Nigeria that the solution we seek is in the rural areas (states).” On what I-POREA has achieved in so short a time, Okorogu said the Imo State secretariat has been lighted, and that the agency is exploring hidden renewable energy resources. He talked about emergency electrification plan, saying his team planned to leverage on abundance of compressed gas

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resources and use the ‘willing buyer/willing seller concept to get 24-hour power supply in the state. On various funding available for alternative energy, he warned that attention must go to the rural areas but regretted that the funders concentrate on the urban areas. “Wise governments push into the rural areas with electricity to push them out of deep poverty. We urge development agencies and entrepreneurs to endeavour to partner with state governments to change the energy story of Nigeria. At the moment, attention is only in the urban areas.

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The money is on the table, take it!

Gregory Kronsten

he 2020 budget projects new external borrowing of N850 billion, and the objective is to raise the funds from concessionary sources for the lower interest rates and longer tenors. Any shortfall, the Debt Management Office (DMO) noted, can be raised from the market. Warnings about the FGN’s total indebtedness can be heard in many quarters. In our view it should not hesitate to borrow from concessionary and market sources if it wants to transform the economy into a production-based model. In 2016 the FGN had a similar strategy, only its multilateral partners were reluctant to lend to Nigeria. The World Bank would not disburse anything, and the African Development Bank released just $600 million of the $1 billion requested. This arose because the FGN requested budget support and therefore had to pass unspecified conditionality tests. It reportedly failed its exams because of objections to the CBN’s circular of June 2015 which listed 41 import items that would no longer have ac-

cess to fx (other than through the parallel market). Now it is looking for external financing for projects, which, we understand, is not subject to the same tests. It may be that the federal finance ministry will access project loans to cover the entire N850 billion. Timing is generally an issue however. The paperwork to secure such loans can consume much more time than, for example, the rapid process of tapping the Eurobond market. Additionally, we note that the FGN had an external borrowing target (also of N850 billion) in the 2019 budget but pushed it back into the current year because of the successful harmonization of calendar and budget years. The argument for caution is based upon an analysis of the indicators and upon the FGN’s track record for deploying loan proceeds over many years. The debt stock ratio, even when we adopt a loose definition of public debt, is exemplary. It currently stands at less than 30 percent of GDP on a worst case scenario that assumes, for example, that AMCON makes no more recoveries. Kenya’s latest comparable figure is 67 percent. We should also address the issue of fx risk. As at end-September, the total public debt of the FGN and states combined was 31 percent external and 69 percent domestic. The external component was 41 per cent commercial and 59 percent bilateral/multilateral on concessionary terms. Put differently, the FGN has $11.2 billion in commercial borrowings for a $350 billion economy (at the NAFEX exchange rate). This is modest fx risk by any criteria. The weakest link in the credit

story is, of course, the debt service ratio. Total debt service consumed 68.6 percent of the FGN’s total inflows in 2017, and 55.9 percent in 2018 according to the implementation reports of the Budget Office of the Federation. Purists may object to the measure of total inflows, which consist of retained revenue plus assorted extras and one-offs such as transfers from special accounts and exchange-rate adjustments. The ratio is alarming, and reflects the dire history of tax collection in Nigeria. Gross federally collected revenue (ie for distribution to the three tiers) reached N7.1 trillion in 2017, equivalent to 6.2 percent of GDP. In 2018 it picked up to N9.6 trillion (7.5 percent). A frontier/ emerging market should be generating more than 15 percent, and more than 20 percent if, like Nigeria, it produces commodities for export on a large scale that it can tax. Nigeria is moving in the right direction, albeit far too slowly. The increase in the standard rate of VAT takes effect from next month, and the National Assembly has passed legislation that will boost the tax take from the oil industry. The mining of data for sharing between government departments and public agencies has started to pay off. More generally, coverage of the population will grow as financial inclusion rises. The ratio will also look better now that the borrowing rates on both FGN bonds and NTBs have fallen considerably in the last three months. The wish list for improvement remains long, including: the removal of most tax exemptions; the strengthening of the judiciary to

‘

Nigeria is moving in the right direction, albeit far too slowly. The increase in the standard rate of VAT takes effect from next month, and the National Assembly has passed legislation that will boost the tax take from the oil industry

pursue tax defaulters and recover assets marked for confiscation; an increase in the remuneration of officials in the tax collection agencies: and education campaigns to encourage the payment of tax. As for the second argument for caution in new borrowing, the record for productive use of loan proceeds is poor. The proceeds are often lost in funding recurrent spending. This, however, is not a reason not to borrow. Estimates of the infrastructure deficit vary: we have seen figures of $100 billion or more, or $10 billion or more per year. The FGN’s capital spending amounted to about $5 billion equivalent in 2018. When we add contributions from the donor community, dedicated infrastructure funds and private equity, we are still well short of the annual requirement. The FGN therefore needs to borrow to cover the deficit: if it does not, it cannot transform the non-oil economy. Nigeria will remain a rent-seeking economy without the transformation. If it chose, the FGN could tap the Eurobond market quickly and offer a decent case to investors, based upon its external balance sheet. This would fund overdue capital spending and put a better gloss on official reserves (as defined by the CBN). Investors have shown a little fatigue with issuers which have tapped the market regularly such as Kenya. Nigeria has not issued since November 2018, and there seems little doubt that an issue would be well received on competitive terms. Kronsten is the head, macroeconomic & fixed income research at FBNQuest

Is electronic voting out of the equation?

o say that the electoral system as exists in Nigeria today is becoming a huge embarrassment is to put it very mildly. At every election cycle and even those off season, humongous amounts of money running into billions of Naira are consistently appropriated with little or no much successes recorded – no thanks to the machinations of politicians, the security agencies and sometimes even the pliable electoral umpire. Most of the discourse in this article will centre on Nigeria’s experience with its electoral system since the advent of the present 4th republic. Since Nigeria transited from military to democratic rule in 1999, there had been five major general elections with some off season ones in between; each with its peculiarities. While the 1999 general elections were conducted under the supervision of the military that seemed so much in a hurry to hand over power and so left some loopholes in the constitution, the subsequent ones were conducted under democratic dispensation with expectations that whatever shortcomings experienced at the first and subsequent outings would be corrected and improved upon with passage of time. But what has really changed? The general elections conducted between 2003 - 2007 were no improvements on what transpired in 1999. If anything, they merely mimicked democratic ethos and were indeed worse. Words such as “do or die”, “capture”, “landslide” were freely used. Thuggery and election violence were the order of the day. No serious efforts were made at reforming the electoral system.

However, after the 2007 general elections that produced the late President Yar’Adua, some conscious efforts were made to correct a lot of anomalies already embedded in the system. The then President openly acknowledged that the election that brought him into power was fatally flawed. That open admission, contrary to what Nigerians were used to, opened another vista in Nigeria’s democratic journey. He didn’t stop at mere platitudes but took practical steps to concretize his intentions. The popular Justice Mohammed Uwais Commission on electoral reforms was a by-product. That was somewhat a turning point in reforming Nigeria’s electoral system as the then National Assembly woke up from its slumber to key into the prevailing sentiment and perform its mandated constitutional duties. Between 2007 – 2015, the National assembly did a lot to pass some laws aimed at improving the electoral system in the country. A lot of amendments were effected into already existing ones where some noticeable flaws manifested. Such innovation as the card reader for voting came on board within this period. More importantly, it must be emphasized that the leadership at the executive level within this period cooperated fully with the leadership of the National Assembly and the Independent National Electoral Commission (INEC) in bringing about those changes. What’s more, some tranquillity in the conduct of elections was experienced. Such words as “do or die”, “capturing” etc. and thuggery that were characteristics of the conduct of elections hitherto, started to dissipate. The www.businessday.ng

late President Yar’Adua and later President Jonathan were quick to congratulate any opposition candidate that emerged victorious at the polls at the expense of their party’s candidate. It is on record that the current Chairman of the ruling party – All Progressives Congress (APC) – Comrade Adams Oshiomole openly lauded then President Jonathan for allowing ‘one man, one vote’ mantra to prevail during his re-election as Governor of Edo State in 2012. The same then President topped the icing on the cake by conceding defeat in 2015 presidential poll. That was the first time in the history of the country and everybody shouted hurrah! That at last, the country was getting it right and could be counted among comity of democratic nations. Has the country progressed in the same trajectory since after 2015 general elections under new leadership at both the governmental and electoral umpire levels? Unfortunately, facts on ground don’t suggest answering in the affirmative. It seems the country has regressed to pre 2007 era. What could have substantially aided the conduct of the 2019 general elections – the signing of the comprehensive electoral bill duly passed by the 8th National Assembly - was aborted due to withdrawal of assent by the current President. Suddenly such unedifying actions portraying the “do or die” stance of pre 2007 era started rearing their ugly heads. Thuggery had since taken over the conduct of elections. Snatching of ballot boxes, destroying of ballot papers in the strongholds of the opposition, none or late supply of voting materials where the opposition is strong, stuffing of

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EMEKA OKOLO

ballot boxes, over voting including allowing under aged voters to cast votes, maiming and killing of innocent voters and electoral officials are now the new normal. Sadly, these antidemocratic behaviours have been conducted under the watchful eyes of security agents usually deployed to aid the peaceful conduct of the elections. Above all, foreign observers have been threatened to keep quiet in the face of all the electoral malfeasance or have their dead bodies shipped to their countries in bags! The two off season elections recently conducted in Bayelsa and Kogi states effectively validated the view that the country has actually turned to the worst as far as conducting elections and giving the electorate the unfettered freedom in making their choices - which is the hallmark of democracy. Fighting corruption which is a cardinal objective of the present administration should actually start with credible elections. There’s no gainsaying it that any victory procured at election through any form of rigging or manipulation is a product of corruption. Dr. Okolo is a chartered stockbroker and management consultant based in Lagos.

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Monday 27 January 2020

BUSINESS DAY

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With unexpected hike in CRR, what happens to equities rally?

Patrick Atuanya

n an unexp e cte d move, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) raised the cash reserve ratio (CRR) to 27.5 percent of Friday from 22.5 percent previously. The CRR in Central Bank parlance is the amount of funds that banks have to maintain with the CBN. If the central bank decides to increase the CRR, the amount available with the banks for disbursal comes down. It is often used to drain excess liquidity from the system. The MPC chose to maintain all other variables with the monetary policy rate (MPR) kept unchanged at 13.5 percent, Liquidity Ratio at 30 percent and asymmetric corridor at +200/-500 basis points around the MPR. It is clear that the MPC and by

extension the CBN regards the CRR as the key policy transmission mechanism in its price/monetary stability mandate. With total banking sector local currency deposits standing at circa N16.6 trillion as at September 2019, analysts estimate additional CRR debits of between N800 billion and N1.3 trillion as a result of the hike. There are two main drivers of the decision to hike, inflation and growing liquidity in the banking system. The MPC expressed concern about the rising inflation, which increased consecutively in the last 4 months as at December 2019 to 11.98 per cent and higher than its target range of 6-9 percent. According to the MPC, this rising price level is attributable to a combination of structural and supply side factors, expansionary fiscal policy; and growth in money supply arising from rising liquidity surfeit in the industry due to changes in the Bank’s open market operations (OMO) policy. With anticipated medium term liquidity surfeit from maturing OMO securities held by institutional investors, which were not eligible to be rolled over, the MPC considered it prudent to raise the CRR. The MPC may have partial justifications for its actions as some of the drivers of inflation are largely out of its control. For instance, inflation has been creeping upwards over the past four months largely due to the Federal Government’s policy of land border

closures impacting food prices, and also the recent rise in VAT and expectations of an increase in electricity tariffs. However the potential ‘liquidity overhang’ the MPC spoke of is largely of the CBNs own making as it stems primarily from the CBN’s decision to bar resident non-bank financial institutions from participating in OMOs, even as large OMO maturities are set to hit the markets. Banks are already having to deal with a multiplicity of regulatory headwinds and it is likely that the new 27.5 percent CRR will have a negative impact on earnings going forward. There is already a punitive CRR that banks face in the event that they fail to meet the stipulated minimum loan to deposit ratio (LDR) levels set by the CBN. There is also the recent announcements by the CBN on a cut in fees that banks can charge for various services rendered as well as the slide in yields which has depressed interest income in recent months. However banks have remained highly profitable over the past 3 years despite a recession and slow growing economy, a sign of the huge profit levers they can pull, especially those with large balance sheets. BusinessDay analysis of the 2019 nine months performance of the banks revealed that they generated about N716.9 billion in net profit for the period. Assuming the profit trend continues till year

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It is clear that the MPC and by extension the CBN regards the CRR as the key policy transmission mechanism in its price/ monetary stability mandate

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

Why we should not hide from the climate change challenges

he world economic forum had its annual meetings in Davos early last week. This is the exclusive event where CEOs, global leaders, and other big wigs go once a year to discuss global issues and hobnob over food and drinks. This year the major focus has been on climate change and its effects. The chaotic fires in Australia drove home the case for climate action but that was not all. Throughout the past year there was one climate related issue or the other. From the fires burning the amazon to freak snowstorms to record temperature and rainfall. Is anyone still in doubt? The talk in Davos was all about what to do about climate change and rising global temperatures. The 2010s were apparently the hottest since records started being kept. Global temperatures are expected to rise further in the coming decades and the impact of human activity is apparent to most. The question for those at Davos was what to do to slow rising temperatures and limit the disruption from climate change. As is now apparent, tackling climate change is not just good for the environment, it is good economics too. Back here in Nigeria the effects of cli-

mate change are already becoming apparent. Many countries in Africa are expected to bear a relatively higher share of the costs of climate change and this is mostly due to the continuing importance of agriculture. In many African countries agriculture still accounts for a relatively large share of the economies and an even larger share of employment. This type of agriculture is however mostly still dependent on rainfall. Rainfall that is becoming more erratic due to climate change and very few of our farmers have irrigation systems in place to cope with rainfall shocks. The temperature is also getting more erratic with consequences for those in agriculture. People in richer countries mostly engage in activities that are not directly affected by the climate but those here are much more dependent on it. The consequences do not stop with agriculture. Rising temperatures are projected to cause rising ocean levels due to the melting ice caps. For places like Lagos, which are already very low lying, rising ocean levels could wreak havoc. I am already trying to imagine what an already swampy Lekki would look like with the sea level a few centimetres higher. Even if they did try to www.businessday.ng

build an A msterdam style elaborate system of sea defences, it would cost billions of dollars. How are they going to do that when they cannot even build a fourth mainland bridge? Then there is the excess rainfall and all the flooding. And the dry weather in some parts. With climate change the only thing certain about the future is that it will be different and that will have consequences. Many argue that Africa, including Nigeria, should not have to bear the brunt of climate change issues given that we were mostly not responsible for the greenhouse gas emissions that have contributed to the climate problem. They argue that we therefore should not be saddled with the responsibility for cleaning up the mess. “Let those who did the damage deal with it”. But then is that what we really want? The world is moving towards being “climate smart” and using environmentally friendly technology. Do we really want to be left behind while the rest of the world makes these technological advancements? Do we want to wake up a hundred years from now when the world has moved on from fossil fuels and start trying to catch up to the tech-

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end, the annualized 2019 net profit is expected to reach N955.8 billion. In the two years post-recession, the profitability of the 13 banks have grown from N447.8 billion to N858.4 billion in 2018, marking a 92 percent growth. With profits expected to exceed N900 billion in 2019, this will mean that banks have been able to double their profit in just 3 years post-recession (see full story in our Markets Intelligence Section today). The NSE Banking index has returned +10.46 percent less than a month into the New Year, a rally that mimics the broader gains in equities (+10.38% YTD for NSEASI) as liquidity from the CBNs regulatory actions on OMO pours into stocks. The announcement by the MPC to hike the CRR signals a tightening of liquidity, and near-term, analysts expect market interest rates to adjust higher to this, most likely at the front-end of the curve. This would be somewhat negative for equities even if continued OMO maturities offset rising yields. A higher floor in yields would push Pension Funds and other institutional investors to see fixed income as relatively more attractive than equities. In a sense the CBN’s quest to preserve currency stability and ongoing concern over the price level, could bring a screeching halt to the rally in equities it engineered some 5 months ago.

ECONOMIST

NONSO OBIKILI

nological advancements made elsewhere? Or do we want to be at the table now and try to compete? Even though I do not think we should be saddled with some of the same responsibilities for dealing with the climate crisis as other much richer countries, I think we should start to act to adjust to the inevitable future crisis. Whether it be things as simple as limiting the amount of single use plastics we pollute the environment with or building cities that actually take flood water evacuation into account, we have to play our part. As the world moves towards a more climate sensitive future we really cannot afford to be left behind again. Dr. Obikili is the chief economist at BusinessDay

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BUSINESS DAY

Monday 27 January 2020

EDITORIAL No justification for CNG subsidy Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

DEPUTY EDITOR John Osadolor, Abuja NEWS EDITOR Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

espite the clamour to end the outrageous fund spent on petrol subsidy and save the federal government some money to deploy into more productive projects, it is somewhat surprising that the FG plans to embark on another form of subsidy through the use of Compressed Natural Gas (CNG) as alternative petrol. The Minister of State for Petroleum Resources, Timipre Sylva, notified that plans were already on-going by the federal government. According to him, CNG could be made available at a cost between N95 and N97 for Nigerians who found petrol too expensive. Here is the challenge. At such price, CNG would be trading at a huge discount to its market price and the difference borne by the federal government. Could the minister forget so quick that the federal government is currently battling with revenue challenge, hence, its move to increase VAT to 7.5 percent? The prob-

lem with such plan is not only its lack of practicability but another avenue to waste insufficient fund on another expensive subsidy. To put in context, the average market price of CNG according to CNGprices.com hovers between $2 (N723) and $3 (N1,084.50). Selling at N95 would amount to a cost of N628 or N989.5 to be borne by the government. This is worse than about N85 currently borne by the FG in form of petrol subsidy. This is rather confusing when you juxtapose this illustration with Sylva’s justification. According to him, “the switch to CNG will help reduce the burden of petrol subsidy on the finances of the country, and the government is working towards encouraging Nigerians to use CNG as fuel for transportation.” While CNG can be used in place of PMS (petrol), diesel fuel and propane/Liquefied Petroleum Gas (LPG), the CNG industry could also create local employment opportunities, spur economic growth, aid domestic manufacturing with cheaper electricity and reduces strain

on foreign exchange reserves for US dollars. However, for a frontier economy like Nigeria, creating a natural gas market is not an easy undertaking. Investments in gas projects are inherently capitalintensive, requiring large increments for each expansion. This largely explains the truism, implicit in the fact that Nigeria’s natural gas reserves places her 9th in the world, yet she is not among the top 20 gas producers in the world. For a successful adoption of CNG, we must be prepared to fix our gas infrastructure, stimulate private-sector involvement through tax holidays, import duty waivers and also provide a legal framework and not subsidy. Currently, the federal government clearly doesn’t have enough funds to deploy into such capital-intensive project given uncertainties in the crude oil market which we are still dependent on, also about 60 percent of revenue still channelled towards debt servicing, FDI statistics showing very low foreign

exposure in Nigeria, on-going battles with tax compliance etc. Equally, there is no specific agency set up to promote the automotive use of CNG in Nigeria. The government-owned Nigerian Gas Company Limited (NGC), which is wholly responsible for gas transmission and sales, and a local company entered into a joint venture agreement in 2007 to establish a chain of CNG refilling stations. The pilot scheme is in Benin City, within the Niger Delta region, where gas is produced. Targets included the conversion of 50,000 vehicles in the first four years and the construction of between eight and ten CNG stations, 50km of steel pipeline and two conversion workshops in the first two years. As at the end of 2015, nine years after the commencement of the pilot programme, only the target for conversion workshops had been met. The federal government clearly has no business doing business. Give room for private investment while you provide an enabling environment for efficiency and effectiveness.

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

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Monday 27 January 2020

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Post-Brexit Britain is open for business, Nigeria and Africa must embrace it global Perspectives

OLU FASAN

frica has become the cynosure of all eyes around the world. Every major country wants to be its friend. The Economist magazine calls it “the new scramble for Africa”. This is evident from the number of forums established by major countries to strengthen ties with the continent. China, Europe, Japan, Russia and the US, not to mention India, Brazil, Turkey and Israel, are actively engaging with Africa through summitry. Britain has now joined the race by establishing the UK-Africa Investment Summit, the first of which was held in London this month, on January 20. Of course, Africa’s attractions are obvious. Here’s a continent whose population, currently 1.2 billion, is predicted to double to over 2 billion within the next three decades. Here’s a continent with six of the world’s 15 fastest growing economies. And here’s a continent which, if the African Continental Free Trade Area (AfCFTA) succeeds, will be the world’s largest single market. So, it’s understandable why major developed and developing countries want not only to strengthen political and diplomatic links with Africa, but also develop or scale up investment, trade and economic cooperation with the continent. The Economist said that, from 2010 to 2016, more than 320 embassies were opened in Africa, describing it as “probably the biggest embassy-building boom anywhere, ever”. It’s indeed a new scramble for Africa! But of these relationships, that between the UK and Africa has not, hitherto, been driven mainly by commercial considerations. Britain is genuinely pro-development and pro-Africa. As a member of the European Union, Britain was the

strongest voice for Africa in Brussels. It constantly opposed attempts to protect the EU market against African exports; it pushed hesitant EU member states to support the WTO’s LDC Services Waiver, which allowed developed and developing countries to provide preferential treatment to services and service providers from the least-developed countries, LDCs. The UK is, so far, the only major developed country to have met, and legislated for, the UN foreign aid target of 0.7 per cent of gross national income, GNI. The only other countries that have met the target are Denmark, the Netherlands, Norway, Luxembourg, and Sweden. Furthermore, the UK played a key role in securing debt relief for Africa, particularly Nigeria. The Commission for Africa, set up by Prime Minister Tony Blair in early 2004, made a strong case for debt relief, and, as the chair of the G8 in 2005, the UK pushed for a “Year of Africa”, with debt relief at its core. Thus, unsurprisingly, when Nigeria asked for debt relief from the Paris Club, it was the UK, under the leadership of Gordon Brown, the then Chancellor of the Exchequer, that persuaded G8 finance ministers to support Nigeria’s request. As Dr Ngozi Okonjo-Iweala, Nigeria’s finance minister at the time, recalled in her book, Reforming the Unreformable, “Brown was able to convince the G8 finance ministers to move to 60 per cent” as opposed to their opening offer of less than 50 per cent debt relief. None of this is meant to say that other major countries have not supported Africa’s development. Of course, they have. China has invested heavily in Africa’s infrastructure, with President Xi Jinping making a $60 bn investment pledge at the 2018 China-Africa summit. Germany launched a Marshall Plan with Africa in 2018 to encourage investment on the continent. But, as I said earlier, while these other major countries have prioritised trade and investment with Africa, the UK is late to the game. As former prime Minister Tony Blair wrote in the British newspaper, The Guardian, “Up to now, despite the significant amount of aid Britain spends and the strong political and diplomatic footprint it has in Africa, investment lags”, stating

that “Between 2014 and 2018, UK direct investment into Africa was $17 bn, well below China’s $72 bn, France’s $34bn and the US’s $31bn”. Of course, Britain still does significant trade and investment with Africa, but considering its historical links with the continent, many expected it to be a dominant foreign player there. About two decades ago, in the 1990s, I was a member of the British Chapter of the British-Nigerian Chamber of Commerce. Every two years, members of the Nigerian Chapter, led by the then president, Chief Dotun Okubanjo, and later Chief Amzat Adebowale, held bilateral talks with their British counterparts and government officials. The constant talking points were Nigeria’s low trade with Britain and Britain’s low investments in Nigeria. The British would say that Nigeria’s trade imbalance with Britain was due to its mono-economy, the fact that it had nothing much to sell beyond oil. As for Britain’s relatively low investments in Nigeria, well, they blamed the country’s poor reputation and image overseas, bureaucratic bottlenecks and political tension. But the question often asked was: Why did the litany of woes not deter Germany, which was doing more business than Britain in Nigeria? The truth is that the commercial relationships between Britain and Africa have long been influenced by negative perceptions. As the Financial Times put it recently, “For too long, Britain has viewed Africa through the prism of poverty”. But that’s now changing, thanks to Britain’s exit from the EU, which will happen at the end of this month! Last week’s UK-Africa Investment summit, the first of its kind, was a hugely significant step towards establishing a new post-Brexit relationship between Africa and Britain. The summit, attended by President Muhammadu Buhari and several other African heads of state, as well as business leaders, laid down the marker in terms of Britain’s ambition for a comprehensive economic partnership with Africa to boost trade and investment, particularly in infrastructure and clean energy. Boris Johnson, the British prime minister, set out the new agenda in an eloquent and friendly speech, enticing the African

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But is Africa ready for this new partnership? Is Nigeria willing to embrace an open postBrexit Britain? Certainly, this would require Nigeria and Africa to embrace free trade and open markets

leaders with warm words. For instance, he assured President Museveni that “Ugandan beef cattle will have an honoured place on the tables of post-Brexit Britain”, and told President Kenyatta that “Britain without a nice cup of tea is barely worth thinking about”, adding, “and that means Britain without Kenya is barely worth thinking about”! What a good salesman! But much of his speech was devoted to Nigeria. He spoke fondly about Lolade Oresanwo, who went to study in the UK and, after obtaining an MBA from Cranfield University, returned to Nigeria to set a waste-processing company, West Africa ENRG. He said the company would soon be generating clean electricity for schools and hospitals. But his main point was that it was a British-Nigerian connection that made this happen: Oresanwo’s company was using British-made equipment. This meant it was providing good returns for investors both in Nigeria and the UK. “It is a great example of what the modern UK-Africa partnership looks like”, he said, adding, in a thinly disguised dig at China, that it was not one based on “extraordinarily one-sided terms and delivered by a vast imported workforce”. But is Africa ready for this new partnership? Is Nigeria willing to embrace an open post-Brexit Britain? Certainly, this would require Nigeria and Africa to embrace free trade and open markets. Interestingly, President Buhari told Britain in an article published in the London Times ahead of the summit: “Your visa restrictions and customs barriers must be removed”. Fair enough. But would Nigeria remove its own trade barriers? The UK has signed trade agreements with 11 African countries, but not with Nigeria. Is Nigeria willing to sign a comprehensive trade and investment agreement with the UK? It should! Prime Minister Johnson ended with a powerful pitch: “Africa is the future”, he said, “and the UK has a huge and active role to play in that future”. But would Nigeria and Africa accept Britain’s offer? Well, they should! Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

Succession planning and the role of the board

recurrent challenge with many businesses globally is the failure to adequately plan for succession. Whilst the reasons for this may vary from one institution to another, there is no gainsaying that failure of leadership to plan for the future has far-reaching consequences that go beyond the organisation itself and impacts on economic sustainability and the society. Succession Planning entails devising a systematic process for ensuring leadership availability, continuity and the development of an organisation’s leadership talent. Systematic process – there must be a conscious, documented and pro-active process in place for defining and implementing an organisation’s approach to succession planning. Availability – the process must identify suitable ‘ready now’ successors for the critical roles and leadership positions within the organisation at any material time. Continuity – succession planning must be linked with business continuity to ensure that the available human capital is sufficiently cross-trained to assume diverse responsibilities and be able to step in and fill critical positions even if on a temporary basis to ensure continuity. Development – as the saying goes, “success occurs when opportunity meets preparation”. Management must take advantage of every opportunity to develop existing talent and

prepare them to assume future, challenging leadership roles within the organisation or elsewhere. The Board has the primary responsibility for ensuring that an organisation has a practical and implementable succession planning process in place which is applicable throughout the organisation. Typically, the Board would delegate such responsibilities to a Board Committee (usually the Governance/Remuneration/HR Committee) which would receive and deliberate on reports from Management on employee-related and succession matters. The importance of the Board taking direct responsibility for the succession planning process, particularly as it pertains to the succession to the position of CEO/ MD and other key executive roles, cannot be overemphasised. To this end, it is advisable that the Board periodically reviews the company’s leadership development program to ensure that the succession planning program is indeed being implemented. In preparing its Succession Planning Policy, an organisation should give careful consideration to existing talent and where the requisite capacity is lacking, it should not shy away from looking outside the organisation to fill specific positions. Whatever option is expedient, an organisation’s policy on succession planning must be clearly defined, transparent and properly managed to avoid disgruntled www.businessday.ng

employees sabotaging the process. As organisations are typically established to subsist in perpetuity, the process for implementing the succession planning is a continuous, on-going one. The process is therefore not time-bound. A good Succession Planning process gives assurance to the organisation’s stakeholders that their interests will not be negatively impacted in the event of sudden exits and that the going concern status of the organisation will not be derailed. Whether at the Board or at Management level, the talent development and management process is incomplete without opportunities for evaluation. Retaining ineffective employees in the system will ultimately prove detrimental to an organisation’s health. A proactive organisation will therefore structure its performance evaluation system around the attainment of set goals and objectives and ensure that periodic performance evaluation is undertaken to enable Management and the Board identify areas of improvement and note the star performers within the organisation both for reward and to optimize the execution of the organisation’s strategy. Ownership of the succession planning process by the Board has been proven to enhance both organisational process and outcomes. Increased awareness at the Board level about the significance of succession to organisational sustainability will encour-

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Bisi Adeyemi age Board members to focus on their own individual and collective professional development to prepare themselves to assume increased responsibilities, be positioned to identify potential successors to key roles more easily which will foster smoother transition to leadership roles. Are you looking to evaluate the corporate governance practices of your company? The Governance team at DCSL is fully equipped to provide support organisations in assessing their corporate governance practices and providing them with a comprehensive report of their compliance with the NCCG and other relevant codes. Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. DCSL provides Governance Advisory, Corporate Restructuring & Board Evaluation, Board & Senior Management Training, Retreats & Strategy Sessions, Executive Talent Recruitment, HR Outsourcing, Company Secretarial services

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Monday 27 January 2020

BUSINESS DAY

cityfile Kogi ex-commissioner bags 19 years FELIX OMOHOMHION, Abuja

Residents of Kaida Community in Gwagwalada Area Council, fetching water at Sabudu stream in Abuja.

Conjunctivitis: Demand for sun glasses increases in Enugu RAGIS ANUKWUOJI, Enugu

emand for sun glasses has risen in Enugu, as residents come under fear of contacting conjunctivitis, an eye disease locally known as ‘Apollo’. Conjunctivitis is a common and uncomfortable eye condition that can be caused by infections or irritants. Checks in shops around Enugu at the weekend, showed an unprecedented number of customers, purchasing eye glasses to avoid contacting the disease. At the Ogbete market, some of the residents, who were purchasing the glasses, said it was better to prevent the disease than

to cure it. According to them, the harmattan season has come with heavy dust that could also cause other eye problems if adequate care was not taken. The pain and discomfort from ‘Apollo’ can be severe for anyone to be careless over his or her eyes, they said. Onyiye Agu, a student at one of the shops visited, said she had to buy a shade to prevent dust that could lead to ‘Apollo’. “I need sun glasses not to contact any eye disease, because if I eventually get infected it will be terrible because nobody will help me to copy notes,” she said. Evelyn Ofia, a civil servant, noted that some had already been infected with the eye problem adding

that she was afraid of contacting same. Ofia said it was important for everyone to have shade to protect oneself from the sun and dust or any form of eye disease. Ifennna Egbuna, a seller at Obgete main market, said it was a boom time for their business. “Due to dry season, which is characterised by dust and high degree of sun and sometimes ‘Apolo’, our sales have gone up,” Egbuna said. Uche Kelechi, another seller, said that the prices were affordable adding that it was based on customers’ status, income and choice. “In my shop, I have sun glasses ranging from N800 to N6,000, depending on customers’ choice,” Kelechi said. Emeka Ossai, an Oph-

thalmologist, formerly with ECWA eye clinic, said the use of shades during the dry season was commendable. According to Ossai, the purpose of the sun glass is to reduce the effect of the sun on the eyes and as well to reduce spread of conjunctivitis which is an airborne disease. “Sun glasses help to reduce dust and the emission from the rays of sun, which also reduces the effect of ultra radiation of the sun. The ophthalmologist said that it was healthy to use shades especially now that the dust had increased due to change in weather condition. According to him, conjunctivitis is caused by bacteria and it is airborne disease which can be highly contagious.

Siblings charged for faking EFCC agents in Abeokuta REMI FEYISIPO, Ibadan

conomic and Financial Crimes Commission, (EFCC), Ibadan zonal office has arraigned two siblings - Olatunji Beyioku (aka Bashorun) and Oluwayomi Oluwafemi Beyioku (aka Ola 1) – for allegedly falsely presenting themselves as agent of the commission to defraud members of the public. The duo were dragged before Justice Mohammed Abubakar of the Federal High Court 1, sitting in Abeokuta, Ogun State capital, on 18-count charges bordering on conspiracy,

impersonation, forgery, money laundering and obtaining money under false pretenses. According to the charges, the accused persons allegedly laundered over N12 million and also defrauded unsuspecting victims of the sum of N404 million. The facts of the case revealed that the brothers had represented themselves as operatives of the EFCC in order to gain undue advantage of their victims. The charge also stated that Oluwayomi forged a document to claim that he bagged a Higher National Diploma (HND) from the Lagos State Polytechnic, www.businessday.ng

and another claiming that he participated in the oneyear mandatory National Youth Service. The duo were found to have made millions of naira engaging in series of fraudulent activities, using the proceeds to purchase a multi-million naira building, two cars - Honda Accord Crosstour and a Mercedes Benz GLK, different brands of mobile phones and other landed properties worth millions of naira. The accused persons pleaded not guilty to the eighteen-count charges. Upon their not-guilty plea, EFCC’s counsel, Festus Ojo prayed the court for

a trial date and an order to remand them in correctional custody. However, their counsel, Femi Meyile, prayed the court to admit them to bail. Abubakar allowed the prayer as he granted them bail in the sum of five million naira with one surety each in like sum. The sureties were also ordered to deposit their international passports with the Chief Registrar of the court. The case was adjourned to March 9, 2020, for trial while the accused persons are to be remanded in the correctional custody pending the perfection of their bail conditions.

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ogi State High Court has sentenced Zachaeus Atte, a former commissioner for agriculture in Kogi State, to 19 years imprisonment. The court sitting in Okene, Kogi State capital and presided over by J.J Majebi, found the excommissioner guilty on seven out of the 11 counts of the corruption charge preferred against him by the Independent Corrupt Practices and Other Related Offences Commission (ICPC). The convict who is to serve a total of 19 years jail term, was sentenced to five years imprisonment each on counts 1 and 3 without an option of fine, for collecting the sum of N11.93 million and N8.87 million respectively, being money meant for “the raising and distribution of Oil Palm Sprouted Nuts Seedlings” to cocoa farmers in Kogi State but did not raise nor distribute same. This is an offence contrary to and punishable under Section 19 of the Corrupt Practices and

Other Related Offences Act 2000 (ICPC Act). He was also sentenced on count 2 to five years imprisonment without an option of fine, “for receiving the sum of N350,000 being amount earmarked to defray the transportation costs of the farmers during the cocoa seedlings distribution exercise” but failed to do so. This is also an offence contrary to and punishable under Section 19 of the ICPC Act. The former commissioner was further sentenced to 1 year imprisonment each on counts 8 to 11 for “spending from the sum of N2.84 million being amount earmarked for the purchase of office equipment on what he called statewide sensitisation tour; visit to Lagos from Lokoja on issues of Power Tiller; and video coverage” contrary to and punishable under section 22(5) of the ICPC Act. Justifying the conviction of Atte, Justice Majebi held that the ICPC counsel was able to prove beyond reasonable doubt that the convict committed the crime.

Court remands 5 robbing at gunpoint

n Ikeja Magistrate Court has remanded five men in the Kirikiri Custodial Centre, Lagos State, for allegedly robbing two men of valuables worth N395,000, at gunpoint. The defendants – Rasaki Sunmola, 20; Kunle Asemidara, 22; Japhaet Scoth, 28; Joseph Jimoh, 29, and Daniel Joseph, 23 – are facing charges of conspiracy, armed robbery and illegal possession of firearms. The magistrate, O.A. Akokhia, who did not take their pleas, ordered that the case file should be sent to the state director of public prosecutions for advice. Akokhia adjourned the case until Feb. 6 for mention. According to the prosecutor, Adegoke Philip, the defendants committed the offences in October 2019 at Ikeja, Lagos. Philip told the court that the defendants, armed with two guns, robbed Messrs David Samuel and Ogadima Obi of valuables worth N395,000. “They dispossessed Samuel of his three phones, a gold wristwatch and money. The defen-

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dants robbed Obi of his phone, a wristwatch, a gold necklace and money,” he said. Philip said that the defendants invaded the bar where the complainants were drinking. “They entered the bar, pointed guns at the complainants, demanding for their phones, cash and other valuables. The complainants surrendered their belongings for fear of unknown,” the prosecutor told the court. He said that one of the complainants sighted one of the defendants few days after the robbery and quickly called the police. “The defendant led the police to the arrest of others,” Philip said. The prosecutor said that the offences violated sections 296, 297 and 411 of the Criminal Law of Lagos State, 2015. Section 296 prescribes 21 years’ imprisonment for robbery, while section 297 also attracts 21 years for unlawfully arming self with firearms. Armed robbery is punishable with death under the Robbery and Firearms (Special Provisions) Act.

Monday 27 January 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

HELP! I lost my job! We all know that a healthy diet and exercise are good for the mind and body. You have the time now to put an exercise routine in place; it will put you in a better frame of mind as well. If you are unable to shake off the feelings of despair that can lead to depression, seek professional help early. Be honest in your CV Do not pretend to be what you are not; you will be caught out. Your CV should be truthful, flawless and tailored to the positions you are seeking as well as presenting your diverse skills for any opportunity. There is nothing more exasperating for a prospective employer than to have to read a badly written CV full of grammatical and typographical errors. Prepare your CV and proof read it very carefully; there are many good online samples and tips to guide you. Be punctual and well prepared for interviews. Do some research about the company with whom you are interviewing. What value can you add? What makes you stand out? What problems can you solve? Prepare your questions and listen. Cultivate your network This is not the time to withdraw from your circle. Your network, including your immediate family, relatives, friends, colleagues, former clients,

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‘

More people than ever before are experiencing job loss, and for significant periods of time. Whilst being unemployed is one of life’s most challenging events, it can also come with opportunities if you remain calm, proactive and carefully consider the positive implications of your situation

‘

hether we call it restructuring, downsizing, rightsizing, retrenchment, being laid off or just plain being fired, losing one’s job ranks as one of life’s most challenging events; these include the loss of a loved one, divorce or serious illness. In January, thousands of Nigerians woke up with the news that they had lost their jobs. Have you recently been laid off? Here are some survival tips that should help: Try to remain positive There are jobs out there, but there are millions of people looking for them; the competition is fierce. Yes, you have already sent your CV to over 100 companies. Companies receive literally thousands of resumes so that even the most efficient human resource departments struggle to review each one and many go unacknowledged. It is nothing personal. Typically, the natural feelings that follow job loss include denial, shock, anger, frustration, loss of self-esteem and depression. Try to dust off your disappointment as quickly as you can. If you stay focused on the numerous negative responses and allow yourself to wallow in self-pity, you may miss out on the next opportunity. Remember that employers are looking forward to meeting with ambitious, energetic prospects. As difficult as it is, try to focus on the practical issues and your next steps. Take stock How much money do you have? What are your entitlements? For how long will your money last? Review your income, savings and investments

against your short-term financial obligations. Are there assets that you can sell if you have to? Draw up a new budget to clarify priorities that must be met including groceries, utility bills, rent and school fees. Don’t let your insurance premiums lapse. Don’t wish away your debt; try to pay the minimum monthly repayments. If you owe family and friends interest free loans, don’t avoid them; meet with them to explain the situation and see if you can gain a bit more time. You need to stretch your cash to meet living and other important expenses. Be brutal about cutting back on non-essentials for now since you don’t know when you will be earning again. The need for an Emergency Fund becomes so glaring at times like this. If you don’t have one, make this a priority as soon as you start a new job. Aim to set aside six to twelve months of your living expenses in a money market account. If your finances are relatively healthy, you have options and won’t be forced to take the first unattractive job that comes your way. Don’t ignore your mental health Particularly if you are stressed or anxious, your physical and mental health can be affected so don’t neglect this very important aspect of your life.

and business contacts, matter now more than ever. Networking activities, provide good opportunities for job leads, and for you to sell yourself. Stay in touch with former managers; it pays to leave with a good impression. If you left well, your former employer might be able to help. Be sure to tell everyone you know that you are looking for a job; many great job opportunities are not advertised; they are often filled by personal contacts. Avoid employment gaps in your CV Try to avoid having to explain significant gaps in your CV. A future employer will be impressed that you did not just sit at home twiddling your thumbs, but rather that you kept yourself occupied gaining experience and new skills even if unpaid.

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Internship and volunteering gets you a foot in the door, presenting an opportunity to showcase your skills, commitment, and professionalism. Volunteering comes with personal and social benefits as well as a sense of fulfillment. It can also enhance your skill sets and introduce new knowledge that will be helpful in your job search; indeed many permanent roles have resulted from a stint as an intern or a volunteer. Even if it doesn’t, you would have gained valuable experience. Can you leverage on your skills? What is that special talent or skill that you can leverage on to earn? What are you passionate about and capable of doing relatively easily and well and doesn’t have huge start up costs? Do you have a great idea that you are passionate about that could become a small business? Reflect on this and you will find that there is some solution that you can provide. People pay for solutions. Develop yourself Do you need to spruce up your skills to make yourself more marketable? IT, language and other skills or certifications will broaden your job options and keep you current and engaged. Another Masters degree, if you can afford it might seem tempting, but will it really alter the stakes? Whilst no learning is wasted, becoming an “eternal student” picking up every available qualification does not necessarily give you an edge. Be strategic about your @Businessdayng

choices and seek relevant knowledge and experience for the future that can directly support any chosen career path. Don’t be fixated on your dream job. You may have to accept a role that does not necessarily meet your expectations when you consider your qualifications, expertise, experience or status. Be flexible and take what is available particularly if you have significant bills to pay and no savings. If you are offered something that you can do well at, even parttime, take it whilst you continue the search. More people than ever before are experiencing job loss, and for significant periods of time. Whilst being unemployed is one of life’s most challenging events, it can also come with opportunities if you remain calm, proactive and carefully consider the positive implications of your situation. You have time to make some changes, learn new skills, and generally improve yourself. This turn of events could well be the impetus that you need to follow that passion, to birth that dream.

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

Monday 27 January 2020

BUSINESS DAY

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Monday 27 January 2020

BUSINESS DAY

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Monday 27 January 2020

BUSINESS DAY

In Association With

Intolerant India

Narendra Modi stokes divisions in the world’s biggest democracy India’s 200m Muslims fear the prime minister is building a Hindu state

AST MON TH India changed the law to make it easier for adherents of all the subcontinent’s religions, except Islam, to acquire citizenship. At the same time, the ruling Bharatiya Janata Party (BJP) wants to compile a register of all India’s 1.3bn citizens, as a means to hunt down illegal immigrants (see Briefing). Those sound like technicalities, but many of the country’s 200m Muslims do not have the papers to prove they are Indian, so they risk being made stateless. Ominously, the government has ordered the building of camps to detain those caught in the net. You might think that the BJP’s scheme was a miscalculation. It has sparked widespread and lasting protests. Students, secularists, even the largely fawning media have begun to speak out against Narendra Modi, the prime minister, for his apparent determination to transform India from a tolerant, multi-religious place into a chauvinist Hindu state. In fact, the scheme looks like the most ambitious step yet in a decades-long project of incitement. The BJP first rose to national prominence by agitating for the demolition of a mosque in the city of Ayodhya, to make way for a temple to Ram, a Hindu deity. The destruction of the mosque in 1992 by a mob of Hindu extremists, followed by deadly riots, only propelled the party’s ascent. Likewise, a massacre of Muslims in the state of Gujarat in 2002, when Mr Modi was chief minister, made him a hero to Hindu nationalists around the country. Alas, what has been electoral nectar for the BJP is political poison for India. By undermining the secular principles of the constitution, Mr Modi’s latest initiatives threaten to do damage to India’s democracy that could last for decades. They are also likely to lead to bloodshed. The sad truth is that Mr Modi and the BJP are likely to ben-

A Balkan beChanging tastes

Business has gone sour in America’s dairy capital Wisconsin’s small farms are vanishing

efit politically by creating divisions over religion and national identity. Such subjects keep the party’s activists and their allies in Hindu-nationalist groups energised—always a boon, given India’s relentless sequence of state elections. They also distract attention from awkward topics such as the economy, which has struggled since the BJP’s thumping election victory last year (see article). Most important, Mr Modi seems to calculate that a sizeable minority of Indian voters are sympathetic to his constant insinuation that Muslims are dangerous fifth-columnists, always scheming to do Hindus down and sell out their country to Pakistan. That is enough to keep him in office. Because of India’s first-pastthe-post electoral system and a divided opposition, the BJP won its outright majority in parliament with just 37% of the vote. Just now the BJP may be hunting for a new grievance. The Supreme Court recently issued a ruling that had the effect of depriving it of its favourite cause, by clearing the way for a Hindu temple to be built at the site of the demolished mosque in Ayodhya. The citizenship ruckus appeals to the party for the very same reasons that it has prompted widespread alarm. The plan

to compile a register of genuine Indians as part of a hunt for foreign interlopers affects all 1.3bn people in the country. It could drag on for years, inflaming passions over and over again, as the list is compiled, challenged and revised. Just how the register will be drawn up, and what the consequences of exclusion are, remain woolly. Indeed, Mr Modi is already claiming it has all been misunderstood. Meanwhile, the hullabaloo helps reinforce the notion, so electorally valuable to the BJP, that Hindus, although about 80% of the population, are threatened by shadowy forces that it alone has the courage to confront. This imper ils the inspiring idea of India as the world’s largest democracy. Mr Modi’s policies blatantly discriminate against his Muslim compatriots. Why should a secular government shelter persecuted Hindus from Afghanistan, Bangladesh and Pakistan, but explicitly vow not to take a single downtrodden Muslim? The citizenship row is only the latest in a series of affronts, from the BJP’s lionising of vigilantes thought to have killed Muslims to the collective punishment of the people of the Kashmir valley, who have suffered arbitrary arrests, smothering curfews and an internet blackout for five

months. Since independence, India has confounded predictions that its democracy would crumble by accommodating its many constituencies of language, ethnicity, caste and religion. A secular and impartial government, even if flawed in many other ways, protects all these groups. The deliberate and sustained persecution of one of them constitutes an implicit threat against all—and so puts the political system at risk. Voters should recall that the BJP has experimented with policies that disadvantage other minorities, from low-caste Hindus who defy the party’s view of their religion to speakers of languages other than Hindi. Because his rabble-rousing has a human cost, Mr Modi is also tarnishing the memory of Mahatma Gandhi, a preacher of non-violence. As it is, many Muslims have been lynched or beaten to death for supposed slights to Hinduism, such as loving a Hindu woman or killing a cow. From time to time the stoking of anti-Muslim sentiment leads to massacres like the one in Gujarat, in which more than 1,000 people were killed. By perpetually firing up Hindus and infuriating Muslims, the BJP makes fresh bloodshed more likely.

O WALK AROUND Dan Wegmueller’s farm in southern Wisconsin is to conjure up the past. He says each of his 50 Brown Swiss cows—with white-tipped ears and bells clanging from their necks— has a name and distinct personality. His red-painted barn is crowned by an elegantly arched roof. He trundles over the snow on a green John Deere tractor. Such small-scale farming looks wonderfully quaint. But it might as well exist in a museum. The farm, set amid rolling hills on 350 acres, has been in Mr Wegmueller’s family since the 1930s, the decade when dairy farms in America peaked at 3.6m. Today the country has 37,000 left, with just over 7,000 in Wisconsin. The state still brands itself

as “America’s Dairy Land” (though California has long produced more milk), and turns most of its white stuff into cheese. Farms are either going bust or industrial. Almost two dairy farms close each day in the state. In 2019 one-tenth of Wisconsin’s dairy farms shut down. Wisconsin is witnessing what other states—especially in the south and west—saw in earlier decades. Consolidation has come late partly because its small farms had previously remained relatively productive. Mostly, now, it is the small that go. Industrial-scale ones do well from technology, economies of scale and easier access to capital. A few minutes’ drive away from Mr Wegmueller’s farm is Pinnacle dairy. It opened in 2018 and has a 5,000-strong herd in six enormous white barns. Pumps at a warehouse fill several steel tanker trucks at a time. Tuls Dairies, a growing dairy firm, owns Pinnacle and six more big farms in Wisconsin Continues on page 19

Monday 27 January 2020

BUSINESS DAY

In Association With

Designed to acquit

The strange impeachment trial of Donald Trump As rivals wrangle over procedure, all eyes are on five vulnerable Republican senators

UTSIDE THE Capitol building on January 21st it was business as usual. A group of demonstrators chanted on the lawn. One man silently held up a sign warning “God is watching”. Another, with a placard taped to his purple shirt proclaiming, among several other things, “I am Jesus Christ”, screamed tirelessly. The closer you drew to the Senate floor, however, the more unusual things became. Reporters who wished to enter the Senate’s half of the building required not just press credentials, but special tickets, and were confined to roped-off pens outside the Senate floor. The Senate’s presiding officer was not, as is customary, a senator or the vice-president, but John Roberts, the Supreme Court’s chief justice. During the proceeding, senators had to surrender their mobile phones, forswear coffee—only water or milk allowed on the Senate floor—and heed the sergeant-at-arms’s warning to “keep silence, on pain of imprisonment”. For the most part, the customarily garrulous senators complied, notwithstanding the occasional passed note. After more than 12 hours of bitter debate, the Senate approved rules governing Donald Trump’s impeachment trial on a party-line vote. The trial began the next afternoon, and will probably be over by the time Mr Trump delivers his state-of-theunion address on February 4th. The outcome is not in doubt. To remove Mr Trump from office, 20 Republican senators would have to cross party lines, which is not

about to happen. But the trial still reveals much about Mr Trump’s hold on his party. The two sides gave previews of their arguments and tactics during the debate over rules. Adam Schiff, who chairs the House Intelligence Committee and is one of seven House managers acting as prosecutors, argued that Mr Trump had abused his power by subverting American foreign policy for his personal political benefit, had obstructed Congress by ordering his subordinates not to co-operate with its investigation, and that these comprise “the most serious [misconduct] ever charged against a president”. He also argued that the trial rules proposed by Mitch McConnell, the Senate majority leader, would make “a mockery of a [fair] trial”, because they threaten to block Democrats from introducing witnesses and evidence. The president’s lawyers, by contrast, focused on process. Jay Sekulow, Mr Trump’s lead outside counsel, argued that Mr Trump was “denied the right to cross-examine witnesses” during the House inquiry, which is untrue. Pat Cipollone, the White House counsel, asserted that Republicans were denied access to a secure room where Mr Schiff held a hearing, which is also untrue. He accused Mr Schiff of having “manufactured a false version” of Mr Trump’s phone call with Ukraine’s president, when in fact Mr Schiff introduced it as a paraphrase. Alan Dershowitz, a law professor who volubly defends Mr Trump, plans to argue that impeachment requires an ac-

tual crime or “criminal-like behaviour”—a view that is at odds with mainstream opinion and American history. (Richard Nixon was nearly impeached for abuse of power, which is not a crime, and Andrew Johnson was impeached for, among other things, “declar[ing] with a loud voice, certain intemperate, inflammatory and scandalous harangues”.) The debate between the two sides grew so heated that after 12 hours in session, the perennially decorous Mr Roberts moved to admonish them to “avoid…using language that is not conducive to civil discourse.” An hour later Mr McConnell’s rules passed. Each side will get 24 hours to make its case, spread over three days. The Senate will be in session six days a week, excluding Sundays, until the trial ends. After the initial presentations, the Senate will get 16 hours to ask questions, submitted in writing for Mr Roberts to read aloud, followed by four hours of argument and deliberation. The Senate will then debate whether to call for more witnesses and evidence. That last rule rankled Democrats. Since the House impeached Mr Trump, John Bolton, a former national security adviser, has said he would honour a subpoena for testimony. Lev Parnas, a Ukrainian-born Republican donor indicted for campaign-finance violations, said that Messrs Trump and Bolton, as well as Vice-President Mike Pence and William Barr, the attorney-general, were all aware of the scheme to press Ukraine’s president to open an investigation into Joe and Hunter Biden. Democrats want to hear from

them, as well as other witnesses whom the White House has blocked. On January 21st they forced—and lost—many votes on subpoenas for documents and witnesses, less because they thought they stood a chance of winning than because they wanted to force vulnerable incumbent Republican senators to cast votes that can be used against them in an election campaign. These five senators, running this autumn in states where Mr Trump has a negative net-approval rating—Susan Collins of Maine, Martha McSally of Arizona, Thom Tillis of North Carolina, Cory Gardner of Colorado and Joni Ernst of Iowa—are in an unenviable position. Voting to convict Mr Trump risks prompting a Republican primary challenger. Helping to form majority support for more witnesses and evidence risks inviting a long court fight—Mr Trump will probably try to block Mr Bolton from testifying—which leaves time for questions from pesky reporters. Yet, appearing too eager to rush to a verdict risks harming them with the independent voters they need to hold on to their seats. Mr Trump, watching the initial proceedings from Davos, appeared supremely unconcerned with anyone’s fate but his own. He called the House managers “major sleazebags”, and fantasised about attending his trial in order to “sit right in the front row and stare into their corrupt faces”. And he boasted, “Honestly, we have all the material. They don’t have the material.” That is, of course, precisely what is alleged in the second article of impeachment.

Business has gone sour in America’s... Continued from page 18

and Nebraska. A state report last year noted that such big farms, with at least 200 cows, already churn out two-thirds of all Wisconsin’s milk. That share is likely to rise. The industry is consolidating for several reasons. In the long run, blame an ageing rural population. Many older owners cannot persuade their adult children to take over. And why would they? It is ever tougher to turn a profit from a small herd of cows. Milk prices have slid for decades, largely because ever better techniques, genetics and technology ensure rising supply. Consumers at the same time are losing their taste for drinking milk. On average an American gulped 247lb (109 litres) of it in 1975, but only 146lb in 2018. Tina Hinchie, who has 220 cows on another picturesque lot with red barns, mentions more recent problems. She laments volatile weather, especially floods, in the past few years. And although most milk is sold domestically (in Wisconsin 90% goes to local cheesemakers), exports that once accounted for 15-18% of national sales have been hit. China last year shunned many products, including whey, which it previously lapped up; after an outbreak of swine fever in China killed half its pigs, demand for whey as animal feed collapsed. Exports of cheese to Mexico have also suffered. Mrs Hinchie blames “horrific” trade disputes engineered by Donald Trump, although other difficulties are also to blame. Farmers complain it is getting hard to find labour, even as wages rise. Mr Wegmueller can lure parttime help only by offering free accommodation. Mrs Hinchie last year invested $3.3m in a laser-guided robot milking system she calls the “Taj Mahal” of high-tech help. It means she can cut her labour force to a single farm hand, from four. She boosts income with farm tours—with as many as 10,000 visitors a year—that city folk enjoy. Mr Wegmueller is also betting that farm stays will be a bigger business than milk sales. Small farms that do not diversify are unlikely to hang on.

Monday 27 January 2020

BUSINESS DAY

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Monday 27 January 2020

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

INDUSTRIALS

Vitafoam hits 5-year high on the back of impressive full-year result

times earnings. The average PE on the NSE is 7.8 times earnings. After a disappointing 2019 the equities market has regained its mojo since the

beginning of the year as investors take positions ahead of the earnings season. Buoyed by the recent move of the central bank to ban individuals and local corporates from the Open Market Operations (OMO) window means that current maturities cannot be rolled over, this has led to increasing liquidity in the system. With the current abysmal rates on sovereign bonds and government short-term debt instruments often called treasury bills, investors are left with no other option than to seek alternative assets classes to invest their funds, and it appears the equities market is now the logical destination of any discerning investor. Vitafoam’s Q1 2019/2020 results would be out in a few weeks from now and will be a pointer as to the company’s ability to sustain last year’s performance. The results are for the three months ended December 2019, which witnessed increased consumer spending.

be absorbed into the leadership structure at Paga, retaining Eric Chijoke as the chief technology officer responsible for product development, Simon Solomon becoming the lead systems architect, and Gideon Abate as the head of product innovation. The 62 team members of Apposit will now join the rest of the Paga organization bring-

ing the total staff strength of Paga to over 530 people. With this acquisition, Paga is now poised to build a global product development organization with teams based in Lagos, Addis Ababa, London, and Mexico City. Paga was advised on the investment round by global law firm Norton Rose Fulbright LLP (Bayo Odubeko and Nari Ertem)

OLUFIKAYO OWOEYE

fter an impressive full-year results, investors have continued to take position in the shares of foam-maker, Vita-Foam forcing the share price to hit N5, the highest in five years. Since the beginning of trading this year, the share price of Vitafoam has gained 13.64percent as at Friday. In its full-year result for the period ended 30th September, profit more-than-quadrupled and crossed a record billion naira-mark after company sales jumped 14 percent. Vitafoam posted an annual profit of N2.46bn for the business year ended 30 September 2019. This is 309 percent more than it made in the previous year and the fastest bottomline growth in at least five years. The manufacturer grew revenue by 14 percent to N22.28bn with sales from foams and other products up by 10 percent year-on-year

while Freight income which was dormant in 2018 contributed N779.328m in 2019. The Key drivers behind the results were higher revenue and lower finance costs. Fi-

nance costs reduced from N1.3 billion in 2018 to N1 billion in 2019, down 23percent year on year. While it has hit a 5-year high, there may be room for

further upside, as the stock is trading at a price-earnings ratio far lower than the average on the Nigerian Stock Exchange (NSE). Vitafoam is trading at a PE ratio of 2.7

TECHNOLOGY

Paga acquires US software company, Apposit LLC …Launches fintech services to push digital transformation in Ethiopia JUMOKE AKIYODE-LAWANSON

igeria’s largest mobile money operator, Paga, poised for global expansion, has announced its acquisition of Apposit, a technology company based in Addis Ababa. In 2018, when announcing its $10million raise in growth financing, Paga also made it known that it had begun exploring opportunities in other economies similar to Nigeria in efforts to build a global emerging markets payments powerhouse. In line with this, the company has acquired its strategic partner, Apposit, a US software company with primary operations in Addis Ababa, Ethiopia, that builds software to power innovative and high impact businesses in Africa. This relationship is not new; Apposit has dedicated an engineering team to the company since 2009, led by Eric Chijioke, who is also Paga’s chief technology officer. “Our favorite motto at Paga is that we go farther together as a team, and this is exemplified in our decision to take our trusted business relationship with Apposit

one step further and have it fully become a part of the Paga family. By doing so, we not only gain a scalable world-class internal engineering team, but we also are in a stronger position to grow our global payments business,” said Tayo Oviosu, founder/CEO of Paga. Oviosu said; “Last year we refined our mission and vision to birth our massive transformative purpose: To make it simple for one billion people to access and use money. Apposit has demonstrated strong alignment with our purpose and they have some of the very best engineers I have been privileged to work with, in over two decades in technology in Silicon Valley and elsewhere. I am very excited to have Apposit join the Paga team.” Its global vision has led Paga to pinpoint Ethiopia as one of the viable countries with similar cash and payment problems identified in Nigeria and introduce its services to the market. Acquiring Apposit provides Paga with an instant go-tomarket strategy to launch the Paga service in Ethiopia under the vast experience and leadership of Adam Abate,

co-founder & CEO of Apposit, who will now become the CEO of Paga Ethiopia. The company will now also own Apposit’s other in-house technology products, Terra and Tangio. Terra is a digital agricultural platform that provides products and tools to collect, manage and analyze data in agricultural value chains. The Terra platform harnesses the power of data to improve decision making in agriculture. Tangio is a sales force automation platform for manufacturers and distributors of FMCG products. It provides companies the tools and intelligence to plan and execute their route to market strategies. “The acquisition of Apposit by Paga is a very natural progression in the close relationship we have enjoyed with Paga over the last 10 years. We are excited to join forces with Paga at a time where Ethiopia embarks in earnest on its digital transformation. As one company we will solve the use of cash and bring access to finance to millions of people in Ethiopia and beyond. Our companies are strongly aligned in terms of values, culture,

and purpose, and leveraging Paga’s vast experience and robust payments platform will position us for success,” Adam Abate, Apposit’s CEO said. “We also look forward to strengthening Paga’s product team and continuing to build technology that will be used globally.” Paga says the leadership team at Apposit will

L-R: Albert Folorunsho; managing consultant, Pedabo, Oluseyi Olanrewaju; executive head, finance, Vodacom Business Nigeria, and Killian Khanoba; Partner, Pedabo at the recently held Finance Act 2020 in Lagos with the theme: Navigating the New Tax Regime.

Monday 27 January 2020

BUSINESS DAY

COMPANIES&MARKETS POS transaction hit N3.2trn as stamp duty charge confusion persists OLUFIKAYO OWOEYE

he value of transactions on Point of Sale (PoS) channels across the country in 2019 increased 37.9percent to N3.20trillion from N2.32trillion recorded in 2018, according to the latest data released by the Nigeria Inter-Bank Settlement System Plc (NIBSS Analysis of the report shows that N222.9 billion worth transactions were carried out through the channel in January, However, in February, there was a drop in the value of PoS transactions to 193.4 billion – the lowest recorded in the year. While the highest value of PoS transactions was recorded in December with N372.68 billion. During the year, the volume of PoS transactions surged 53.4percent to 438.6 million, up from 285.8 million in 2018. Understand-

ably, December recorded the highest volume with a total of 46.13 million transactions, while the lowest volume was recorded in February 25.7million. The use of interbank instant payments on USSD platforms by bank customers received a significant boost in 2019, as transactions through NIBSS Instant Payment (NIP) increased 24.79percent to N105.2 trillion, from 80.4 trillion in 2018. The highest value of transactions recorded through NIP was December while the lowest was recorded in February. On another hand, further analysis shows that in 2019, transactions done through mobile transfers (Mobile Inter-scheme Transactions) hit N828 billion. Several impediments have been identified as dragging the full adoption of cashless policy in the coun-

try. Top among these concerns include the N50 stamp duty on transactions above N10,000. The Federal competition & consumer protection commission FCCPC, in a directive said the charge of N50 on point of sale transactions transferred to consumers has been banned According to FCCPC, any business found in offense of this directive shall be penalised in accordance with the applicable law. Sadly, despite the directive, some malls and outlets still continue to charge the N50 stamp duty. Findings by BusinessDay shows that some merchants in retail outlets, filling stations included the N50 stamp duty in their PoS machines automatically. This followed the widespread adoption of the N50 charge on customers seeking to pay their bills using debit cards.

L-R: Abdulhamid Hassan, senior manager, sales and trade development, middle belt, MTN Nigeria; Olugbenga Hammed, manager go to market (GTM), mobile financial high value services MTN Nigeria; Amina Danbatta, GM regional operations north MTN, Nigeria; Njide Ken-odogwu, sponsorship and promotion MTN, and Joseph Ogbuka, manager go to market MTN Nigeria, at the MTN Turn It Up Activation in Kubwa, Abuja. Pic by Tunde Adeniyi.

Jide Akeredolu (2nd l), district governor of Rotory District 9110 inducts Adebola Ismail Akindele, GMD/ CEO, Courteville Business Solutions, as a senior Rotarian while, Abdul Adewale Azeez, (r), president of Rotary Club of Yaba Metropolitan, and Tunbosun, Ajayi, (l), assistant governor applaud, at the official visit of the district governor in Lagos.

Monday 27 January 2020

COMPANIES&MARKETS

BUSINESS DAY

Business Event

ECONOMY

Tax professionals express optimism on the new Finance Bill OLUFIKAYO OWOEYE

he new Finance Bill recently signed into law would drive the government’s fiscal responsibilities this year and subsequent years. Speaking at an interactive breakfast forum organised by Pedabo in Lagos, Albert Folorunsho, Partner at Pedabo, highlighted some new changes to the Finance Bill and how this would impact businesses and individuals. According to Folorunsho, the new Act made changes to the Companies Income Tax (CIT) act, Value Added Tax (VAT) Act, Petroleum Profits Tax Act (PPTA), Personal Income Tax Act, Capital Gains Tax Act (CGTA), Customs and Excise Tariff Etc. (Consolidation) Act and Stamp Duties Act. Under the Companies Income Tax (CIT) Act insurance companies would be able to carry forward losses indefinitely as opposed to the 4-year restriction currently in place, also, Life and nonlife businesses would no longer be liable to special minimum tax provision and all wholly, exclusively, reasonably and necessarily incurred expenses

will be tax-deductible, the law also removes the double taxation caused by excess dividend tax (EDT) thereby encouraging corporate savings and retention of profits. In a bid to boost government’s shrinking revenue, the new Act increased Value Added Tax rate to 7.5percent from the current 5percent. Henceforth, banks are to request for Tax Identification Number (TIN) before opening business bank accounts for individuals, while existing account holders must provide their TIN to continue operating their accounts. Under the Petroleum Profits Tax Act, the new law repealed the provision of PPTA that exempts dividends paid out of profits derived from petroleum operations from withholding tax. Taxpayers in this space would now be saddled with the responsibility of withholding tax when paying dividends. The new Act increases the stamp duty on receipts to ₦50 on every transaction from ₦10,000 and above; and expands the definition of receipt to cover electronic transactions. In his address at the event, Muhammad Nani, chairman, federal inland

revenue service, FIRS represented by Gabriel Ogunjemilusi, a deputy director in FIRS, said the N8trn revenue target in the 2020 budget is feasible, noting that guidelines for the full implementation of the newly signed Finance Bill would be ready by February. According to Ogunjemilusi, in implementing the new VAT rate, the commencement rule would apply. “that is the new VAT rate of 7.5 percent would be effective at the point of invoicing and not the date of order or transaction,” he said Ogunjemilusi further said the Finance Bill would be an annual ritual that would accompany the appropriation bill. Noting that any inadequacies noted would be improved on. Also speaking at the even Ganiyu Musa, managing director, Cornerstone Insurance plc said the new Finance Bill would remove impediments on the operations of Insurance companies in the country. Pedabo is an independent member firm of Morison Ksi Providing Audit Assurance, Tax consulting and Advisory to clients in all sectors of the Nigerian economy.

Ngozi Osuya, traffic manager, SO&U Limited; Joe Ulaeto, associate director creative services, SO&U Limited; Biodun Adefila, chief operating officer, SO&U Limited; Udeme Ufot, group MD, SO&U; Mojisola SAKA, chief operating officer, Soulcomms Limited, and Kemi Evbota, group head human interest & admin, SO&U, at the SO&U Group GiveLove Community Outreach in Lagos.

L-R: Johnson Ndukwe, CEO, Jons Ndy Limited; Innocent Entonu, GM, regional operations, East, MTN Nigeria; Ugonwa Nwoye, chief customer services officer, MTN Nigeria; Kunle Adebiyi, chief sales/ distribution officer, MTN Nigeria, and Obiageli Agim, GM, Sudha Nigeria Limited, at the Y’ello Partners Appreciation Day event held in Owerri.

L-R: Nancy Ameh, Nollywood actress; Bose Ogunyemi, brand manager, Hollandia Evap Milk, Chi Limited; Mercy Johnson Okojie, brand ambassador Hollandia Evap Milk, and Godspower Utawure, brand manager, operations and activation, Chi Limited, at the Hollandia Evap Milk Consumer engagement at the movie premiere of “The Legend of Inikpi”

L-R: Uche Hilary-Ogbonna, consultant Civil Society Legislative Advocacy Centre (CISLAC), Auwa Musa Rafsanjani, executive director, CISLAC and Adesina Oke, director legal CISLAC during a press briefing on 2019 Corruption Perceptions Index (CPI), the global corruption ranking which Nigeria scored 26 out of 100 points, falling back by one point compared to the previous ranking held in Abuja. Pic by Tunde Adeniyi.

L-R: Ari De Beer, facilitator, Steadicam MTF Masterclass; Oladimeji Gbenga of Nigeria Television Authority; Femi Odugbemi, academy director, MultiChoice Talent Factory, West Africa, and Ifeanyi Ene, manager, Outside Broadcasting and studios, at a one-day ultiChoice Talent Factory Masterclass in Steadicam operations at the Africa Magic Studios, Lagos

Monday 27 January 2020

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 24 January 2020 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

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Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 364,338.56 10.25 -0.97 226 5,482,310 UNITED BANK FOR AFRICA PLC 290,695.08 8.55 -1.16 208 8,490,680 ZENITH BANK PLC 687,583.21 21.95 -0.23 388 11,036,167 822 25,009,157 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 263,830.40 7.30 -2.67 162 3,529,556 162 3,529,556 984 28,538,713 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,544,314.13 125.00 -1.57 129 1,467,790 129 1,467,790 129 1,467,790 BUILDING MATERIALS DANGOTE CEMENT PLC 3,065,587.28 179.90 2.86 190 2,461,288 LAFARGE AFRICA PLC. 281,886.42 17.50 1.74 206 5,525,033 396 7,986,321 396 7,986,321 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 356,008.96 605.00 0.83 14 1,073,382 14 1,073,382 14 1,073,382 1,523 39,066,206 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 9,072.12 3.40 1.47 6 1,133,150 6 1,133,150 6 1,133,150 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 6 1,133,150 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 3 650,000 OKOMU OIL PALM PLC. 62,958.06 66.00 - 10 17,066 PRESCO PLC 52,250.00 52.25 - 4 16,630 17 683,696 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,500.00 4.25 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,680.00 0.56 - 3 110,429 3 110,429 20 794,125 DIVERSIFIED INDUSTRIES JOHN HOLT PLC. 217.92 0.56 - 0 0 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 43,493.35 1.07 -0.93 96 15,054,076 U A C N PLC. 30,397.68 10.55 0.48 63 3,013,044 159 18,067,120 159 18,067,120 BUILDING CONSTRUCTION ARBICO PLC. 469.26 3.16 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 28,380.00 21.50 7.50 18 235,595 ROADS NIG PLC. 165.00 6.60 - 0 0 18 235,595 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,598.40 1.00 - 8 27,871 8 27,871 26 263,466 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 7,046.55 0.90 - 0 0 GOLDEN GUINEA BREW. PLC. 220.45 0.81 - 0 0 GUINNESS NIG PLC 66,149.56 30.20 - 32 73,406 INTERNATIONAL BREWERIES PLC. 77,362.76 9.00 - 24 113,636 NIGERIAN BREW. PLC. 415,838.91 52.00 - 37 310,649 93 497,691 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 166,800.00 13.90 -5.12 89 967,669 FLOUR MILLS NIG. PLC. 92,873.60 22.65 - 71 806,400 HONEYWELL FLOUR MILL PLC 9,357.63 1.18 9.26 38 1,085,003 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 39,741.58 15.00 - 35 999,787 UNION DICON SALT PLC. 2,993.06 10.95 - 0 0 233 3,858,859 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 20,378.49 10.85 - 11 31,240 NESTLE NIGERIA PLC. 1,093,865.63 1,380.00 - 59 219,746 70 250,986 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 6,254.22 5.00 - 30 446,682 30 446,682 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 23,227.29 5.85 - 25 108,561 UNILEVER NIGERIA PLC. 100,824.85 17.55 -9.77 81 1,050,329 106 1,158,890 532 6,213,108 BANKING ECOBANK TRANSNATIONAL INCORPORATED 140,374.07 7.65 0.66 71 7,327,325 FIDELITY BANK PLC 64,324.05 2.22 -3.48 52 2,720,763 GUARANTY TRUST BANK PLC. 944,740.85 32.10 0.16 324 34,309,716 JAIZ BANK PLC 19,446.40 0.66 1.54 26 2,246,639 STERLING BANK PLC. 55,853.41 1.94 -1.02 59 3,393,000 UNION BANK NIG.PLC. 180,548.67 6.20 - 45 348,017 UNITY BANK PLC 7,364.28 0.63 -8.70 53 5,427,792 WEMA BANK PLC. 27,387.87 0.71 - 19 470,461 649 56,243,713 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 5,613.47 0.81 -2.41 31 1,407,966 AXAMANSARD INSURANCE PLC 22,365.00 2.13 - 2 140 CONSOLIDATED HALLMARK INSURANCE PLC 2,926.80 0.36 - 2 650 CORNERSTONE INSURANCE PLC 7,953.93 0.54 - 14 51,414 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 1 100,000 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 1,904.09 0.26 - 15 538,177 LAW UNION AND ROCK INS. PLC. 2,964.47 0.69 4.55 20 4,418,000 LINKAGE ASSURANCE PLC 3,840.00 0.48 9.09 6 781,233 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 3 2,658,200 NEM INSURANCE PLC 11,617.11 2.20 10.00 22 1,174,100 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,906.58 0.54 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 2,272.89 0.20 - 2 240,000 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 2 2,450 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 1 219,570 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,951.61 0.37 5.71 22 1,077,496 143 12,669,396 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,583.90 1.13 -5.83 16 1,000,000 16 1,000,000

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MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,410.00 1.05 - 4 61,000 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 0 0 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 2,949.22 3.02 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 4 61,000 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 9,200.00 4.60 - 47 1,195,826 CUSTODIAN INVESTMENT PLC 34,997.09 5.95 - 5 59,677 540.00 0.36 - 1 30,000 DEAP CAPITAL MANAGEMENT & TRUST PLC FCMB GROUP PLC. 38,813.31 1.96 -2.00 75 4,951,543 ROYAL EXCHANGE PLC. 1,697.97 0.33 -9.09 9 428,212 STANBIC IBTC HOLDINGS PLC 446,461.11 42.50 - 18 68,193 UNITED CAPITAL PLC 16,200.00 2.70 - 42 834,363 197 7,567,814 1,009 77,541,923 HEALTHCARE PROVIDERS EKOCORP PLC. 2,592.72 5.20 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 746.16 0.21 - 0 0 0 0 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 494.58 0.50 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 5,424.54 2.60 -1.52 15 606,739 GLAXO SMITHKLINE CONSUMER NIG. PLC. 7,175.26 6.00 - 15 178,866 MAY & BAKER NIGERIA PLC. 3,743.76 2.17 - 10 170,155 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 892.60 0.47 -7.84 13 497,879 556.71 3.62 - 0 0 NIGERIA-GERMAN CHEMICALS PLC. PHARMA-DEKO PLC. 325.23 1.50 - 0 0 53 1,453,639 53 1,453,639 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 781.44 0.22 - 7 1,510,000 7 1,510,000 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,206.13 0.41 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 357.48 3.31 -9.32 8 227,484 TRIPPLE GEE AND COMPANY PLC. 287.07 0.58 - 0 0 8 227,484 PROCESSING SYSTEMS CHAMS PLC 1,596.66 0.34 3.03 35 11,453,329 E-TRANZACT INTERNATIONAL PLC 10,962.00 2.61 - 0 0 35 11,453,329 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,123,311.48 298.90 - 2 8 2 8 52 13,190,821 BUILDING MATERIALS BERGER PAINTS PLC 1,956.31 6.75 - 2 1,099 BUA CEMENT PLC 1,280,072.58 37.80 - 52 407,497 CAP PLC 19,250.00 27.50 - 20 93,937 MEYER PLC. 244.37 0.46 - 1 3,000 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,769.32 2.23 - 1 1,500 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 76 507,033 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,192.12 2.03 - 0 0 CUTIX PLC. 2,501.08 1.42 -0.70 53 1,565,259 53 1,565,259 PACKAGING/CONTAINERS BETA GLASS PLC. 34,998.04 70.00 9.55 18 123,305 GREIF NIGERIA PLC 388.02 9.10 - 0 0 18 123,305 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 147 2,195,597 CHEMICALS B.O.C. GASES PLC. 2,060.41 4.95 - 2 5,005 2 5,005 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 77.00 0.35 - 0 0 0 0 2 5,005 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 28 5,036,130 28 5,036,130 INTEGRATED OIL AND GAS SERVICES OANDO PLC 46,617.80 3.75 -2.85 62 1,354,892 62 1,354,892 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 53,332.04 147.90 - 17 4,863 CONOIL PLC 13,879.04 20.00 - 15 110,111 ETERNA PLC. 4,108.06 3.15 - 16 161,140 FORTE OIL PLC. 26,831.11 20.60 - 34 191,956 MRS OIL NIGERIA PLC. 4,663.23 15.30 - 9 10,996 TOTAL NIGERIA PLC. 39,724.05 117.00 - 24 43,006 115 522,072 205 6,913,094 ADVERTISING AFROMEDIA PLC 1,509.28 0.34 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 15,796.05 1.62 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 235.27 0.20 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,623.26 4.45 - 4 9,904 TRANS-NATIONWIDE EXPRESS PLC. 421.96 0.90 - 1 7,900 5 17,804 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,259.15 2.75 - 0 0 IKEJA HOTEL PLC 2,328.25 1.12 - 3 29,520 TOURIST COMPANY OF NIGERIA PLC. 7,076.28 3.15 - 0 0 TRANSCORP HOTELS PLC 33,821.80 4.45 - 0 0 3 29,520 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,320.00 0.36 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 223.78 0.37 - 3 16,487 LEARN AFRICA PLC 933.45 1.21 - 0 0 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 1 100 UNIVERSITY PRESS PLC. 539.26 1.25 - 5 15,742 9 32,329 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 679.66 0.41 -8.89 6 284,100 6 284,100 SPECIALTY INTERLINKED TECHNOLOGIES PLC 688.80 2.91 - 0 0

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Monday 27 January 2020

BUSINESS DAY

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Monday 27 January 2020

BUSINESS DAY

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Monday 27 January 2020

BUSINESS DAY

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Monday 27 January 2020

BUSINESS DAY

insurance today

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Insurance industry drives new initiative to close skills gap in actuarial profession …as NAICOM, CIFM partners Modestus Anaesoronye

he nation’s insurance industry is getting bigger with different aspects of the market requiring special skills and knowledge for growth and sustainability. One skill that more than ever before has become highly needed is actuarial skills, particularly with the need to do proper pricing of risks, and effective risks management. Importantly, and most demanding at the moment in insurance industry is the growing size of annuity business following increasing growth in pension funds under management currently standing at about N10 trillion, to which large chunk of it is expected will empty itself in insurance. According to Sunday Thomas, acting commissioner for Insurance/CEO, National Insurance Commission (NAICOM), the growing size of annuity as well as other aspect of the business had demanded the need for more actuaries in our industry. According to him, and more are whey the Commis-

sion is driving a new initiative to increase the number of actuarial analysts in the industry. Thomas said this informed the decision to grow about 100 actuarial analysts in the next five years, who will help to enhance the growth of the insurance sector. Thomas, who disclosed this in Lagos at the Actuarial Development Sensitization Workshop organised by the Commission in partnership

with College of Insurance and Financial Management (CIFM), stated that the initiative is aimed at developing necessary professional skills set and talents to drive the insurance sector. He said all expenses of the course and examination would be fully funded by the commission and offered at no cost to the selected participants. “Part of our plans is that within the next five years, we

want to produce at least 100 Certified Actuarial Analyst and we will take responsibility for the commitment. He said this is one of the market development initiatives to grow the insurance industry, stating that as a regulator human capital development was critical for its success and effective supervision of the industry. “Part of the development is the human capital development, as the growing potential

L-R: Oladimeji Salami, member, Committee on Actuarial Development, National Insurance Commission (NAICOM); Pius Agboola, director, Policy & Regulation, NAICOM; Yeside Oyetayo, rector, College of Insurance and Financial Management; Sunday Olorundare Thomas, acting commissioner for Insurance, NAICOM; Jola Fakoya, facilitator, Nigeria Actuarial Society (NAS); and Taiwo Aderoye, chairman, NAICOM Committee on Actuarial during the Actuarial Development Sensitization Workshop organised by NAICOM in partnership with CIFM in Lagos

of the industry is built on the capacity to have the required capital that will drive it forward. “The issue of measuring and taking necessary step for effective pricing has made the Actuarial profession to be more pertinent than ever before . “There is need to develop young professionals and give them a future in the insurance industry and we are determined to develop their potentials and make them relevant to the sector, “he posited. According to him, only a couple of the Insurance companies have an in-house Actuaries and this is why the commission has intervened to stem the tide , Thomas said Actuaries are also needed to manage the Annuity business which was becoming quite significance and almost accounting for 35 to 40 per cent of the life portfolio. He urged the potential beneficiaries to be committed to the programme to succeed, as the commission would only give candidates the opportunity to those who show commitment and decication. “This programme requires sharp, determined, qualita-

tive minded and serious individuals, so think critically about it before opting for it. “We are ready to give you all the necessary support and will persuade the Chief Executive Officers of the Insurance companies to give the candidates adequate time to study, ” he said. Thomas also noted that the NAICOM Academy would kick-off operations within the year in Abuja to train and empower its in-house staff, said there were all the efforts to build human capital for the industry. He said the academy would be the first of its kind for regulators in West Africa and would be structured to acquire and share more knowledge to promote the industry. Tope Smart, chairman of Nigerian Insurers Association (NIA) in his remark said there is no way the industry can do business of insurance very well without actuaries because of their role in proper pricing and risk management. He noted that this is a big market development initiative, thanking the acting commissioner for Insurance and the NNAICOM management for driving and sponsoring the programme.

Mutual Benefits Assurance recounts success 12 years after, looks to the future with optimism Modestus Anaesoronye

he Board, Management and Staff of Mutual Benefits Assurance Plc has rolled out rolled-out drums to worship and appreciate God for the successes it has recorded over the past 12 years of its existence as a company, while

also looking into the future with great optimism. At the firm’s 24th Annual Thanksgiving Service in Ikeja, Lagos, which was attended by staff, their families and friends, prayers were also made for this year’s businesses and wellbeing of the company and its stakeholders. The event was also used to reward no fewer than 75 Staff

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of the firm for their dedication and commitments to the growth of the company. Speaking at the event, Akin Ogunbiyi, chairman of the Company thanked God for what he has done in his life and the life of the insurance firm, while applauding all the company’s stakeholders for the roles they played in the success story of Mutual Benefits.

He applauded all the awardees for their dedication to work and keying into the mission of vision of the company to be a top insurer of choice in Nigeria, urging other staff to emulate this gesture. While imploring the awardees not to relent on their oars, he charged the company’s staff to increase their productivity in a bid to further grow

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the bottom line of the underwriting firm. “Looking back to what God has done for us, it is essential to start the year with a thanksgiving service like this. The last 24 years are full of testimonies. The company still remains solid and one of the top players in insurance industry. So, we need to thank God for this, while praying for his continuous support in the

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life of this company,” he said. Femi Asenuga, managing director, Mutual Benefits Assurance Plc, said the management of the company was making numerous efforts to increase its top line and bottom line, adding that, there are positive signs that better days lie ahead for the shareholders, customers and relevant stakeholders.

Monday 27 January 2020

BUSINESS DAY

insurance today

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E-mail: insurancetoday@businessdayonline.com

Cost of governance going up over incessant fire incidents ...embrace insurance The incessant fire incidents across the country, both at home and in commercial areas are adding to cost of governance when governments all the time comes to take responsibility of reinstating victims and providing palliatives when such situations occur. This was better left to insurers whose responsibility it is to manage risk and provide compensation, shares Dele Ayeleso, PR Manager at the Nigerian Council of Registered Insurance Brokers. Modestus Anaesoronye reports.

isks are inevitable part of human’s life. Nature has various manifestations that could either be gentle or aggressive. Sometimes, incidence of nature could be so calm while at the other times, it becomes fierce. The calm side is loved and desired by everyone, however, when the ferocious side is shown, devastation happens followed by gnashing of teeth and regrets. Time and tide are inconsequential when nature plays up its pranks. Certain phenomenons of nature are out of human’s control, hence the need to prepare for the inevitable. Or how else could one describe news of incessant fire disasters that often disturb the flow of human activities, not respecting the times or places. The incessant cases of fatal fires in homes and public buildings in major cities in Nigeria resulting in loss of lives and properties is a call for concern as most cases reported in recent past have further shrank the nation’s economy as most of the victims do not have insurance cover. Experts have opined that every fire outbreak poses serious threat to national economy, as enormous materials and properties are often damaged in the process. It is quite unfortunate that some breadwinners may not be so fortunate to escape death in the process. It is often a potential weapon of disruption of economic and commercial activities of the victims. The pathetic story of Late Thomas Adeyanju, a renowned photographer in Osun State brings to the fore the extent a man could risk his life to salvage his properties from being damaged as a result of inferno. On that faithful day, if Adeyanju had known that he won’t escape being trapped in the fire incidence, probably, he would have rather let go. The fire that started in an apartment set aside for his photography shop allegedly started as a result of electric spark that met with leaked fuel from his generator. Adeyanju woke to this reality but attempted to rescue his three children and some other valuables from the affected apartment. According to eye witness, Adeyanju successfully rescued the three children but could not escape to beat the last attempt to rescue some of his valuables. Eventually, he died suffering from almost 90 per cent burnt. Again, at the wake of activities in the New Year, the people of ancient Oyo town in Oyo State were routed by the incidence of fire disaster that gutted the ancient Akesan market in Oyo town in which materials worth millions of naira were lost. The incident brings to the fore the painful

agony and sense of loss such catastrophic events often leave with the victims after their occurrence. The nation has indeed continued to have sad tales of similar fires across the country in recent times, compounding the frustrations and poverty index of the populace. The Kano and Kaduna experience were least to be talked about. It seems government efforts to put firefighting mechanism in place have not been so much successful in taming the tide. It is pathetic to note that such fires catastrophes also lead to emotional distress of the victims and constitute a great loss to the nation’s gross domestic product. Although it is often the case that when such occur, attention is often directed at lack of, or inadequate fire-fighting equipment and safety devices that should have been put in place, which prompted the Oyo State Governor, Seyi Makinde, to take responsibility for the market fire. There have been many cases of fire incidents in Nigeria, some happened domestically, others were industrial which include market places. In the light of wanton loss of lives and properties the country is witnessing frequently, with the Nigerian economy being the ultimate loser, developing insurance culture will not only save Nigerians from huge losses caused by fire outbreak www.businessday.ng

and other mishaps but will also reduce the burden such development places on government by way of providing palliatives. This was corroborated Obafemi Hamzat, deputy governor of Lagos State, who emphasised the need for insurance, while reacting to incidence of fire that destroyed Lagos Market towards the end of the year 2019. Hamzat disclosed that the amount budgeted to provide succor for victims of mishap in Lagos could hardly suffice for just a few victims of an incident and could even have been used for other infrastructural development if proper insurance is in put in place. He added that where adequate fire insurance policy exists, property destroyed by fire can be reinstated with minimum delay. According to him, “When people lose their house, or in case of any other disaster, they have to start all over again, we are one disaster away from homelessness and poverty. It seems to me that the insurance industry should put heads together and see the way we can get all those people into insurance circle. We must institutionalize the culture of insurance”. In other climes, victims look up to insurance for succor in form of claims in any case of mishap but in Nigeria, victims beckon on Government for reinstatement.

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This has further hiked the cost of governance as a percentage of the state annual budget is often dedicated to provide succor for the victims. Unfortunately, in most cases, whatever is released from government is grossly insufficient to ameliorate the gravity of the loss. Hamzat believed that the way forward is for Nigerians to buy insurance policy and transfer this burden to the insurers, who are the professional risk bearers. This, he said, would surely ease the burden of government in mitigating these losses, since insurance is a social device providing financial compensation to cushion the effect of unexpected misfortune. Reacting to Akesan Market fire incident, the President of the Nigerian Council of Registered Insurance Brokers (NCRIB), Bola Onigbogi strongly canvassed insurance for the citizens, especially for public utilities like markets and other public places. She said, “it remains an incontrovertible fact that Insurance is actually the last hope of the common man, as it provides enduring succor to victims in the event of loss, which is part of the hallmark of human existence. It is our Council’s take that State Governments should encourage, patronize and embrace insurance for the purposes of ensuring prudence in managing and preserving their huge and valued human and material assets. “Of course, in the event of a loss, the government has minimal concern about providing succor to the victims, a burden that would have been shifted to insurance as the risk undertakers, as obtainable in other progressive countries of the world. This step would further allow government free its limited and scarce resources to satisfy other public oriented projects being yarned for by the people. “It must, however, be stressed that since insurance operations could be quite intricate, the engagement of Registered Insurance Brokers for providing insurance covers is a necessity’. “The continuous loses of merchandise and properties in many commodity markets in the country to fire disasters, is a serious concern since such loses could be better prevented and mitigated if the victims had embraced insurance.” It is often said that whatever is worth having is actually worth insuring. This gives credence to the increasing need for the individual and corporate institutions including government to insure their values human and material asset. This step will keep them away from the usual culture of often literally shutting the gates after the horse had bolted off!

@Businessdayng

Monday 27 January 2020

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

To be a great leader, you need the right mindset tify a specific purpose, goal or destination and prioritize making progress toward it. Leaders with a prevention mindset, however, are focused on avoiding losses. Research has found that those with a promotion mindset are more prone to positive thinking, are more open to change and demonstrate higher levels of task performance and innovative behaviors. If organizations want their investment in leadership development to more fully pay off, it is essential that they prioritize mindset development, specifically by targeting growth, learning, deliberative and promotion mindsets. As leaders cultivate each, their thinking, learning and behaviors will naturally improve because they are seeing and interpreting their situations more effectively.

RYAN GOTTFREDSON AND CHRIS REINA

he Brandon Hall Group, a human capital research and analyst firm, surveyed 329 organizations in 2013 and found that 75% rated their leadership development programs as not very effective. Why aren’t companies getting more bang for their leadership development buck? Our latest research suggests it’s likely to be because most efforts overlook a specific attribute that is foundational to how leaders think, learn and behave: their mindsets. We identified four distinct sets of mindsets that have been found to affect leaders’ ability to engage with others, navigate change more successfully and perform in their roles more effectively: — GROWTH AND FIXED MINDSETS: Decades of research have found that those with a growth mindset are more mentally primed to approach and take on challenges, take advantage of feedback, adopt the most effective problem-solving strategies, provide

developmental feedback to subordinates and be persistent in seeking to accomplish goals. — LEARNING AND PERFORMANCE MINDSETS: Compared to those with a performance mindset, leaders with a learning mindset are more mentally primed to increase

their competence, engage in deep-level learning strategies, seek out feedback and exert more effort. — DELIBERATIVE AND IMPLEMENTAL MINDSETS: Leaders with a deliberative mindset have a heightened receptiveness to all kinds of infor-

mation, as a way to ensure that they think and act as optimally as possible. Leaders with an implemental mindset, as the name suggests, are more focused on implementing decisions. — PROMOTION AND PREVENTION MINDSETS: Leaders with a promotion mindset iden-

(Ryan Gottfredson a professor at California State UniversityFullerton. Chris Reina is an assistant professor at Virginia Commonwealth University.)

How the venture capital pitch process is failing female entrepreneurs KAMAL HASSAN, MONISHA VARADAN AND CLAUDIA

n 2018, only 3% of venture capital in the U.S. went to companies with a female CEO. If we want both better VC outcomes and more gender balance in entrepreneurship, we need to root out the bias hampering ventures at their earliest stages. Our results suggest that by adopting a more data-driven approach to assessing a startup’s potential and profitability, VCs may see a better-performing portfolios that include more femalefounded firms. Multiple academic studies have shown that there is a strong gender bias in many different elements of the pitch process. The confidence gender gap is one reason pitching frequently gives women short shift; women tend to undervalue themselves compared with men in competitive situations, and consequently come off to potential investors as “less sure of themselves.”

Does pitching serve a business purpose that outweighs its blind spots? Most of the VCs we spoke to insisted there is no other way to get an up-close-andpersonal sense of the venture and the founder. But we would argue that if VCs’ instinctive gift for picking winners leads them to choose almost exclusively men, maybe their senses aren’t all they’re purported to be. There are far more important predictors of venture success than the CEO’s ability to deliver a pitch. Early-stage sales data deliver nonbiased indicators of customer need, product fit, marketing skill, sales funnel and customer relationship management, not to mention the CEO’s ability to assemble and manage a team to deliver results. If the goal of venture investing is to pick the best companies and deliver top quartile returns, it doesn’t make sense to incorporate a step that knowingly leads to selecting startups based on gender and looks. If VCs decide to keep the traditional pitch, one rational choice is to allocate pools of money explicitly by gender. This

eliminates gender bias, by having women pitch only against other women. The alternative to gender segregation is to choose to design a pitch-less investment process. We’ve found that funds that don’t consider a pitch invest in eight to 12 times more

women than average, even though they do not have an explicit gender mandate and are investing purely on financial performance. This means there is both a strong financial reason and a gender-equity reason to eliminate the pitch from the venture capital process.

(Kamal Hassan is a founding partner of Loyal VC. Monisha Varadan is a partner at Zephyr Ventures. Claudia Zeisberger is a senior affiliate professor at INSEAD.)

Monday 27 January 2020

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

How global leaders should think about solving our biggest problems MARK R. KRAMER, MARC W. PFITZER AND HELGE MAHNE

he idea that global companies can take a leading role in social progress is not wrong; the question is how they can do so in a way that realistically achieves social impact and delivers value to their shareholders. High-level global partnerships serve a useful purpose by garnering resources, generating knowledge and focusing attention on the urgency and importance of the issue at stake. Unfortunately, the one thing these partnerships rarely do is actually solve these problems. As we have learned from studying more than a dozen examples, the collaboration must happen at a local level, where all relevant actors in business, government and civil society must be brought together to create systemic change. A case in point is the way Novo Nordisk, a leading provider of insulin, is fighting diabetes. It recognized that achieving a positive global social impact meant concentrating its efforts in the specific regions where the company’s ability to provide insulin is constrained by a dysfunctional health care system.

When the company entered the Indonesian market in 2003, for example, its sales were stymied by the lack of health care infrastructure, inadequate training of care providers and limited patient awareness of the disease. Improved diagnosis and patient adherence could have increased the insulin market fourfold by 2020, saving 4.6 million life-years, reducing government health care costs by $5.8 billion and increasing the country’s gross domestic prod-

uct by $2.14 trillion. Yet little progress was being made by the government, social sector organizations or global coalitions. Novo Nordisk estimated that the company could capture up to half that market increase and determined that the potential sales justified an eight-figure investment to launch a regional public-private partnership. Working with the country’s Ministry of Health, the Indonesian Society of Endocrinology and the Indonesian Diabetes

Association, the company’s local leadership and funding catalyzed a new level of crosssector engagement and alignment. Diagnostic rates have already improved by 10%, generating increased sales for the company as well as improved health for tens of thousands of Indonesians. Our research has consistently shown that companies that adopt an approach similar to Novo Nordisk’s can successfully lead social progress in ways that

deliver improved economic performance for shareholders. That entails working at a local level with the specific partners who can orchestrate change.

(Mark R. Kramer is a co-founder and a managing director of FSG, a global social-impact consulting firm. Marc W. Pfitzer is a managing director at FSG, and Helge Mahne is a director.)

Larry Fink isn’t going to read your sustainability report a line item on financial statements that reflects the company’s impact on all stakeholders, the environment and the broader society. This future is not far away, and BlackRock’s financial heft will accelerate its arrival. The need for a new language that bridges sustainability and finance is now.

MARK R. KRAMER

n his recent annual letter to CEOs, BlackRock CEO Larry Fink makes the stunning claim that climate change has brought us to “the edge of a fundamental reshaping of finance.” BlackRock has committed to “place sustainability at the center of [its] investment approach.” This is a warning from the world’s largest shareholder that public companies dare not ignore. It also brings together three corporate roles that have rarely been in the same room: finance, investor relations and sustainability. If Fink is correct in predicting that capital will increasingly be allocated to those companies with the most sustainable business models, then investors will need new sources of data to understand and anticipate the economic significance of sustainability strategies. Companies will need to communi-

(Mark R. Kramer is a cofounder and a managing director of FSG, a global social-impact consulting firm.)

cate very differently with their investors. Disclosing their performance on the most material social issues (determined by the Sustainability Accounting Standards Board), as Fink recommends, is a necessary step. But the more fundamental question is whether a given business is positioned to thrive in a world transformed by cli-

mate change and financed by investors who care about social impact. And if that message is to be heard by the capital markets, it will have to come through financial statements, quarterly earnings calls and investor briefings, not sustainability reports. What is needed is a new lan-

guage — or at least a new way of bridging social impact and economic performance. Companies must begin to report on the shared value they create, a new kind of double-entry accounting system. Alternatively, my colleague George Serafeim has proposed the development of “impact-weighted accounts,”

Brought to you courtesy of First Bank Nigeria

Monday 27 January 2020

BUSINESS DAY

real sector watch

Sluggish growth hits manufacturing sector as investment slumps 22% ODINAKA ANUDU

igeria’s manufacturing sector was hit by sluggish economic growth in 2019 as investments slumped 22 percent in the first half of the year. Manufacturing sector investment stood at N238.45 billion in the first half of 2019, representing 22 percent drop (N67.11 billion reduction) from N305.56 billion recorded in the first half of 2018, according to latest data from the Manufacturers Association of Nigeria (MAN). When compared with the second half of 2018, the number then represents 3.5 percent decline from N247.08 billion recorded in the period. “Manufacturing investment, in the period, was affected by late passage of 2019 budget which affected capital expenditure implementation and support for infrastructure. There were also over-regulation and high cost of capital in the economy,” MAN said in the economic review. Manufacturing investments are based on investments by new entrants and those of existing manufacturers. They are usually calculated from the amount of money pumped into buildings,

L-R: Gabriel Idahosa, vice president, Lagos Chambers of Commerce and Industry (LCCI); Michael Olawale-Cole, deputy president; Toki Mabogunje, president/chairman of Council, LCCI; Olumide Bolumole, head, Listing Business Division, Nigerian Stock Exchange (NSE); Nike Akande, past president, LCCI, and Muda Yusuf, director general, LCCI during the ringing of the closing bell by LCCI’s president at the Exchange in Lagos last Tuesday.

plants, machinery, vehicles, and land, among others. According to the report, estimated cumulative manufacturing investments from 2013 to first half of 2019 stood at N4.78 trillion. Within the period, investment in plant and machinery was biggest at N100.92 billion, though lower than N110.47 billion recorded in corresponding half of 2018 but higher than N72.98 billion recorded in the second half of 2018. Asset under construction trailed with investment worth N84.06 billion; land and building attracted investment valued at N40.35 billion, while N7.97 billion

was pumped into the purchase of new vehicles. More so, investment in furniture and fitting stood at N5.15 billion within the period. Across sectoral groups, food, beverage and tobacco group ranked highest with investment worth N73.95 billion. The group was trailed by chemical & pharmaceutical sub-sector whose investment was N51.76 billion. Next was the basic metal, iron & steel group whose investment stood at N33.06 billion within the period. For industrial zones, Ogun ranked highest with an investment of N74.56 billion. This was lower than

N95.31 billion recorded in the first half of 2018 but higher than N26.16 billion recorded in the second half. This puts Ogun zone as Nigeria’s investment destination within the period. Ikeja zone in Lagos recorded investment valued at N55.98 billion in the first half of 2019, though higher than N54.8 billion obtained in the corresponding half of 2018 but lower than N80.76 billion achieved in second quarter of 2018. Investment in Apapa zone declined to N18.52 billion as against N93.67 billion recorded in the first of half of 2018 and N47.29 billion in the second half, according to MAN’s

report. In the first half of 2019, Nigeria’s gross domestic product (GDP) growth, which measures economic activities within a period, stood at 1.97 percent. This was lower than 2.6 percent annual population growth, signifying low rate of spending and poverty among the population. Manufacturers self-generate 13,000 megawatts of electricity and spend huge amounts in powering their factories, owing to poor power supply by distribution companies. The country is still without critical rails in many parts of the country and poor road infra-

structure is a common sight. Taxes are many and are yet to be harmonised by various levels of government and their agencies in their chase for higher internally generated revenue. Muda Yusuf, directorgeneral of the Lagos Chamber of Commerce and Industry (LCCI), said all these would naturally make Nigerian manufacturers uncompetitive and unable to find their feet in the global market. The Nigerian economy has become unattractive to investors as old problems continue to drag the country. Cases take long to settle in courts, and government agencies contradict one another. The nation’s premier ports in Apapa and Tin Can, Lagos, are not easily accessible by manufacturers and exporters. “The slight improvement, notwithstanding, port-related challenges are still present, particularly delay in clearance of imported raw-materials and machinery that are not locally available by manufacturers, including the associated high and unwarranted demurrage which oftentimes slow down manufacturing operations and increases cost of production in the sector,” CEOs of manufacturing firms said in a third quarter report compiled by MAN.

SON advocates improved patronage of made- in-Nigeria products SIKIRAT SHEHU, Ilorin

sita Anthony Obaloma, director general of the Standard Organisation of Nigeria (SON), has stressed the need for citizens to patronise Mandatory Assessment Conformity Programme (MANCAP)certified products as they have been produced in line with global standards and can compete as well. Obaloma, who stated this weekend at the MANCAP Certificate Presentation to MUBAB Nigeria Ltd in Ilorin, Kwara State, equally charged the company management to be on the look-out by synergysing with the distributors as

experience had shown that adulterated of fake products was usually traced to improper monitoring and communication gap. Represented by Esther Okon, Kwara coordinator for SON, Aboloma commended MUBAB Nigeria Ltd for compliance with the Nigerian industrial Standard and sacred mandate in the provision of quality products, pointing out that with the certificate, the company was licensed to market its products within and beyond the shores of the country. MUBAB Nigeria Ltd had its first production on 13th Feb. 2013 with an initial production of 7,000 cartons per day and has expanded www.businessday.ng

exponentially. The nine certified products are; Sage hair treatment, Visage kitchen charm, dishwashing liquid detergent, Visage hand wash liquid detergent, Sage

instant hair conditioner, Sage hair relaxer, Visage car wash liquid detergent, Visage bleach and Visage laundrymate liquid soap. “Our local manufacturers are beginning to look

Esther Okon, Kwara coordinator for SON https://www.facebook.com/businessdayng

inwardly and becoming more creative rather than going out there, bringing in substandard products. They are now producing it themselves under the watchful eyes of SON. “Nigerian manufacturers should just hold on to standards as their watchword. As long as they have the standards, then they are likely to comply with the Nigerian industrial requirements. “We thank Mr President for doing this because it is helping us to bring out talents and qualities in us. Now that the border has been closed, farmers have gone back to the farm and we the consumers are beginning to patronise our locally manufactured products. As Nige@Businessdayng

rians, we should not allow our country to be a dumping ground for substandard products,” said Okon. Babalola Oyeyemi, chairman of MUBAB Nigeria Limited, who expressed delight over the development, as his company was first to receive three ISO and nine MANCAP certificates, said the company was planning to export its products to the international market. He identified funding, double taxation, electricity as major challenges confronting the company, and canvassed for local manufacturers to be protected and well funded. He further said that banks should address the issue of exorbitant interest on loans.

Monday 27 January 2020

BUSINESS DAY

real sector watch

Cross-border trade in ECOWAS marred by corruption, multiplicity of checkpoints — LCCI

....says border closure favours farmers but hurts traders ODINAKA ANUDU

he Lagos Chamber of Commerce and Industry (LCCI) says cross-border trade in West Africa is hard hit by non-tariff issues such as corruption, multiplicity of agencies and checkpoints as well as weak compliance with Economic Community of West African States (ECOWAS) protocol. The chamber spoke in reaction to the decision of francophone West African countries to move from the CFA to ECO—a move that has been criticised by Englishspeaking countries that had earlier agreed with francophone countries to use the currency for the entire West African region. Toki Mabogunje, president of the LCCI, said at a press conference in Lagos that West African countries should not worry about currency but about non-tariff barriers limitig economic activities within the region. “Currency issues are not the biggest issues in the integration process in ECOWAS,” Mabogunje said. “The bigger issues are around the nontariff barriers to trade. These include complex and corrupt customs procedures, multiplicity of agencies and checkpoints along the borders, import bans, foreign exchange regu-

lations, quality requirements, excessive documentation and many more,” she said. According to her, the experience of investors involved in the cross-border trade in the region had been awful. “There is also the challenge of weak compliance with the ECOWAS protocols, especially around the Ecowas Trade liberalisation scheme [ETLS]. Connectivity between countries in the sub region is also a major problem,” she noted. She explained that more

than 80 percent of trade in the sub-region was done by road which created a great deal of transit problems for movement of goods in the region. Mabogunje further said that lack of rail connectivity within the region was causing investors a lot of problems, stressing that there was weak link by sea because of the volume of cargo destined for the sub region and the economics of shipments to the sub region. “These are the bigger constraints to economic integration which the Heads of

States of ECOWAS need to address. It is important to get priorities right as far as economic integration issues are concerned,” she admonished. She said that the change by the francophone West African countries from the CFA to Eco had no significant implication for the Nigerian economy, but knocked the francophone countries for arbitrarily taking the decision without carrying other interest groups along. “The manner of the adoption of the Eco by the fran-

cophone countries raises concern around the mutual confidence levels between the Anglophone and francophone countries in the region,” she noted. “The agreement by the ECOWAS countries was that the Eco will be the name for the common currency to be adopted by the all ECOWAS countries as soon as necessary conditions are met. But curiously, the francophone countries went ahead to adopt the name apparently without consulting the Anglophone counterparts in the region. This has surely created a confidence problem between the two divides.” Trade among West African countries is about 12 percent, which is relatively low when compared with other regions. On continental basis, trade among African countries is 16 percent, which is poor when compared with Europe’s 59 percent, Asia’s 51 percent, North America’s 37 percent, and Latin America’s 20 percent, data show. Nigerian exporters spend an arm and a leg on logistics owing to inefficiencies and barriers to trade in the ECOWAS region. Even the ETLS, which is a tool used in ensuring free trade in the region, is violated as goods that come outside the region are branded ‘ECOWAS’. Sea transport is slow and vessels are often very difficult to find,

exporters say. Mabogunje further said that the closure of NigeriaBenin border had positively affected farmers as their productivity had been boosted, but said traders were hard hit by the decision. “Trade has been impacted negatively because a lot of trade is done across borders,” she said. She pointed out that many businesses in Nigeria were not ready for the upcoming African Continental Free Trade Area (AfCFTA) regime which would start in July this year. But she said AfCFTA was the way to go because this was time for Africans to do business with each other. On visa-on-arrival, which the federal government recently sanctioned, Mabogunje said the policy could be bittersweet. “While we believe the policy would help facilitate trade and investment in the country, it should be subjected to rigorous processes and screening before departure from affected countries. There is a need for concerned agencies to create mechanism so that this policy will not expose the country to further security risks,” she advised. “We should also liberalise visa requirements for citizens of advanced economies to facilitate inflow of foreign capital,” she added.

Unilever Nigeria hit by consumer shrinking wallets Gbemi Faminu

nilever Nigeria is a household brand and one of the foremost leaders in the fast moving consumer goods industry. However, over the years, its market position and consumer loyalty have waned, leading to a decline in the firm’s margins. Unilever, which was established in 1923, has enjoyed a large market share with the manufacture and marketing of foods and food ingredients, as well as home and personal care products. Unilever sources a lot of raw materials locally, including palm oil, local herbs, spices and packaging materials, which it uses for soaps,

seasoning cubes and other products. However, economic headwinds and low purchasing power of consumers have placed the firm in a position where it struggles. In 2018, the firm sold its spreads business which produced Flora, Blue Band and Rama owing to the segment’s underperformance. The company then decided to focus more on other better-performing categories. Analysis of Unilever’s financials for the 2019 full year shows that the firm recorded a series of declines yearon-year in both sales and revenue across its major segments, especially in home and personal care products. Its foods sector contributed N31 billion to its revenue. www.businessday.ng

This could be attributed to the recent introduction of the Lipton Iced Tea into the Nigerian market as well as its Knorr product, which has been able to retain a leading position in the seasoning cube market. The company’s revenue dropped significantly by 35 percent to N60 billion in the full year of 2019 from the N92 billion realised in the previous year. Its gross profit also dropped by 78 percent to N6 billion from N27 billion in 2018. Its other income recorded a huge decline to N65 million in 2019 from the N2 billion it recorded in the previous year. This was majorly affected by the huge drop in its sale of property plant and equipment which earned N2 million in 2019 but N2.1 bil-

lion in 2018. The company’s loss for the period stood at N4.2 billion marking a significant 142 percent decrease from the N10 billion profit recorded in the previous period. “It is all about the shrinking consumer wallets,” said Iker Ibeabuchi, an analyst and manufacturer of chemicals. “This is why the government has to focus on lifting Nigerians out of poverty,” he said. Unilever liabilities reduced as it did not borrow or request loans in 2019, according to its financial statement. However, its assets declined to N107 billion in 2019 from N131 billion in 2018. Following the federal government’s move to increase the VAT to 7.5 percent, ana-

https://www.facebook.com/businessdayng

lysts say manufacturing companies could incur higher costs, which will be passed on to the consumers in the form of price increases. The company has appointed Carl Cruz as its new managing director effective 1st February 2020 and analysts expect that with his experience, the new leadership will reflect Unilever’s focus on strengthening its operational effectiveness and efficiency. Giving an industry overview, United Capital’s consumer goods industry report says, “In all, while Nigeria’s market size is its biggest case for consumer companies to invest in the nation, weak consumer disposable income and high poverty rates have made the case for growth less @Businessdayng

compelling. Additionally, the country’s tough operating environment; decrepit infrastructures, porous borders, double-digit inflation and sluggish economic recovery, have further compounded sector players woes as they struggle to break-even.” Analysts say product demand drives activities in the consumer goods sector. Therefore, the success of FMCGs heavily depends on the consumer purchasing power. Since the country’s exit from the 2016 recession, consumer purchasing power has been constrained by poverty and unemployment. The country is world’s poverty capital and unemployment rate has risen from 18.8 percent to 23.1 percent since the third quarter of 2018.

Monday 27 January 2020

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: January 24– January 31, 2020

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

2.28

Q3 2019 — higher by 0.17% compared to 2.12% in Q2 2019

Broad Money Supply (N’ trillion) Credit to Private Sector (N’ trillion)

36.48 26.41

Increased by 2.9% in Nov’ 2019 from N35.45 trillion in Oct’ 2019 Increased by 2.18% in Nov’ 2019 from N25.85 trillion in Oct’ 2019

Currency in Circulation (N’ trillion) Inflation rate (%) (y-o-y) Monetary Policy Rate (%)

2.20 11.98 13.5

Increased by 7.17% in Nov’ 2019 from N2.06 trillion in Oct’ 2019 Increased to 11.98% in December 2019 from 11.85% in November 2019 Adjusted to 13.5% in March 2019 from 14%

Interest Rate (Asymmetrical Corridor) External Reserves (US$ million) Oil Price (US$/Barrel)

13.5 (+2/-5) 38.25 62.05

Lending rate changed to 15.5% & Deposit rate 8.5% January 22, 2019 figure — a decrease of 0.73% from January start January 23, 2020 figure— a decrease of 4.96% from the previous wk

Oil Production mbpd (OPEC)

1.77

December 2019, figure — a decrease of 1.34% from November 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Change(%)

24/01/20

17/01/20

29,628.84

29,618.52

0.03

15.26 0.18

15.26 0.32

0.03 (43.21)

3.51

3.55

(1.14)

Friday Rate

Change (Basis Point)

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

MONEY MARKET NIBOR Tenor

OBB

(%)

24/01/20

17/01/20

4.33

3.00

133.0

O/N CALL 30 Days

3.67 3.61 8.07

3.86 5.30 8.73

(19) (169.1) (66)

90 Days

8.10

8.72

(62.1)

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

24/01/20

17/01/20

24/12/19

Official (N) Inter-Bank (N)

306.95 362.25

306.90 361.84

307.00 363.62

BDC (N) Parallel (N)

0.00 362.00

Indicators

(%) (%) Energy Crude Oil $/bbl) 62.05 Natural Gas ($/MMBtu) 1.89 Agriculture Cocoa ($/MT) 2771.00 Coffee ($/lb.) 111.20 Cotton ($/lb.) 69.71 Sugar ($/lb.) 14.50 Wheat ($/bu.) 576.50 Metals Gold ($/t oz.) 1559.14 Silver ($/t oz.) 17.80 Copper ($/lb.) 271.75

1 Mnth 3 Mnths 6 Mnths 9 Mnths 12 Mnths

Friday

Change

(%)

(Basis Point)

24/01/20

17/01/20

3-Year 5-Year

0.00 8.16

0.00 9.16

0.0 (99.7)

7-Year 10-Year 20-Year

10.13 10.18 11.13

10.40 10.51 11.44

(26.7) (33.0) (30.4)

30-Year

12.49

12.61

(12)

Indicators

(3.74) (38.15)

2.97 (1.11) (1.73) 0.76 1.63

43.13 (14.59) (10.05) (5.41) 32.99

0.24 (1.44) (5.23)

18.34 3.55 (17.10)

Friday

Change

(%)

(Basis Point)

24/01/20

17/01/20

2.98 3.18 3.60 4.28 4.99

2.89 2.90 3.57 4.17 4.35

9 27 3 11 64

Friday

Change

(%)

(Basis Point)

24/01/20

17/01/20

3575.21

3535.41

1.13

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

11.17 7.51 45.54

11.05 7.40 43.92

1.12 1.46 1.62

YTD return (%)(US $)

-10.27

-11.86

1.59

Index

TREASURY BILLS (MATURITIES)

91 Day

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.

(4.96) (7.80)

Friday

Tenor

Disclaimer

YTD Change

ACCESS BANK NIGERIAN GOV’T BOND INDEX

AVERAGE YIELDS Friday

1-week Change

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS Tenor

BOND MARKET Tenor

24/01/20

182 Day 364 Day

Amount (N' million) 5,849.03 266,000.00 193,000.00

Rate (%) 2.95 3.95 5.09

Date 15-Jan-2020 15-Jan-2020 15-Jan-2020

Global Economy In Europe, the Central Bank left the key interest rate on the main refinancing operations unchanged at 0% during its January 2020 meeting. The marginal lending facility was also kept at 0.25% and the deposit facility at -0.50%. The President of the European Central Bank (ECB) confirmed the launch of a review of its monetary policy strategy. According to the central bank's press release, the review of its monetary policy strategy, which is expected to be concluded by the end of the year, will encompass quantitative formulation of price stability, monetary policy toolkit, economic and monetary analyses and communication practices. Other considerations, such as financial stability, employment and environmental sustainability, will also be part of it. In a separate development, the US IHS Markit Manufacturing PMI fell to 51.7 in January 2020 from 52.4 in December 2019, the slowest increase in factory activity in three months. Output continued to rise at a moderate pace, new business growth was only marginal as both domestic and foreign client demand softened. Elsewhere, Japan manufacturing Purchasers Managers Index fell for the ninth consecutive time as readings came below 50. A PMI above 50 represents an expansion when compared with the previous month. A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change. The Jibun Bank Japan Manufacturing PMI rose to 49.3 in January 2020 from 48.4 in the previous month. This is the fastest it has risen since August as both output and new orders fell at softer rate amid a rebound in export sales. Finally, business confidence strengthened in the wake of easing US-China tensions and optimism regarding Japanese relations with South Korea. Local Economy The Monetary Policy Committee (MPC) of the CBN raised the Cash Reserve Ratio (CRR) to 27.5% from 22.5% in its first meeting for the year 2020. This is the first time in about 4 years that the cash reserve ratio is experiencing any change. It did reach a record high of 31% in May 2015 and a record low of 1% in 2009. However, it left the benchmark interest rate unchanged at 13.5%, as it seeks to contain price pressures. In December 2019, headline inflation quickened to a 19-month high of 11.98%, well above the bank's upper band target of 9%, amid lingering effects of border closure which started in August and seasonal demand during the festive season. The Committee also kept other monetary policy parameters unchanged. The liquidity ratio was retained at 30%, whilst the asymmetric corridor on the monetary policy rate was left steady at +200 and -500 basis points. In a separate development, the Federation Account Allocation Committee (FAAC) disbursed the sum of N716.29bn to the three tiers of government in December 2019 from the revenue generated in November 2019. The amount disbursed comprised of N600.31bn from the Statutory Account and N114.8bn from Valued Added Tax (VAT). A breakdown of the sum disbursed among the three tiers, revealed that the Federal Government received N287.92 billion, states received N191.3 billion and the local governments received N143.69 billion. The oil producing states received N50.27 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 a collective sum of N43.08 billion as cost of revenue collection. Stock Market Trading activities on the Nigerian Stock Exchange th (NSE) for the week ended January 24 , 2020 were bullish as the market recorded one straight month of wins. Positive sentiment from investors and low-priced stocks are part of the reasons for the rise in demand. Consequently, the All Share Index (ASI) rose marginally by 0.03% to end at 29,628.84 points from 26,618.52 points the prior week.

Similarly, market capitalization notched up 0.03% to N15.261 trillion from N15.256 trillion the prior week. This week, we expect that market will react to the decision of the Monetary Policy Committee to raise the cash reserve ratio of banks from 22.5% to 27.5%. Money Market Borrowing costs declined last week across both short and long tenored rates as rates were boosted by net Open Market Operations credit of N360 billion. Short-dated placements such as call rates and Over Night (O/N) rates closed lower at 3.61% and 3.67% from 5.30% and 3.86%. The slightly longer dated instruments such as 30-day and 90day Nigeria Interbank Offered Rate (NIBOR) settled at 8.07% and 8.10% from 8.73% and 8.72% the prior week. This week, we expect rates to trend around current levels as the market reacts to the news of the CRR increase. Foreign Exchange Market The naira depreciated across major market segments the prior week. The official rate marginally declined ending at N306.95/$, a 5 kobo drop from the previous week whilst the Nigerian Autonomous Foreign Exchange (NAFEX) lost 41 kobo to close at N362.25/US$ from N361.84/US$ the prior week. The parallel market remained unchanged week-on-week at N362/US$. The depreciation was due to demand for funds outweighing supply at the Investors' and Exporters (I&E) window. This week, we expect the naira to hover around prevailing levels at the various windows, boosted by the Central Bank's sustained supply of dollar liquidity to the market. Bond Market The previous week saw a dive in bond yields due to an active market. There was significant buying interest for most maturities across the curve which further compressed market yields. Overall yields on the five-, seven-, ten- twenty- and thirty-year debt papers finished at 8.16%, 10.13%, 10.18%, 11.13% and 12.49% from 9.16%, 10.40%, 10.51%, 11.44% and 12.61% respectively, the previous week. Consequently, the Access Bank Bond index increased by 39.80 points to close at 3,575.21 points from 3,535.41 points the prior week. We expect the buying sentiment to persist as market players attempt to mop up available attractive market yields. Commodities Market The oil market went into a negative spiral as China, one of the largest consumers of oil was hit by the SARS Coronavirus. The coronavirus is not only deadly, but highly contagious. Bonny light, Nigeria's benchmark crude dipped 4.96% or $3.24 cents to close the week at $62.05 per barrel. Bullions moved in varying directions as gold prices rose while silver prices dropped. Gold price gained support from weakness in global equities and the virus in China, while silver prices decreased on the grounds of profit-booking. Consequently, gold gained 0.24% to $1,559.14 per ounce while silver declined by 1.44% to $17.80 per ounce. This week oil prices are likely to bounce back from their lows as the World Health Organization (WHO) has come out to say that the new virus that has emerged from China does not yet constitute an international emergency. Precious metal prices might decline this week as the news by WHO tapers investors' confidence in the market.

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

Feb’20

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@Businessdayng

Mar’20

363

362

12.1

12.2

12.4

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

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

www.businessday.ng

Jan’20

Monday 27 January 2020

BUSINESS DAY

Start-Up Digest

In association with

Give me $100m and I will turn Africa upside down — Babaeko ODINAKA ANUDU

teve Babaeko is a consummate entrepreneur and astute player in the advertising industry. He is the group chief executive officer of X3M Group, which is made up of X3M Ideas, X3M Music, and Zero Degrees, among others. When he speaks, the industry listens. In an interview in his expansive office in Lagos, he explains that 2019 was a difficult year for businesses in Nigeria but 2020 offers glimmers of hope for Nigerians. Babaeko has made incursions into several African countries. His Nigerian office accounts for the whole West Africa because the country represents about 75 percent of the entire West African gross domestic product (GDP). “We are in South Central Africa, operating from Johannesburg, and Zambia covering Malawi, Mozambique and whole of that south central African region. This year, we will have the opportunity to move into East Africa that will cover Kenya, Rwanda and Ethiopia, but for now, let keep our fingers crossed,” he says. He explains that his expansion into several African countries objective is not basically to make money but to do what other people think is impossible. The Nigerian economy generally underperformed in 2019 owing to global and local headwinds. Nigeria is world’s poverty capital and unemployment rate is 23.1

percent, according to the National Bureau of Statistics (NBS). These indices weakened the capacity of Nigerian firms which should patronise the advertising industry. In spite of these, X3M Ideas withstood the storm. “The number could have been better but we are one of the few agencies you can say survived and withstood them,” he says. “Again, careful planning, good fiscal policy and cost management drove up productivity of the team. It is not a disastrous year for us, though it could have been better. But again, we are part of the micro economy; whatever happens at the macro economy has a way of trickling down to us,” he explains. He says what compounded the problem of the advertising industry in 2019 was that most of the usual spending that happened within the political cycle did not go mostly through registered Association of Advertising Agencies of Nigeria (AAAN) agencies. “I think it is because of lot of backdoor deals. Some foreign PR companies were contracted to the detriment of the local industry. I think it is high time the government looked into this. Each time those activities happened, the local industry is hurt,” he says. “If this government is serious about promoting the local contents and industries, they must look into the spending that happens during electoral cycles so that registered advertising companies in Nigeria can get the lion’s share of such spending,” he suggests.

If we look at the goal of the border closure, it is very sound strategy, but if we don’t find a way to communicate it effectively to the people, then we start to have problems. People just think this government is wicked and wants to punish them simply because the communication is poorly handled. He urges the government to ensure that professional advertisers become part of the policy-making process. “The advertising industry is being overlooked in this part of the world, but outside, I don’t think there is any year that UK economic case is discussed and somebody like Sir Martin Sorrell opinion is not sought as to the direction the economy will go. This is necessary because we are the people who interact with big players within sectors of the macro economy— from the

manufacturing to the farmer, to distributors to Fast Moving Consumer Goods and so on. They are our clients, so the first way to check where the wind of economy is blowing is from the advertising space because we know who is reducing spend, who is increasing spend, so you can use that to build up data to say ‘this is what happened last year, this is what is likely to happen this year.” He urges the federal government to set up a council for the Advertising Practitioners Council of Nigeria (APCON). “You cannot leave that sector grounded for three to four years without a council. It makes no sense,” he notes. “There is a government Act that set up APCON and to see that it is the government itself that is flouting that Act, for me, is bewildering,” he adds. He says despite the hue and cry about digital advertising, human capacity for creativity is what will sustain the industry. “The new media of today will become the old media of the next three years. Any agency that wants to see its business grow needs to know how to integrate technology into what it does because that is where the budget will continue to go. In Nigeria, because of the peculiarity of our own social economic structure, we probably will get there. However, digital technology and traditional advertising will still remain side by side until we are able to clean up some of the challenges we have in our infrastructure and social space,” he explains. Babaeko says though this

is the period he has seen the highest number of middleclass Nigerians flee the country, he remains confident of Nigeria’s potential . He has plans to list his business on the Nigerian Stock Exchange in the nearest future. “Honestly, if I have one last goal in my pocket list, I want to be the first agency that will list in stock exchange. I know it is going to take a bit of some kind of mergers and acquisition. We are really open and ready for some of those conversations. Like I said, we are meeting some potential investors in Switzerland in couple of days. For some of the expansions we are doing now, we require a lot of money. I keep telling people if I have a war chest of N100 million dollars in my pocked today, I will turn Africa upside down as far advertising is concerned. We are looking forward and optimistic, we have built a brand that people will be excited to invest in,” he says. Babaeko is now a farmer. He plans to be part of the contingent that will feed Africans in the near future. “I have close to 50 hectares with palm trees in Kogi State. By the end of this year, it will be one year, and then we want to start bringing the machines from Malaysia that will be doing the extraction. I am not even pretending that it is easy because I can see the challenges. Now, we are setting up irrigation systems that we got out of Israel. We try to see how we fuse technology into traditional means of farming. We are really excited,” he further says.

said Attah Anzaku, CEO of AgroEknor, exporter to Europe, Asia and the Americas. “Even if you have the access, cost is crippling,” he added. The Central Bank of Nigeria (CBN), realising that many banks would not want to lend to the real sector, raised the loan-to-deposit ratio from 60 to 65 percent in 2019. There are indications that it may be further raised to 70 percent this year. Oladapo Abiodun, former chairman of Small and Medium Enterprises Group (SMEG) of the Lagos Chamber of Commerce and Industry (LCCI), said cost and access to funds were intertwined, adding that tenor of

funds was an often ignored but important issue. “The funds we have are not suitable for the kind of economic environment we have. The economy requires long-term funds, which are unfortunately not available,” Abiodun, who is also the CEO of an exporting firm, Comtrade Foods Limited, said. He explained that most SMEs could hardly afford to provide collaterals required by commercials banks. “In many climes, government intervenes to guarantee such funds and even provide the needed mentorship,” he said. Muda Yusuf, directorgeneral of LCCI, said access for funding was much more difficult for MSMEs but cost

of funding was a much bigger challenge for medium and large enterprises. “For micro and small businesses, because they are perceived as high risk, collaterals is tougher and many of them cannot provide such,” he said. “For them, the big issue is not just the cost but access. If you ask them to pay 30 percent per annum, they will pay, after all some micro and small businesses borrow from microfinance banks at 5 percent per month or more, which amounts to 60 percent per year or more,” he added. He explained that bigger firms could provide collaterals due to their size but worry about high funding costs.

Steve Babaeko

Babaeko thinks it is all about taste for the foreign things, which has overtaken Nigerians as a people. He believes that the closure of Nigeria-Benin border is good as it forces Nigerians to consume local rice and get used to the taste, instead of the obsession for foreign rice and other products. “It will be a welcome development if they could do the same for advertising and related services,” he recommends. He points out that border closure is a commendable government policy, but it was misconceived due to poor communication and advertising. “One thing that affected the consumer confidence late last year was the border closure. For this, the government needs an effective advertising sector.

Are start-ups worried about cost of funds or access? ODINAKA ANUDU

ecently, BusinessDay sampled the opinions of entrepreneurs to determine which between cost and access is the bigger problem for MSMEs. The opinions were divided, with the majority thinking that both access and cost of funds have equal weight. “Interest rate is very high,” Adepeju Jaiyeoba, lawyer and chief executive of Mothers Delivery Kit, which reduces maternal mortality in rural communities, said. Ibrahim Maigari Ahmadu, chief executive of Liverstock247.com, Nigeria’s first

livestock online marketing and listing platform, said interest rate was high just as there were many gridlocks to access to funds. “Nigerian commercial banks are risk-averse. They put so many bottlenecks on the way when you want to access funds,” he said. “Interest rate is very high, which is a major inhibiting factor. Collaterisation is structured to knock you out,” he said. He explained that the risk averseness of banks prevented them from funding the agriculture sector as they were not certain about what to get. Nigeria’s benchmark interest rate is among the highest in Africa at 13.5 percent. www.businessday.ng

Ethiopia’s is 7 percent; Kenya’s is 9 percent; South Africa is 6.25 percent; Zambia is 10.25 percent, and Cameroon is 4.25 percent. Similarly, Rwanda is 5 percent; Mauritius, 3.5 percent; Algeria is 8 percent, and Senegal is 4.5 percent. Interestingly, the National Bureau of Statistics (NBS)’s recent MSME report shows that 85 percent of businesses could not have access to external financing within 2013 and 2017. In fact, only 5.3 percent of SMEs had access to bank credit, even with 40 percent of them having relationships with banks. “Both access to funds and costs are big issues for me,”

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Monday 27 January 2020

BUSINESS DAY

Start-Up Digest

Joan Adewale: Creating unique clothing line Josephine Okojie

ome people have to wait a lifetime to discover their real purpose in life. But for talented designer, Joan Adewale, founder of Agbeke AlasoOke, that time came when life presented an opportunity for her while still on a job hunt. Since then, the young entrepreneur has pursued her passion and turned it into a profitable clothing business through the preservation of some cultural heritage. Agbeke Alaso-Oke does not just design clothes, but do so using locally-made fabrics that has cultural heritage such as Aso-Oke to design her clothing line. Joan was inspired to establish her business in 2016 out of her desire to preserve the Yoruba culture. While still hunting for a job, the young entrepreneur saw an opportunity in the fashion industry. “I saw that the new rave at the time was how people embellished their Aso-Oke

for weddings. It was really big then and I thought to myself that I wanted to do something different with Aso-Oke,” she explains. “That was how I started designing my clothing line using Aso-Oke as fabrics,” she says. The brand communicator-turned-entrepreneur attended a fashion institution to learn about fashion and designs before establishing Agbeke Alaso-Oke. “I wanted to carve a niche for myself and the first step for me was to enrol in a fashion institution to learn about Aso-Oke. At the time, the tuition fee was high for a job seeker then, but I was determined to go for it,” she recalls. She started the business with N5,000, an amount she got from her personal savings. Since starting, she says the business has grown, as its fashion line has been widely accepted by Nigerians. “My business has grown in leaps and bounds. We have been able to produce unique

Joan Adewale

fashion pieces that have been widely accepted by customers,” she says. She currently has eight full-time employees working with her. Joan sources her Aso-Oke fabrics majorly from Ibadan,

Oyo state. “Seeing that Oyo state is the home of Aso-Oke, I knew sourcing it will not be difficult. We source our fabrics from Iseyin, Oyo State and Ilorin, Kwara State.” She notes that Agbeke

Alaso-Oke has continued to remain business owing to its urban infusion to its clothing line. “What we have been doing to remain relevant in business is to have an urban infusion to our pieces such that you can wear on a daily basis,” she says. She explains that the business plans to diversify into interior decoration owing to the opportunities within the subsector in the short run. In the long run, she plans to go into large scale production of Aso-Oke clothing line by establishing a worldclass production factory. The young entrepreneur also wants her brand to become a household name all across Africa. Speaking on the major challenges confronting her business, she says that the high cost of fabrics with cultural heritage has remained the major hurdle for the business. “The major challenge for us is the high cost of production as well as access to pro-

duction machines,” she says. “Due to the nature of the Aso Oke fabric, it is usually woven. You will agree with me that handmade items are pricier than machineproduced items,” she adds. Joan urges the government to provide key infrastructure such as power to drive down production costs, while calling on them to support local Aso-Oke weavers with technology. Joan is a recipient of the Federal Government MSME 2019 Award for Excellence in Fashion and Style. Evaluating the Nigerian fashion industry, the young entrepreneur says that the industry is tremendously evolving and many organisations have continued to support it. On her advice to other entrepreneurs, she says, “Stay focused on your craft. Make sure you deliver solutions to the need of your customers.” “Be sure they need the solutions before you roll them out. Finally, make sure you carve a niche in your business,” she adds.

Wole Akeju: Providing affordable finger food for Nigerians BUNMI BAILEY

o l e A ke ju i s the executive director of RedBox Deluxe Cafe by Diddies Grill, a company that provides affordable luxury finger food to consumers in Nigeria and other parts of the world. It is a full-service grill bar with head office in Gbagada, Lagos. The bar features a full menu of moderately priced ‘comfort’ grill, but based on time-honoured recipes from around the world. “We have been in business since February 2019, taking care of walk-in customers, online requesters, events of different capacities as well as custom orders in a minimum of 18 hours daily availability scale,” Akeju says. The inspiration behind the business of the Computer Engineering graduate of the University of Lagos was drawn from the need to provide affordable food for the Nigerian masses. “I started this business with N4 million, which I borrowed from other arms of my business. And since then, the food business has experienced exponential growth,” he says. Before his food business, he had been a seasoned IT

professionally involved in web app developments, thus applying IT on other fields of endeavours, such as music and talent management There are a lot of street food vendors in Nigeria but for Akeju, his business prides itself with uncommon luxury service, taste and delivery. Like they say, every business has its challenges. “The major one for us is unstable prices of our supplies and the government shutdown of the borders. But in a good way, the shutdown has helped boost internal agricultural growth and development which forces us to be creative with

Wole Akeju www.businessday.ng

the production,” he says. “But the government should help reduce these challenges by boosting agricultural pre- and post-productions to make available more supplies. It should also ensure that loans really get to micro businesses of this nature serving multiple units of the economy,” he notes. Akeju, whose life values have taught him to be the best by providing peopleoriented solutions, did a couple of trainings in food business in New York, USA. He also has a chain of other business which are Reitigh G. Nigeria Limited, the company behind many travel

booking portals, CliqueTv Africa(online Tv) and RG5Music Events & Lifestyle company which manages Dj Consequence, Alatika, and Mc lively, among others. Currently, his outlet at Gbagada has a total of eight staff members with opportunities for ad hoc engagements during massive event functions. Apart from the outlet at Gbagada, he is currently planning to expand by opening additional four stores in Nigeria which will employ over 32 staff members. “I have plans to expand to other locations in Lagos and Nigeria as a whole, continuously improve on delivery by dispatch via our sister company Diddies Delivery to all locations and continuously partner with online food vendors such as Jumia Foods, Opay Foods, Konga Foods and Nairabox Foods to serve their customers. I also want to partner with major events this year to give the best memories. We will flaunt our own proprietary event on a quarterly basis called ‘TheGrill X Parties’ also,” he elucidates. Akeju, whose mentors are Richard James and Maurice James McDonald(founders of Mc Donalds worldwide), sees himself leading the finger food industry, making it affordable and accessible to the majority of people in the world.

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SMEs lament impact of Apapa congestion on production cost ODINAKA ANUDU

mall businesses in manufacturing and export say the cost of production has risen as a result of congestion in Apapa and Tin Can ports. They say cost of logistics has risen sporadically owing to the congestion, lamenting that corruption is now the order of the day at the ports. Jon Kachinwu, CEO of Jon Tudy Enterprises, an exporter to the United States, said he used to pay N55, 000 to N65, 000 for a 40-foot container from his Yaba factory to Tin Can four years ago, but now pays N350,000. He disclosed that agency fees had also risen from N350,000 to N650,000 as a @Businessdayng

result of the mess in Apapa and Tin Can. “This is why I call on the government to develop other ports, and provide adequate security there,” he recommended. A manufacturer, who prefers anonymity, said he paid N1 million to bring in his container in December 2019, which included N400,000 for transport to his Ojota/ Mile 12 factory. “The commissioner of police has to sign before you move in or move out your container. And this involves money. You have to ‘settle’ the police, the Navy and the Army, otherwise your container will be there for three weeks. But once you pay, your container will be free in one week, “ the manufacturer said.

Monday 27 January 2020

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

Saraki advocates rapid frontline solutions to maternal mortality Godsgift Onyedinefu, Abuja

L-R: Momoh Okpanachi, manager, sales and trade development, MTN Nigeria; Chikaodi Ofoegbu, regional sales manager, customer operations, MTN Nigeria; Caroline Obi, fashion designer and awardee of the MTN Turn It Up Empowerment Scheme; Umar Bashir, photographer and awardee of the MTN Turn It Up Empowerment Scheme, and Njide Ken-Odogwu, manager, sponsorship and promotions, MTN Nigeria, during the presentation of certificate to the Awardees of the Turn It Up Empowerment Scheme in Abuja. Pic by Tunde Adeniyi

Governors pledge inclusion of nutrition in primary healthcare James Kwen, Abuja

overnors under the auspices of the Progressives G overnors Forum (PGF) have indicated interest to include nutrition in the primary healthcare programmes of their states. The Progressive Governors said they saw the need to incorporate nutrition into their next phase of primary health programme covering about 21 states as well nourished people have strong immunity against certain ailments. Plateau State Governor and Co-Chairman, Progressives Governors Forum Governance Pro-

gramme Steering Committee gave this indication at the end of the 2020 1st Quarterly meeting of the Committee in Abuja. Lalong said the Committee conducts assessment of the performance of the states from time to time to determine those that are living up to expectations in the task of effective and efficient healthcare service delivery to the people, especially at the grassroot. He urged the PGF Secretariat to hold the meeting of the Commissioners of Health and Executive Secretaries of Primary Health Care Agencies of APC States before the end of the first quarter of the year as the outcome is expected to be taken also

at next APC Secretary to the States Governments’ Quarterly Meeting. “As we pointed out during the Inaugural meeting of this Steering Committee, during the era of 2019 2023 we will want the work of the PGF Governance Programme Steering Committee to focus more on strengthening the capacity of our states to have increased commitment to implement approved initiatives. “The PGF Secretariat would need to work with necessary experts to developing strategic framework to address this. We would expect this to form part of the proposals to be reviewed at the next APC SGSs Quarterly Meeting, after which Forum can

give its approval” Lalong instructed. Speaking further on the primary healthcare, he said, “apart from the general policies from the federal government and the states we also rely on donor agencies and from time to time, we do assessment. We issue bulletins to all the states so that the states will know their ratings in terms of performance. “Primary health is very important to us. We had a presentation by the Emir of Kano on issue of nutrition and before now some governors do not understand the importance of nutrition but after the lecture we saw the need to incorporate nutrition into our next phase of the programme.

Guinea-Bissau seeks Nigeria support in rice production Cynthia Egboboh, Abuja

he Federal Government has received request from the Government of Guninea-Bissau seeking assistance in rice production so as to enable them strive towards food sufficiency, food security and nutrition. This request was made in Abuja when the Minister of Agriculture and Rural Development, Mu-

hammad Sabo-Nanono received the Guinean Ambassador to Nigeria, Henrique Adriano Da Silva along with the Country Representative of Food and Agricultural Organization (FAO), Suffyan Koroma. The request according to the government shows the innovative successes recorded in the production of Nigerian rice by Nigerian Farmers which can be tied to the equipping www.businessday.ng

of farmers with improved rice seedlings, farm inputs and providing anchor borrowing facilities by the current Administration. Nanono emphasized that in the meantime, the Ministry will assist Guinea-Bissau in terms of personnel training / technical assistance in rice value chain, adding that establishing bilateral agreements between the two countries was absolutely necessary.

Ambassador Da Silva had earlier stated that rice value chain was the core of Guinean agriculture which saw Guinea exporting rice to other countries like Angola, Mozambique and Portugal, among others. The Ambassador remarked that as at today, 90 percent of rice consumed in the country was imported which calls for the government to seek assistance from the Nigerian government.

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he Founder and President of the Wellbeing Foundation Africa, Toyin Saraki has harped on the need for urgency in implementing inventions to reduce maternal mortality in Nigeria. Saraki made the call when she delivered a keynote speech at Ferrings Pharmaceuticals’ Senior Leadership Internal Meeting which included 75 Senior Employees of Ferrings and General Managers from Key Markets. She decried the destructive impact of post-partum haemorrhage on women and families in Nigeria and across Sub-Saharan Africa and called for delivering improved and accessible health systems as a priority. Explaining that health information in the hands of mothers is key to improving

maternal outcomes, wife of the former President of the Senate said, “although medicines are only part of the solution to strengthening health systems, they are a critical component. “As a pharmaceutical group I am delighted that you have found a way to make certain maternal healthcare interventions affordable. However, I believe you should also see it as your responsibly to deliver these solutions to the people who need them the most”. Saraki noted that nearly 20 percent of all global maternal deaths happen in Nigeria. In 2015, the country’s estimated maternal mortality ratio was over 800 maternal deaths per 100,000 live births, with approximated 58,000 maternal deaths during that year, a leading cause of which is post-partum haemorrhage.

Violence: US Embassy, Strauss School to sensitize Nigerian youths on positive attitudes Godsgift Onyedinefu, Abuja

s part of effort to promote positive attitudinal change among youths, the Strauss School of Music and United States Embassy are hosting a New York based band, the Huntertones in the country on an American Music Abroad (AMA) 2020 series aimed at global peaceful coexistence nurtured early among pupils and students. The Cultural Affairs Officer at the US Embassy, Sterling Tilley, said the aim of the visit is to establish a connection with the Nigerian youth, recognising the importance of creative and constructive outlets as opposed to engaging in harmful or violent behaviour. “American Music Abroad artists represent the new generation of musical ambassadors; reaching beyond concert halls to interact with other musicians and citizens around the globe. The aim of this visit is to establish a connection with the Nigerian youth, recognising the importance of creative and constructive outlets as opposed to engaging in harmful or violent behaviour,” Tilley said. Also, a member of the Huntertones band, Dan White, speaking at a one of the concert hosted by the Strauss Preparatory School, Maitama, Abuja said they are using their music to inspire the young children @Businessdayng

who played audience to the concert that they can become what they want to be if they work hard. White noted that Huntertones also encountered challenges at the very start, but through determination and hard work, they became an international band and that’s the type of lesson they want the young children to learn through the music they play. “We are here as cultural ambassadors to share music with Nigerians for a week. today we want the young children to be inspired, work hard and dream about what they could become. Because for the Huntertones inspiration was out driving force”, he said. In the same vein, Director of the Strauss Schools, Golda Obi said they made music a key curriculum because it prepares young children for the wider world, noting that students who learnt music and creative arts have an extra edge over their peers who did not. She added that, “communities are now about human interactions. Music is an ice breaker, it’s a story because education has become so universal, it’s expected that every child will be good in maths and English. But, I have found that the questions students meet at interview is ‘what else are you about?’, and at Strauss we’ve decided that we must give our pupils that what else to talk about”, Obi said.

Monday 27 January 2020

BUSINESS DAY

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Dangote Cement is the most profitable company in Nigeria BALA AUGIE

glimpse of Dangote Cement finances reveal that is it Nigeria’s most profitable company. The largest company by market capitalisation in Africa’s largest economy made N154.35 billion in profit after tax (PAT) as at September 2019, according to data compiled by BusinessDay. By comparison, Zenith Bank, the largest lender by profit made N150.20 billion, while MTN Nigeria, the largest telecommunications company made, N148.32 billion, while Guaranty Trust Bank, the largest lender by market value, made N146.98 billion, while Access Bank, made N90.73 billion. Dangote Cement’s net income is 17.63 percent of the cumulative profit of the 30 most liquid and capitalised companies on the bourse, NSE 30. Its market capitalisation of N2.97 trillion is 19.67 percent of the total market capitalisation on the bourse of N15.30 trillion. The producer of the building material has been paying glamorous dividend to shareholders. In 2018, it paid N443.01 billion while it has approved a share buyback of 10 percent of its ordinary shares outstanding of N17.05 billion. The cement maker has total as-

sets of N1.258 trillion, lower than the market capitalisation of N2.98 trillion. This means the company is sweating its assets in generating higher revenue and profit.

It remains an attractive growth story in the Nigerian cement space, with incrementally larger contribution to gross revenues from its Pan African businesses which provides

SHORT TAKES

exceptional portfolio diversification and strong FX earnings potentials. It continues to enjoy superior margins on account of strong energy efficiency and lower asset maintenance costs. While the recent stringent policies by the central bank have dampened the outlook for banks, the huge infrastructure deficit is a boon for Dangote Cement and its peer rivals. The strong infrastructure investment drive of the current administration is positive for cement consumption. The arguments for cement demand growth in Nigeria are compelling, thus lending credence to our strong cement consumption outlook. Analysts are betting that low per capita cement consumption estimated at 17 million units, infrastructural stock still below peer countries, unimpressive road network and growing case for concrete road, will add strength to the earnings of operators in the industry. Nigeria’s housing deficit is estimated at between 17 to 20 million housing units, with potential cost of $22 billion to bridge the gap over a period of 20 years, according to the World Bank. Dangote Cement’s shares are attractive as it is trading at a price multiple of 7.71 times earnings, as its shares has gained 21.96 since the start of the year.

13 Banks set to record combined N955bn in net profits in 2019 …banks set to grow profits by up to 113% from 2016 levels IFEANYI JOHN

f there were any doubts that banks are true titans of business in Nigeria, the 2019 performance of Nigerian banks is set to dispel any such thought. The New Year marks the beginning of the audit season for Nigerian banks who will be preparing their financial performance for the full year 2019 for stakeholders. Analysts who spoke to BusinessDay say they forecast that the 13 publicly listed banks on the Nigerian Stock Exchange (NSE) earned between N920 and N960 billion in 2019, representing an 11.35 percent growth in Profit after Tax over what was recorded in 2018. BusinessDay analysis of the 2019 nine months performance of the banks revealed that they generated about N716.9 billion in net profit between Q1 and Q3. Assuming the profit trend continues till year end, the annualized 2019

net profit is expected to reach N955.8 billion. In the two years post-recession, the profitability of the 13 banks have grown from N447.8 billion to N858.4 billion in 2018, marking a growth of 92 percent. With profits expected to exceed N900 billion in 2019, this will mean that banks have been able to double their profit in just 3 years post-recession. This remarkable profit report speaks volume to the financial strengths/levers of banks who have continued to expand their bottomline at double digit pace despite the slow economic growth environment. While the industry appears to be very profitable, almost three quarters of the profit generated by the banks was contributed by the five Tier 1 banks alone. Tier 1 banks generated profit of N521 billion in the first 9 months of 2019, which is 14.5 percent greater than the N455.9 billion generated during the same period in 2018. The 9 months profit by Tier 1 banks in 2019

accounted for 73 percent of the industry profit, up from 70 percent during the same period the previous year, proving that profit growth in the Tier 1 banks outpaced the other bank Tiers. Despite the 11.35 percent growth forecasted for Nigerian banks, the banking index returned -11 percent in the last one year as bank shareholders have continued to suffer from broad market selloffs on the local bourse. Many analysts struggle to comprehend why banks are most affected by the negative sentiment of bearish investors in the capital market. “Banks have been the main muscle of the Nigerian capital market for years. Investors have earned steady dividends which we expect to climb by at least 10% considering the strong growth in profitability recorded last year,” said Obinna Uzoma, chief economist at EUA Intelligence. “I think the surge in regulatory risk for banks last year caused investors to panic and triggered another round of selloff like we saw in 2018 during

P.E

the election selloff season. However, considering most foreign investors are invested in bank stocks, anytime they exit our markets, banks stocks typically decline on increased selling pressure,” he added. “I don’t think 2020 will be as rosy for the banks as the last 3 years considering that yields which were in double digits since 2016 have now declined to less than 7 percent. Also, cost of risk and non-performing loans is expected to trend higher with the rush to increase loan exposure based on the new directive of CBN to raise loan to deposit ratio to 65 percent. The increased loan loss provisioning and lower prime lending rates and lower treasury yields in 2020 will have a negative impact on profit growth this year. However, we already see banks trying to protect their net interest margin by giving very low deposit interest rates which should pull interest expense lower this year which adds some positives to hope for a decent profit growth for 2020,” Uzoma concluded.

27.5% The Central Bank Nigeria (CBN) on Friday raised the Cash Reserve Ratio (CRR) by 500 basis points to 27.5% while it held MPR at 13.5 % and kept other parameters constant. Governor Godwin Emefiele in Abuja said the CBN was concerned that inflation was fast rising beyond tolerable threshold, pushed by both monetary and structural factors. The Liquidity Ratio (LR) remains at 30% as well as the Assymetric corridor around the MPR at +200/-500 basis points. The CRR is the amount banks are required to keep with the CBN and it is one of the tool the apex bank uses to control money supply in the country.

9.77% Shares of FMCG Unilever on Friday plunged by nearly the most allowable in a day after the company announced its made an annual loss for the first time in four years. Unilever shares declined by 9.77 percent to N17.55 a unit in Friday’s trade, the most since November last year, as negative investors sentiment weighed on the consumer goods maker so that it emerged the worst performing on the Nigerian Stock Exchange (NSE) in the trading session. Lagos bourse gained 0.13 percent Friday. The loss in 2019 full-year was preceded by three years of decelerating bottom-line growth which had seen Unilever grow by an average of 112 percent a year.

40% Insurers’ premium income may rise 40% on PenCom’s life cover enforcement. Life insurance premium is currently growing at an average of 32 percent annually since 2014. Following implementation of retiree annuity and group life policy in some public and private sector institutions, Insurers’ premium income could witness significant growth if the National Pension Commission (PenCom) succeeds in enforcing compliance of life cover among employers of labour this year

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

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

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Monday 27 January 2020

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GDM Group Masterclass charts path for 2020 innovation in marketing, technology KELECHI EWUZIE

DM Group, a marketing innovation company that offers commercial, strategy and business solutions as part of drive to deepen timeless principles of effective marketing and trends to leverage in marketing innovation, is set to engage industry stakeholders during the maiden edition of its marketing innovation Masterclass in Lagos. The Masterclass with the theme ‘Raising the bar’ will expose participants to what marketing innovation and strategy look like in the 2020s, ROI focused marketing and the gut to win in the innovation game. The programme scheduled for January 28, at Eko Innovation Centre, Ikoyi, will have veteran facilitators like Victor Afolabi, convener of the masterclass and founder, GDM Group; Iquo Ukoh, CEO, Entod Marketing, and Steve Babaeko, CEO, X3M Ideas. Others include Frank Ozekhome, head, group strategy, Insight Redefini;

Lampe Omoyele, CEO, Nitro 121, and Doja Ekeruche, board member, Eko Innovation Centre. Afolabi says marketing innovation masterclass is an annual GDM platform where the company connects with stakeholders in the marketing and innovation industry for knowledge sharing purpose. The 2020 maiden edition will curate conversations around innovation in marketing, leveraging trends, data, storytelling and technology, he states. Speaking on this year’s theme ‘Raising the bar,’ Afolabi says, “We intend to share the decade-long story of GDM Group; how we have successfully distilled complex marketing problems, serviced some of the largest homebred and cosmopolitan brands, emerged as an institution leader, and now raising the bar into the next big thing.” The event, organised by GDM Group as part of its tenth anniversary, is supported by Graymedia, Pavoreal and PRmix among others.

mmanuel Chukwuma, the Anglican Archbishop of Enugu Province, has been advised to be part of the course to make Imo State and its citizens happy rather than the unfortunate incitement over the Supreme Court ruling that brought Hope Uzodinma into power as the sovernor of the state. Charles Osuji, a Revd Father of the Catholic Diocese of Okigwe gave the advise on Thursday in response to the statement credited to Chukwuma and published in the media which said that Anglican bishops have rejected the Supreme court judgement on Imo and called for the apex court to reverse itself. The apex court had a fortnight ago sacked Emeka Ihedioha and installed Senator Hope Uzodinma as the new governor of the state. Chukwuma who claimed that he was speaking the minds of other Anglican bishops had described the ruling as “wicked and corrupt.” He said: “I am speaking the minds of most of the Bishops of the Anglican Church that we are very much discontented and very much in disagreement with the kangaroo judgment of the Supreme Court on what has happened in Imo State. “We sincerely feel disappointed with the Chief Justice of Nigeria who has not got his facts correct and we feel that that judgment is wicked and corrupt.” According to Chukwuma, the clerics also called for the “immediate resignation of the Chief Justice of Nigeria, Justice Tanko Mohammed,” saying “he is not qualified to head the nation’s judiciary.” But Rev Father Osuji took exception to Chukwuma’s

Power stakeholders urge NERC to re-set market governance beyond tariff review HARRISON EDEH, Abuja

Cleric urged to be part of course to make new Imo State Iheanyi Nwachukwu

L-R: Segun Ogunsanya, MD/CEO, Airtel Nigeria; Vice President Yemi Osinbajo; Babajide Sanwo-Olu, governor, Lagos State, and Anthony Akoto Osei, Ghanaian minister of monetory and evaluation, during the Airtel Touching Lives Season 5 Premiere in Lagos, at the weekend. Pic by Olawale Amoo

comments, insisting that Uzodinma’s emergence was not only divine but one that has shown that there will be light at the end of the tunnel for all Imo indigenes, including those on the voyage of blackmail and character assassination since the Supreme Court discovered that Uzodinma clearly won the March 9, 2019 Governosrship election in Imo but was openly robbed and did decided to do needful by pronouncing him duly elected. Osuji said “the coming of our Governor is an act of God” and that “Chukwuma should follow the course of making Imo people happy to justify God’s intervention in the affairs of men, and make his government open to all, both Catholics and non-Catholics.” Osuji said he was aware that Emeka Ihedioha made his government stiffer for nonAnglicans to secure Government patronage, and advised Chukwuma to see the coming of Uzodinma from the spiritual dimension of coming to liberate all Imo citizens regardless of creed, from the bondage of a few selfish strong men who have enslaved the people over the years. In a statement signed by Oguwike Nwachuku, Chief Press Secretary/ Media Adviser to Governor Hope Uzodinma of Imo State, Rev Osuji also advised the likes of Chukwuma to eschew unnecessary sentiments and take their time to ask pertinent questions on what transpired as regards the Imo governorship election rather than relying on single narrative of a few who are determined to shun the truth to deceive the good people of Imo state. Uzodinma in his maiden state broadcast on Tuesday, January 21, pledged that his tenure will bring prosperity to Imo and called on the people to give his regime a chance. www.businessday.ng

ower sector stakeholders are demanding for a reform from the Federal Government that will seek to end the perennial problem bedevilling the power sector beyond the upward tariff review announced by the regulator in early January. The market governance structure the stakeholders are demanding from the government should focus on enforcement of enabling laws establishing the Nigerian Electricity Regulatory Commission (NERC) without undue regulatory mismatch that often characterise the sector. Industry analysts say proper market governance is key in driving old market efficiency while ensuring that the sector run efficiently in a way that it attracts private capital without leveraging on huge government interven-

tions, which have failed to lift the underperforming power sector overtime. The sector has pre-privatisation and post-privatisation lived with perennial problem, which sector analysts say could only be addressed if there is a strong market sector governance that drives the sector devoid of undue political interference. “The power sector is not devoid of laws by the regulator, but the regulator needs to stamp its feet on the ground and do its job effectively. There has been some regulatory mismatch overtime and we need the regulator to launch proper market governance in the sector,” Eyo Ekpo, director, New Frontier Development Limited, told BusinessDay at the monthly NEXIER Power dialogue. “We need to get the market governance right by ensuring all the indices such as gas pricing, and other issues in the power sec-

tor variables are well structured in the market to ensure flow without running the sector merely on interventions and subsidies.” Chuks Nwani, an energy lawyer and power sector governance expert, told BusinessDay that NERC should go back to the various regulations they had passed overtime to evaluate whether they have been able to solve the problem it was meant to solve. “Laws are not made in isolation, they are meant to proffer solutions to certain concerns. Take for instance the issue of Meter Asset Provider; before the law came into effect by the NERC, there was no issue of 45% duty to be paid by the third party providers. Now, most of the meter components are imported, are stuck at the ports, and there is no end in sight to the problems. The government should revisit this concern and find a way to ensure everyone is metered, which is in mop-

ping up liquidity concern in the power sector,” he said. The reform process of the power sector was backed by the electricity Power Sector Reforms Act, 2005, which was the law that even gave birth to the establishment of the NERC as the policemen of the sector. However, several problems that pre-existed before the privatisation still rear its ugly heads post privatisation, prompting uproar and public picky each time the regulator tries to increase the tariff. Former chairman of the NERC, Sam Amadi, said there was need to review the structure and methodology of tariff setting in the electricity industry. “The problem of tariff review is that the product does not exist in the real sense. The principle of tariff is that the operator should charge customers prices that recover only prudent and efficient costs.

Bihari orders air strikes Atiat Leasing announces against bandits in Niger appointment of new MD/CEO TONY Ailemen, Abuja

resident Muhammadu Buhari on Sunday, authorised massive air attacks against bandits terrorising local communities in Niger State. A statement by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, said this was sequel to assurances that with the harmattan dust gradually easing its hold on the skies, fighter aircraft would this week join the efforts to provide effective air attacks against bandits, kidnappers and cattle rustlers that had been attacking remote communities around Dogon Gona forest in Niger State. The President, who described the repeated attacks leading to the losses of several lives in the communities “as a disaster for the nation,” had authorized the deployment of air power to support troops and policemen deployed to the “difficult terrain,” to counter the

menace of the attackers operating in the forest area bordering Kaduna, Niger and Zamfara states. In line with this directive, the Nigerian Air Force is setting up refueling facilities at Minna, Niger State to support the aircraft operations, giving assurances that given the improved weather conditions, a major exercise to “visually acquire targets” and launch attacks will soon follow. Shehu noted that the Police Command in Niger has equally given assurances that the planned dedicated air raids to complement the police helicopter gunship operations remain the best approach given the lack of motorized roads in the areas constantly under attack. “President Buhari commiserates with the government and people of Niger State following the attacks and the loss of lives that followed, and assures that victim communities in the state will not be abandoned by the rest of the country,” he said.

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he Board of Directors of Atiat Leasing Limited is pleased to announce the appointment of Kanayo Eni-Ikeh as the managing director/CEO of Atiat Leasing Limited. Kanayo comes on board with over 14 years’ professional experience, a wealth of knowledge and technical know-how. He has built his career in finance managing strategic positions in Banking and Financial services. His vast experience has positioned him as a leader and prudent manager of resources. He has an exceptional track record of growing businesses and delivering transformation. Until his appointment, he was the general manager, Business Development of VFD Microfinance Bank, @Businessdayng

where he successfully promoted the bank’s products and services to institutional, commercial and retail clients. Kanayo has held management positions in key financial institutions including Process Flow Outsourcing, Diamond Bank (now Access bank), Fidelity Bank, and VFD Group. Kanayo has attended various executive programmes at the Lagos Business School; is an alumnus of the Indian School of Business and holds a B.Sc. in Geological Sciences from Nnamdi Azikiwe University, Awka. The management and board of Atiat Leasing Limited heartily welcome Kanayo to the team even as they look forward to continuous growth and advancement of the company.

Monday 27 January 2020

BUSINESS DAY

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How we plan to curb borrowings – FG BUNMI BAILEY

he new Finance Act 2019 signed into law by President Muhammadu Buhari recently was conceived with a view to meeting a number of current challenges across Nigeria, especially to curb increased borrowings by the three tiers of government. Secretary to the Government of the Federation (SGF), Boss Mustapha, made this known in his office when the executive chairman, Federal Inland Revenue Service (FIRS), Mohammed M. Nami and the Service’s board members paid him a courtesy visit. The SGF also used the opportunity to present Nami’s letter of appointment and those of the newly inaugurated members of the FIRS Board to the chairman. Mustapha, who reiterated President Buhari’s support and confidence in Nami and members of the FIRS Board to deliver on the Service’s crucial roles in the implementation of the 2019 Finance Law, disclosed that funding gaps between government expenditures, especially in the area of desperately needed federal capital projects nationwide, forced the hands of government to borrow in recent times. Despite the generous tax exemptions, reliefs and holidays granted to millions of working Nigerians and Micro, Small and

Medium Enterprises (MSMEs) under the 2019 Finance Law, the SGF stated that government expected that it would generate higher revenue as the law becomes operative, especially from the FIRS, stressing that if more revenue could be generated from tax there would be less need for government to borrow. According to a statement made available to the media in Abuja by Director of Communications to the FIRS chief, Abdullahi Ismaila, the SGF therefore, urged the FIRS chairman and his Board Members to be proactive in their tax collection drive under the 2019 Finance Law. At the event, Nami said he would need the support of everyone to be able to deliver on his mandate of not only meeting the target but also exceeding it. He added that he and his team would work very hard to justify the confidence reposed in him. On his part, Mustapha stressed that the Federal Government “needs all the money it can get to enable Mr. President deliver on his mandate”. The SGF also revealed that as a cost-cutting measure in governance, the Federal Government has directed its officials, particularly ministers, to reduce the number of aides who travel with them. He decried the situation where the overhead cost of governance far outweighs capital expenditure.

How corruption, weak regulation fuel substandard private schools in Nigeria Godsgift Onyedinefu, Abuja

nvestigations have shown how corruption and weak regulation are fuelling the number of substandard private schools amid concerns over the rot in basic education in Nigeria. More disturbing is the fact that relevant government authorities are yet to take committed and stringent measures to clampdown on these schools, while quality of basic education further deteriorates. Investigations have also found that corruption is another key reason for the proliferation of these primary and secondary schools across the country, because the authorities mandated to inspect the schools aid and promote such ill practices. At one of the private primary schools visited by BusinessDay in Abuja, a teacher, who plead-

... sign pact to end housing deficit ed anonymity, narrated how government inspectors take bribes from school proprietors and neglect supervision. “Whenever government inspectors come around, the school authorities take them to their office and offer them money, after which they leave,” she said, while noting that the situation was not so different from some other schools around. While education stakeholders have described as good development the spring up of these schools since they are expected to cover the failure of government-owned schools by offering higher quality education than public schools and boost school enrolment, they however worry that a significant chunk of these schools are unregistered, mushroom and illegal. Their position is that

Nigeria’s basic education is due for a state of emergency. Princewill Anayalaewechi, a former director at the Federal Ministry of Education, expressed concerns on how these schools exploit parents unwilling to send their children to public schools, which equally has its own levels of rot to make profit. He said they lack quality teachers and basic infrastructure needed to drive quality education, but added that more worrisome was that these schools had continued to exist because there was very little or no supervision from relevant authorities. Available statistics show that even the nation’s capital, which is the seat of the Federal Government, is a hotbed for illegal schools in Nigeria with over 2,000 schools operating in the

nation’s capital, while data from the Department of Quality Assurance in the Ministry of Education, Abuja, show only about 500 schools in the approved list. The statistics also show that there are so many unapproved private schools in Cross River, Akwa Ibom, Edo, Delta and Lagos states. It also show that private schools in Oyo for instance have 60 percent of unqualified teachers, 80 percent of the building were inadequate and 73 percent of the schools were lacking in sports facilities. However, Anayalaewechi warns that if the trend is not immediately addressed, there will be consequences. He says these consequences are being ignored because they are not immediate. According to him, education is not just the bedrock of a nation’s development, but quality education is.

Dangote Foundation empowers 34,000 women in Katsina

o fewer than 34,000 vulnerable women from all the 34 local governments in Katsina State benefitted from the N10 billion micro grants being given to disadvantaged women across the country by the Aliko Dangote Foundation (ADF). The money meant to empower the women economically either to start or boost their businesses was handed out amid excitement from the beneficiaries. Chairman of ADF, Aliko Dangote at the flag-off ceremony held last week in Batagarawa Local Government in Katsina State in the presence of the state governor, Aminu Bello Masari and other top government officials, said 1,000 women were drawn from each of the state’s 34 local government areas with each woman receiving N10,000,00 each. Dangote explained that the Foundation had in 2012 earmarked N10 billion for the empowermentofvulnerablewomen in the 774 local governments in the country and that so far about 360,000womenfromKano,Lagos, Jigawa, Kogi, Adamawa, Borno and Yobe, Niger, Sokoto and Nasarawa states, representing 40 percent have benefitted. “The Micro-grants programme is a major component of the Economic Empowerment pillar of the Foundation. It provides disadvantaged and vulnerable women with a one-off, unconditional N10,000,00 cash transfer to boost their household income generation. This we believe will help reduce their

vulnerability and meet their livelihood needs,” he said. “In the coming weeks we would be proceeding to Kebbi, Zamfara, Edo and Osun states to conduct a similar programme,” he said. He recalled that during the last Ramadan fasting, the Foundation had disbursed 106,000 food packs to beneficiaries across Sokoto, Katsina, Kebbi and Zamfara. Dangote, adjudged to be Africa’s wealthiest and top philanthropist, had said: “I do not only want to be known as the Africa’s Richest Man, but the biggest philanthropist. I will continue to use my resources and my voice to help shape a better Nigeria, and Africa as a whole.” Speaking, Governor Masari extolled the ADF for the generosity extended to vulnerable women in his state and urged them to use it to start small businesses and subsequently use the profit to educate their children. Group executive director, commercial, and daughter to Dangote, Halima Aliko Dangote, said the Foundation was poised to help lift the economic status of womanhood in the country, adding: “If you empower a woman, you empower the whole nation.” Managing director/CEO of the Foundation, Zouera Yussouffou, said the micro-grant scheme was part of the four cardinal crust of the Foundation, which are: Health and Nutrition, Education, Economic Empowerment and Disaster Relief. www.businessday.ng

L-R: Etopidiok Joshua James, director, special insured institutions department, Nigeria Deposit Insurance Corporation (NDIC); Foluke Sanu, executive director, Wema Bank plc; Doyin Salami, chief executive officer, Kainos Edge Consulting, and Chizor Malize, managing director/CEO, Financial Institutions Training Centre (FITC), at the FITC 2020 Board Strategy Retreat in Lagos, at the weekend.

Air Peace chairman condemns stigmatisation of Nigerians

ALAT by Wema supports salary earners with low-interest loans

IFEOMA OKEKE

h i e f e xe c u t i v e o fficer of Air Peace, Allen Onyema, has condemned international stigmatisation of Nigerians, saying Nigerian airlines cannot get dry aircraft lease because of international stigmatisation. Air Peace bought an aircraft 2016 from the United States but the aircraft was not released to them till after eight months, despite consistent dialogues with the US Embassy in Nigeria and relevant government agencies, no one came to the airline’s aid. No Nigerian will ever treat a US citizen this way and if that happens, they w i l l hu nt t hat Nig e r ia n down but no one speaks for Nigerians in this country, he noted. Speaking during a press conference in Lagos week-

end, Onyema said any investment creating jobs in the country should be protected. This is also as he called on Nigerians to support indigenous enterpr ises, stressing that it was time to take patriotism to another level and stop the pulldown syndrome. He commended Hadi Sirika, the minister of aviation, for addressing multiple frequencies granted to foreign airlines, but however pleaded that more should be done to protect indigenous carriers so that more jobs would be created and ticket prices would drop. “Air Peace has helped in bringing down the prices of tickets to Dubai. For instance, on Air Peace you can pay as low as N180,000 for a return trip to Dubai, N650,000 for business class and N850,000 on First Class.

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nown for its trailblazing solutions in fintech and providing financial services that support the lifestyle of its customers, ALAT, Africa’s first fully digital bank, is supporting salary earners with instant loans. ALAT salary-based loan is a low-interest loan available to the bank’s existing as well as new salary earning customers who may or may not have their salary account domiciled with Wema Bank. Riding on its reputation of offering seamless financial services, ALAT customers will be able to access the salarybased loan without any form of paperwork, from the comfort of their ALAT app or the ALAT web page without any collateral. Salary earners will be able to receive a minimum of N50,000 and up to N4,000,000 within hours and will have between three to 24 months to pay back with only 2% interest @Businessdayng

rate per month on a reducing balance basis. According to the bank’s brand and marketing communications manager, Funmilayo Falola, the salary-based loan is an initiative of the bank to avail salary earners emergency funds to meet needs that otherwise cannot wait for the next payday or that require additional funding. Falola states that the profiled salary-earners that can profit from the loan range from Oil and Gas and Financial industry workers, Fintechs, Insurance and FMCG staff. She further confirmed that the process of getting the salary-based loan is entirely online - on the ALAT app or web page – and begins with downloading the app from android or IOS apps store for new customers and a simple login with a click on the ‘Loan’ icon for ALAT registered customers on the ALAT app or web page.

Monday 27 January 2020

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news Regulatory headwinds cast a pall on banks... Continued from page 1

tal Limited. “The hike in CRR to 27.50 percent from 22.50 percent means more deposit will go from lenders

L-R: Victor Ndukauba, deputy managing director, Afrinvest West Africa Limited; Ike Chioke, group MD, Afrinvest West Africa Limited; Ayodeji Ebo, MD, Afrinvest Securities Limited, and Ola Belgore, MD, Afrinvest Asset Management Limited, at the launch of the Afrivest Nigerian Economy and financial markets 2020 outlook themed ‘Nigeria in the new decade: Nothing Ventured, Nothing Gained’ in Lagos. Pic by Pius Okeosisi

Nigerian workers are biggest losers in FG... Continued from page 1

in the hands of the govern-

ment in form of bonds and treasury bills. “There were meetings held to speak to the PFAs of some private bonds that we will be sold at between 6-9 percent that they would have to buy,” a source familiar with the matter told Business Day. “The worry with such an action is that pensioners are at risk of giving up their savings to a government that isn’t an efficient spender and prioritizes recurrent expenditure over capital expenditure,” the source said. “It’s only in a lawless society that such will happen,” the source added. The government hasn’t exactly earned the reputation of being judicious with public resources and that has drawn the worry of some sources who say the government’s action could inflict some reputational damage in the eyes of investors. “The Pension Act is one of the pivotal reforms of the Obasanjo era, it’s a shame that this government wants to ruin it this way, given that past schemes run by the govern-

ment never worked but this one has,” another source who did not want to be named, to speak freely said. “No one understands how this will work but the implication this has for the economy and investor confidence is damaging,” the source said. Nasir el-Rufai, the governor of Kaduna state said that the decision to tap into the pension funds was reached by a NEC committee headed by him. El-Rufai said that the committees’ decision is consistent with the Pension Reform Act 2004, which empowers the government to borrow 20 percent of the fund to address national issues. Over the years, Nigeria’s widening infrastructure deficit has been a recurring discourse as it is widely believed that the low stock of infrastructure investments is one of the biggest challenges to the ease of doing business. From poor port infrastructure, dilapidated transport networks, epileptic power supply, huge housing deficit, Nigeria’s infrastructure gap cannot be overemphasized. “The reason why pension

Customs, police, army using fake document... Continued from page 2

bigger racket that had seen traders and villagers in just one local government area of Ogun State contributing up to N668 million ($1.85m) in extortion within 100 days of the border closure. In 200 days, the figure could have doubled to N1.3 billion ($3.7m). To the exploited villagers, this was a “governmentissued document,” and was now only a thorn in their flesh because of the border closure. “If there is any forgery of a document, then the agency involved should come out and do its work, and bring a document that is genu-

ine,” said Abdullahi Maiwada, public relations officer, Nigeria Customs Service, Ogun I Command, when told about NAQS’ response to BusinessDay’s investigation. According to Maiwada, having discovered a document has been forged in its name, and is being used to extort farmers, NAQS should in fact, be at the forefront of bringing those culpable to justice. However, in the statement sent to BusinessDay, NAQS said it was calling “on the Nigerian Police to hunt down the hoodlums perpetrating this crime and bring them to book.” This begs the question, what are the identities of those www.businessday.ng

funds don’t play bigger roles in infrastructure development in Nigeria is because the Federal government is not investing borrowed funds, taken from the PFAs, wisely. After all the government holds 70 percent of the Pension funds,” a source familiar with the matter said. “Saying you want to take private money and do whatever you want just shows how hostile the government is to private capital and that is the last thing it needs at this time,” the source added. “Nigeria’s Pension Fund industry has been through turbulent times to be where it is today and this could scuttle the progress made,” another source said. Prior to the enactment of the Pension Reform Act 2004, pension schemes in Nigeria had been bedevilled by many problems. The Public Service operated an unfunded Defined Benefits Scheme and the payment of retirement benefits were budgeted annually. The annual budgetary allocation for pension was often one of the most vulnerable items in budget implementation in the light of resource constraints. In many cases, even where

budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights. It was obvious therefore that the Defined Benefits Scheme could not be sustained. In the private sector on the other hand, many employees werenotcoveredbythepension schemes put in place by their employers and many of these schemes were not funded. B e s i d e s, w h e re t h e schemes were funded, the management of the pension funds was full of malpractices between the fund managers and the Trustees of the pension funds. This scenario necessitated a re-think of pension administration in Nigeria by the administration of President Olusegun Obasanjo. Accordingly, the administration initiated a pension reform in order to address and eliminate the problems associated with pension schemes in the country. The outcome of the reform was the enactment into law of the Pension Reform Act 2004, which has today led to an unprecedented rise in Pension Assets to N9.4 trillion from a negative position before the reforms.

NAQS uncovered in its investigation, which the agency wants the police to go after. Not only did NAQS say the document is a fake, but further claims there can be no original for it to produce, saying, “Its mandate covers only agro-commodities coming in or going out of Nigeria”. Not only is it a fake, but never should have been required for conveying goods produced within Nigeria by Nigerian farmers and on Nigerian soil. In the end, as contained in the investigation earlier published, from Imeko, this reporter followed a van of allegedly smuggled tomatoes to Abeokuta, which successfully found its way to the Mile 12 Market in Lagos, after passing dozens of

checkpoints. N75,900 was spent between Ilara and Abeokuta on bribes, including the now fake quarantine document, yet, genuine local farmers continue to struggle with extortion. Made in Nigeria or produced in Benin Republic (and brought in illegally), the investigation found that getting goods to major cities was a function of how much a person was willing to pay. “The Command as a responsive and responsible formation will not sweep such weighty allegations under the carpet,” said Maiwada in response to findings of extortion by Customs officers during the investigation. “We will look into your report through proper investigative mechanisms,” he said.

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to the CBN and return zero which means their interest income, which is a major component of earnings, will reduce,” Olusi said. The dividend pay-out ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company. It is the percentage of earnings paid to shareholders in dividends. Guaranty Trust (GTBank) Bank, the largest lender by market value in Africa’s largest economy, has paid a total of N423.15 billion to its owners in eight years, according to data gathered by BusinessDay. From 2012 to 2018, Zenith Bank has paid N490.95 billion to shareholders, and it has a dividend yield of 12.76 percent; this means an investor gets N120,760 in dividend income for every N1 million invested in the stock. In the last eight years, Access Bank, the largest lender by total assets, has paid N163.15 billion to its owners, while it has a dividend yield of 4.8 percent. Banks were able to consistently and generously reward their shareholders because they were taking advantage of the monetary environment to underpin earnings. For instance, between 20116, the devaluation of the currency was a boon for them as foreign currency revaluation gains added strength to profit. Also, a high yield environment gave lenders the leeway to park their money in short term government securities, but a precipitous drop in yields at the start of 2018 resulted in slow growth in interest income from short term government securities. The fear among experts is that banks could cut dividend pay-out because a slew of stringent rules by the apex bank have heightened regulatory risks. The central bank had mandated Deposit Money Banks (DMBs) to maintain minimum Loans to Deposit (LDR) ratio of 65 percent, but analysts say forcing banks to lend to risky sectors will result in rising Non Performing Loans (NPLs).

“These are regulatory headwinds they have to contend with. They also have to deal with the recent slashing of bank charges,” said Johnson Chukwu, managing director and CEO of Cowry Asset Management “It will affect dividend declaration. No bank will start paying dividend from reserves as they will want to settle from current profit. There is cap on such payment by the regulator,” Chukwu said. The Monetary Policy Committee (MPC) of the CBN, at the end of the 2-day policy meeting on Friday, voted to Retain Monetary Policy Rate (MPR) at 13.5 percent; maintain the asymmetric corridor around the MPR at +200/-500bps; increase Cash Reserves Ratio (CRR) by 500bps, from 22.5 percent to 27.5 percent; and retain liquidity ratio at 30.0 percent. Analysts at United Capital Ltd say additional 5 percent CRR is equivalent to N1.2 trillion quarantined by the CBN and that Open Buy Backs (OBB) and overnight (O/N) rates are likely to spike in the short term. “It is negative for banks’ profitability and revenue as rates on fixed deposit will likely increase,” said analysts at United Capital Ltd. The cumulative interest income of the largest Nigerian banks increased by 8.0 percent to N2.06 trillion as at September 2019, the lowest in five years, according to data gathered by BusinessDay. Following CBN’s announcement barring nonbanking corporates as well as individuals from accessing the OMO market, increased liquidity in the secondary debt market as well as auctions has since sent yields crashing. There has been a sharp decline in Nigerian Treasury Bills rate at the primary market auction over a three-month period from 12.94 percent before the announcement was made to 5.1 percent at the last auction. “We believe key institutional investors with trillions of debt assets maturing in 2020 will be searching for alternative investment opportunities given negative real returns on debt and money market instruments. Thus, we expect some of these funds to filter into the equities market,” said analysts at CSL Stock Brokers Limited.

Border closure bites hard as exporters can’t... Continued from page 2

managing director of NEXIM Bank, said in November 2019 that 26 cargo ships had been committed by partners for the commencement of the West and Central Africa sealink project. “We are frustrated and can’t wait to have that,” Okhai Ehimigbai, export manager at Aarti Steel, which exports steel products and zinc ash, said. Okhai said his company had stopped export to the Economic Community of West African countries (ECOWAS) due to the closure of the border. @Businessdayng

Export to Ghana by sea takes one month now as against two weeks or less through the land borders, he said. He further disclosed that his firm had been searching for six containers to move goods by sea to Europe since November 2019, but could only find five. “We can’t export because we can’t get all the containers on time,” he said, saying, “At the moment, many shipping companies have a lot of empty containers due to the situation at the Nigerian ports.”

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Nigerian creative sector players step out for UNDP-Creatives Connect in Lagos GBEMI FAMINU

he United Nations Development Programme (UNDP) in Nigeria held its first series of development conversations with the Nigerian creatives dubbed #CreateToDevelop. This is part of the recently launched UNDP Nigeria Development Dialogue series aimed at creating platforms for conversations that can constructively inform Nigeria’s development agenda that is people driven including creation of opportunities that invest in young people’s innovation and creativity. The #CreateToDevelop dialogues brought together a representation of veterans and young creatives across the sector including Sola Sobowale, Ajoke Silva, Alibaba Akpobome, Don Jazzy, Omotola Jalade Ekeinde, Toke Makinwa, Dakore Akande, Mercy Johnson, Chioma Akpotha, Adebola Williams, Yagazie ‘Gazmadu’ Eguare; Stephanie Busari, Hadiza Nyako Tukur, Edwin Okolo and the awardwinning filmmaker, Joel KachiBenson Nigeria is a notable contributor to Africa’s arts, culture and entertainment scenes, and its entertainment and music industry that emerged in the early 90s is the fastest growing in the world, competing closely with America and India

for the global market share. The Nigeria film industry (Nollywood), employs more than 1 million people – making it the second largest employer after agriculture. In 2016 the Nigeria film industry contributed 2.3% (N239bn) to Nigeria’s Gross Domestic Product (GDP), and is considered a priority sector in the Economic Recovery and Growth Plan of the Federal Government with expected export revenue of $1 billion by 2020. Expounding on role of creatives in social reforms and behavioural change, Mohamed Yahya, the UNDP Resident Representative to Nigeria noted that, Nigeria’s creative sector has over the years played a critical role in influencing the growth of Africa’s arts and culture. With 10 years left to achieving the development goals, the start of the Decade of Action for the Sustainable Development Goals, is timely for UNDP to listen and learn from creatives on how they can use their influence to support the country’s development progress; and shift perceptions of Nigeria among Nigerians and the rest of the world. Yahya said, “While policies are crucial for reforms and development in any country, it is only by amplifying the psychology of progress through creative story-telling in every form

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that we can aspire to becoming a generation that believes in themselves to do better.” Dakore Akande, Ajoke Silva and Omotola Jalade Ekeinde, actresses who have all had extensive experience working with various international organisations, offered useful insights on how the UNDP could rise above political bureaucracies in harnessing Nigeria’s vibrant and diverse creative potential towards the attainment of the SDGs. Creative arts transcend all barriers; gender, age, political, social, economic, geographical and religion, and presents a new frontier that can leapfrog Nigeria’s development trajectory. Over the next few months, UNDP has committed to cocreation of initiatives that will aid the Nigerian creative industry to establish avenues that can leverage better the art of telling representative stories, while supporting monetisation of the industry for sustainability. “The biggest challenge working with development organizations is the ability to stay on an issue or a cause long enough to establish impact. It is our hope that whatever areas/stories UNDP commits to will be consistent for longer term engagement in order to ensure success and ability to measure impact of the causes the organization chooses to support,” Omotola Jalade Ekeinde said.

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Monday 27 January 2020

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COVER

PERSONAL FINANCE

How investors can take advantage of FGN Bond issuance in Q1 2020

This test shows how healthy your ‘finance life’ is

The Debt management office (DMO) has released the calendar for 2020 first quarter FGN Bond issuance. FGN Bond is a bond issued by the Nigerian government in exchange for cash at a given interest rate and a repayment period.

Staying healthy requires a lot of work, but that hasn’t stopped many from hitting the gym religiously and eating right to stay in shape. One’s finance requires the same commitment-without gym wears-if the goal is to grow wealth.

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Personal Finance

How investors can take advantage of FGN Bond issuance in Q1 2020 How will the interest and principal be paid? The interest will be paid quarterly into your bank accounts while the principal will be paid at maturity depending on what duration you subscribed to. Retail investors looking to invest in the FGN bond only need a minimum of N5,000 to invest. Subsequent investment over N5,000 will be in multiples of N1,000. Meaning that investors cannot invest N5,500. It’s either N6,000 or N13,000 or N30,000. The maximum amount a single retail investor can invest in the FGN Bond is N50 million. What if I decide to sell before maturity? Investors need not hold on to the bond until maturity. If you need cash anytime during the duration of the bond, you can sell your bond in exchange for cash. However, the portion of the interest that you are not entitled to earn because you have sold will not accrue to you any longer. For example, if you buy April 24 and sell July 14, because you cannot wait until April 2023 to get your principal, you will only be entitled to the interest earned between April 24 and July 14. Bonds have certain characteristics similar to stocks; their prices can often be higher or lower than their face value. A face value of a Nigerian bond is typically N1,000. So assume an investor bought FGN bond at N1m and at an interest rate of 13 percent per annum. It means that for every N1,000 of your investment, such an investor will earn N130 (also known as the coupon rate). So, if you decide to hold your N1m to maturity, you will earn N130,000 annually. In the secondary market, bond prices behave like stock and react to the forces of demand and supply. Leveraging on technology to buy FGN bonds. The penetration of internet and technology has caused several disruptions in the ecosystem. Fortunately, the fixed income market is not left out in this disruption. There are mobile applications such as, that enable retail investors to buy FGN Bonds from the comfort of their phones and other mobile gadgets. The bond is safe and is backed by the full faith and credit of the FG. Government bonds hardly default, so you are nearly 100 per cent sure that you will get your money back in full along with the interest.

OLUFIKAYO OWOEYE

he Debt management office (DMO) has released the calendar for 2020 first quarter FGN Bond issuance. FGN Bond is a bond issued by the Nigerian government in exchange for cash at a given interest rate and a repayment period. It also states how payments of the principal and interest will be made. A Bond is a confirmation from a borrower that it borrowed money from a lender at a given interest rate and repayable over a period. They also include the minimum amount that can be subscribed to by the lender and in what multiples. Benefits investors stand to gain Investors in bonds earn an interest that will be paid quarterly directly into their bank account. Interestingly, you need not be rich to invest as anyone with as little as N5,000 can invest in the bond. Investing in FGN Bonds is a good way to save towards your House rents, marriage, an occasion, school, project, retirement etc.

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This test shows how healthy your ‘finance life’ is SEGUN ADAMS

taying healthy requires a lot of work, but that hasn’t stopped many from hitting the gym religiously and eating right to stay in shape. One’s finance requires the same commitment-without gym wears-if the goal is to grow wealth. This fitness test, adapted from Afrinvest, helps you keep tab on the state of your finance. It allows you subjectively evaluate yourself by providing answers to unevenly weighted questions and summing your total score to understand how your rank. A total score above 75 indicates a healthy financial life. 50-75 indicates an average fitness level while scores below 50 indicates a performance. I save/invest at least 20% of my monthly earnings (0-10pts) Financial planning involves being able to prepare “the rainy days”; if you are able to put part of your income aside for future consumption then you are well on track-well. I am saving towards retirement (0-10pts) You are not going to work forever! This

makes setting up a pension account very important. Your pension would enable you to maintain a reasonable standard of living when you retire. A high five wouldn’t do justice if you already have a pension account and you are saving enough to live your dream life after retirement. I have saved up to 3-6 months of expenses for emergencies (0-15pts) Think of your savings as a reserve, do you have around three to six months of firepower should an unexpected event-like the loss of a job-occur? Depending on how much your savings can account for three or six months’ worth of expenses, you can assign a score from zero to fifteen. I have investments in Naira (10pts) How much investment (in Naira) do you have? Whether in fixed income, equities, real estate or alternative investment and assets classes, investment is pertinent to your financial fitness. Your minimum investment should be at least 20 percent of your annual salary and diversified across assets. I have investments in Dollars (10pts) Imagine having had investments dominat-

ed in US Dollars before the 2016 oil price crisis and naira’s devaluation. Having investments in Dollars act a safety net and is important to your overall financial soundness. I have insurance-Car, health, life, house (0-5pts) Insurance is a guarantee that in the events of a mishap one is restored to one’s prior state. This makes insurance an important consideration in assessing your financial health.

There are four very important policies an individual should consider. If you have any insurance policy you can assign yourself two marks, then additional one mark for extra policies you hold. I have a supporting source of income (0-30pts) Are you solely dependent on one source of income? That should be a downer! Getting extra sources of income is a great way of diversifying the risk of shock to income when there is an unexpected change to employment situation or business slows. If you have more than just one source of income, rank yourself from one to ten, depending on how much earnings compared to your mainstream job or business is realised from the side job. For more than one supplementary income source, the rating should start from 10. I am debt free (0-10pts) Debt is not necessarily a bad thing. Even the world’s wealthiest 1 percent is not absolutely debt free. The ability to keep debt under reins and to live absolutely debt-free, therefore, is a rare art that might speak volume of one’s ability to manage expenses and live within means. If you are in the debt-free club, it is a high five.

Right things, smart things Nigeria can do to grow economy HOPE MOSES-ASHIKE

igeria as a nation is not yet where it is supposed to be in terms of economic growth. The country is growing at 2.3 percent as at the first quarter of 2019, while the population is growing at 2.6 percent. For the economy to move forward in this new decade, Ike Chioke, group managing director, Afrinvest West Africa Limited said the country the Africa’s largest economy should stop doing wrong things, but start doing right things and smart things. One of the wrong things Nigeria is doing which it should stop is the constitution that encourages indolence whereby states go to Abuja for monthly allocation –constitutional reform. The second thing is exaggerating population numbers for higher revenue share. The third thing is to stop corruption. The fourth thing is subsidizing unavailable electricity – power sector reform. The fifth is the paradox of borrowing while maintaining huge subsidies and the sixth is subsidizing FX and petrol consumption –oil and gas sector reform. Nigeria should start doing the right things and one of such things is Decentralize polic-

ing and security apparatus for greater effectiveness. The second right thing is to declare a state of emergency in educating all primary school-age children. The third is to build additional seaports away from Lagos for security and logistical efficiency. The fourth Chioke says is to make health insurance mandatory. The fifth right thing is to cut the cost of governance, and ensure adherence to the rule of law and the sixth is removing minerals from the exclusive list. Smart things Nigeria should start doing

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include Leverage annual capital expenditure allocation by about 5-7x in partnership with private sector to target critical infrastructure development on a long-term and sustainable basis; Prioritize and build rail to connect major commercial hubs; Drive broadband penetration by easing rights of way challenges; and Rapid adoption of technology to fast-track human capital development The performance of Nigeria in the last decade has been a story of two halves according to Afrinvest West Africa. The period between 2010 and 2014 was characterised by a much better performance than the latter half of the decade. Overall, growth expanded at an average of 3.7 percent, much lower than 7.7 percent in the preceding decade. In early to mid- 2010s, growth was resilient at an average of 6.1 percent per annum. This was driven by sustained expansion in the agriculture sector, which was supported by government policies. Manufacturing and services also blossomed due to the stable macroeconomic environment characterised by income growth, low inflation and a stable exchange rate. However, growth slumped to an average of 1.2 percent in the latter half of the decade. This was due to a volatile macroeconomic environment, mainly due to the slump in oil prices

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and the lack of reforms to reset the path of the economy. Due to the slowdown in growth, per capita income which started the decade at US$2,292 in 2010 peaked at US$2,563.9 in 2016 before slumping to US$2,396 in 2018. Inflation averaged 11.9 percent over the 2010s. In particular, there was a low inflation period at an average of 11.0 percent between 2010 and 2014. In the latter half of the decade, this was higher at 12.9 percent, reflecting the shortage of food, currency devaluation and elevated insecurity. “In 2019, we anticipated a faster pace of recovery but the economy struggled due to lack of support from fiscal and monetary policies”, said analysts at Afrinvest. In Q1:2019, growth moderated to 2.1 percent (vs. 2.4% in Q4:2018). This was sustained as growth was flat at 2.1 percent in Q2:2019 before rising faster at 2.8 percent in Q3:2019. The oil sector supported growth in 2019 through a slower contraction of 1.5 percent in Q1 (vs. -1.6% in Q4:2018) and a significant improvement of 7.2 percent and 6.5 percent in Q2 and Q3:2019 respectively. The non-oil sector could not sustain its positive momentum from 2018 as broad-based performance remained weak. Non-oil sector growth slowed to 2.5 percent in Q1 (vs. 2.7% in Q4:2018), 1.6 percent in Q2 but slightly recovered to 1.8 percent in Q3:2019.

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Monday 27 January 2020

BUSINESS DAY

Market Wrap-up

entiments were mixed on the domestic bourse as cement sub-sector driven gains were offset by selloffs across the equities of companies in the Consumer Goods and Banking sectors. Consequently, the ASI closed marginally higher (0.03%) for the week, with the year-to-date return settling slightly higher at +10.4%. Analyzing performances by sectors, the Industrial Goods (+5.1%) index led gains following investors’ interest in DANGCEM (+2.8%), BUACEMENT (+2.80%) and WAPCO (+10.8%). Similarly, gains were recorded in the Insurance (+3.0%) and Oil & Gas (+2.5%) sectors. However, the Consumer Goods (-3.6%) and Banking (-2.6%) sectors recorded losses, following selloffs of NESTLE (-6.1%) and GUARANTY (-4.2%). Thirty-two equities appreciated in price during the week, higher than twenty-one equities in the previous week. Twenty-eight equities depreciated in price, lower than forty-two equities in the previous week, while one hundred and three equities remained unchanged, higher than one hundred equities recorded in the preceding week.

Chart of the week

WeekAhead Ahead Week Week Ahead (Monday, 8th April –would Friday,continue 12th April, Looking ahead, profit-taking in2019) the coming week, we still

see significant legroom for a further rally as the elevated maturities from fixed income instruments hunt for investment vehicles. Nonetheless, we advise investors to cherry-pick fundamentally sound stocks. Money market In the coming week, inflows worth NGN924.72 billion are expected to hit the system from OMO (NGN695.08 billion) and NTB (NGN229.64 billion) maturities. This, we expect will keep the OVN rate depressed in the coming week. Treasury bills Trading volumes to increase and yields to further trim in the NTB market, as OMO maturities are expected to flood the market in the coming week. However, we do not expect any significant movement in the OMO rates as the CBN will likely mop-up maturities in the coming week. Bond Trading activity will remain elevated. Also, we expect the favourable yields in the space to drive interest in the market and therefore drive up volumes.

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CBN’s MPC holds MPR in year’s first meeting The Central Bank Nigeria (CBN) surprised on Friday raising the Cash Reserve Ratio (CRR) by 500 basis points to 27.5%, while holding the Monetary Policy Rate (MPR) at 13.5%. CRR was raised on the back of inflation concerns while the main interest rate was held to allow time to understand growth trend for the year. The CBN also left the Liquidity Ratio (LR) steady at 30% as well as the Assymetric corridor around the MPR at +200/-500 basis points.

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Monday 27 January 2020

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FINANCIAL TIMES

World Business Newspaper

Gillian Tett, Chris Giles and James Politi

he US commerce secretary has warned that the Trump administration would “react” to the EU’s plans for a carbon tax with possible punitive measures against Brussels, even as officials attempt to strike a truce in their trade feud. Speaking to the Financial Times, Wilbur Ross compared the EU’s plans for a carbon tax to moves by several European countries to impose a digital services tax, which has angered US officials and caused Washington to threaten tariffs on EU products. “Depending on what form the carbon tax takes, we will react to it — but if it is in its essence protectionist, like the digital taxes, we will react,” Mr Ross said. The commerce secretary’s comments are among the clearest signs that the EU’s plans for a carbon tax — a top priority under the new commission led by president Ursula von der Leyen — could emerge as a major new irritant to transatlantic relations. Ever since President Donald Trump announced America’s withdrawal from the Paris climate accord, the EU and US have been at odds over global policies to tackle climate change, but those tensions had not yet spilled over into the trade arena. Mr Trump and Ms von der Leyen said last week in Davos that they would try to strike a limited truce in their trade war this year, easing fears of full-blown escalation. Officials have said there could be common ground in areas ranging from agricultural trade and standards, to technology and energy, that could be settled fairly rapidly. But the potential for new flareups remains. US officials have repeatedly threatened to impose

US threatens retaliation against EU over carbon tax Wilbur Ross warns environmental plan could be new irritant in trade relations with Europe

Right to left: Wilbur Ross, US secretary of commerce, Ivanka Trump, adviser and daughter of the US president, and Swiss defence minister Viola Amherd, applaud at the last plenary session on the final day of the 50th annual meeting of the World Economic Forum in Davos on Friday. © AP

tariffs on the EU automotive sector, and the split on climate policies appears to be widening. Ms von der Leyen outlined last week how her flagship green deal programme would need to involve some carbon border regulations or taxes to ensure that the benefits of the programme were not offset by carbon embedded in imports. The bloc’s officials are understood to be particularly concerned that EU products could be undercut by imports from places with lax

environmental standards, such as China, Russia and India, but would extend the scrutiny to other trading partners such as the US. “There is no point in only reducing greenhouse gas emissions at home, if we increase the import of CO2 from abroad,” Ms von der Leyen said. “It is not only a climate issue; it is also an issue of fairness towards our businesses and our workers. We will protect them from unfair competition.” Her rhetoric has been matched

by a softer stance taken by officials who call it a “mechanism” not a border tax. They suggest it would probably be imposed very gradually in highly polluting sectors by encouraging exporters to the EU to participate in its emissions trading scheme, which puts a market price on carbon. A similar logic has underpinned European nations’ actions to collect tax from tech giants, creating rage in the US administration which threatened France with tariffs on cheese

and champagne and said the UK would be in line for “arbitrary” tariffs on cars if it followed the same route. France, the UK, Italy, Spain and Austria have held firm, saying it was politically impossible to allow US tech giants to make significant profits from activities in their markets but pay little to no tax. That row was defused in Davos this week with the US stepping back from its threats to impose tariffs on France imminently, but if there is no international agreement in Paris, the tension could soon rise again. Mr Ross’s warning on carbon taxes came as he defended the Trump administration’s environmental stance, which has been criticised around the world for ditching America’s global engagement on the issue while lowering regulatory standards domestically to remove disincentives to pollute. During the Davos meetings, Steven Mnuchin, the US Treasury secretary, sparred with Christine Lagarde, the European Central Bank president, over ways to tackle climate change. Mr Mnuchin described a carbon tax as “a tax on hard working people.” A group of influential Republicans have been pushing for the White House to adopt a carbon “dividend” system, comparable to a tax, in recent years. However, this has hitherto made little headway and although the Trump administration is accelerating its embrace of some environmental issues, such as tree planting, it continues to stress that the main onus for action should lie with China.

Democrats dream of Bolton bombshell in impeachment trial Former national security adviser was known to be unhappy with White House dealings on Ukraine

Demetri Sevastopulo and Katrina Manson

hen Democrats push to call witnesses in the Senate impeachment trial of President Donald Trump in the coming days, the top target will be John Bolton, the former national security adviser who compared part of the Ukraine scandal to a “drug deal”. Mr Bolton has been uncharacteristically reticent since he departed the White House in September after, according to Mr Trump, being fired by the president. Democrats are keen to hear from Mr Bolton because he has first-hand knowledge of some of the key meetings on Ukraine, but also because he left the White House following a rift with the president. This suggests that he has less incentive to protect Mr Trump than some of the other officials they want to call, particularly Mick Mulvaney, White House chief of staff, who has refused to testify. “Bolton regularly talked directly to Trump. He should have firsthand knowledge about what Trump directed others to do on his behalf,” said Brendan Boyle, a Democratic

congressman from Philadelphia. “His testimony is very important, which is exactly why the White House will do whatever it takes to block him from telling what he knows.” A hint of why the Democrats are so interested in what he has to say was offered in November by Fiona Hill, his former top National Security Council Russia expert. In testimony to the House, Ms Hill described how administration aides — including Mr Mulvaney and Gordon Sondland, US ambassador to the EU — helped carry out a pressure campaign against Ukrainian president Volodymyr Zelensky orchestrated by Rudy Giuliani, personal lawyer to Mr Trump. Mr Giuliani wanted Ukraine to announce an investigation into Mr Trump’s potential 2020 election rival, former vice-president Joe Biden, and his son Hunter, who served on the board of a Ukrainian company. Mr Trump had made the same request in the July 25 2019 telephone call with Mr Zelensky that sparked the impeachment inquiry. Ms Hill’s most damaging testimony came when she recited comments by Mr Bolton, who had refused to testify before the House committees www.businessday.ng

conducting the investigation, about elements of the Ukraine scandal. Ms Hill described how Mr Bolton bristled in a July 2019 meeting when Mr Sondland told visiting Ukrainian officials that Mr Zelensky would not get a coveted Oval Office audience with Mr Trump until he announced the probe. She told lawmakers that Mr Bolton immediately ended the meeting and instructed her to tell the top National Security Council lawyer that he was “not part of whatever drug deal Mulvaney and Sondland are cooking up”. She also told lawmakers that Mr Bolton had at one point referred to Mr Giuliani as a “hand grenade who’s going to blow everybody up” because of his efforts orchestrating the Ukraine pressure campaign. As the Democrats pursuing the Ukraine investigation called numerous witnesses before Congress, Mr Bolton made clear that he would resist in court any subpoena to testify. But he reversed course in January, saying he was prepared to testify in the Senate impeachment trial if a subpoena was issued to compel him to appear. On the first day of the trial, when the senators determined the rules for

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the proceedings, the Democrats demanded the ability to call witnesses, but were rebuffed by the Republican majority. A few Republican senators suggested they might be willing to allow witnesses, but only in the second phase of the trial after the opening arguments. Some Democrats even floated the idea that they agree to a witness package — they would call Mr Bolton and the Republicans would call Hunter Biden. But that idea was rejected by senior Democrats who said that even entertaining a conspiracy theory involving his father and his own work in Ukraine was a red herring. Another reason that Democrats are putting their faith in Mr Bolton is that he is writing a book about his time in the administration, and might be willing to make big headlines to help sell his memoir. Mr Bolton had been an unusual choice for national security adviser. His hawkish views — particularly his call for military action to induce regime change in Iran and North Korea — made him an unlikely foreign policy bedfellow for the president. Mr Trump campaigned in 2016 on a much less muscular foreign policy than Mr Bolton would endorse. @Businessdayng

“I actually temper John, which is pretty amazing,” Mr Trump said last year about his aide. Mr Trump eventually fell out with the Yale-educated lawyer in September, after rifts over Iran, North Korea and Turkey grew increasingly fraught. But Mr Bolton has yet to articulate his insights into the Ukraine affair in public. A former US ambassador to the UN, Mr Bolton is viewed as a consummate bureaucratic infighter, who during the George W Bush administration strove to direct policy towards his own political ends. His reputation followed him into the Trump administration. In 2018, Jim Mattis, then defence secretary, offered an unusual greeting to Mr Bolton when he welcomed him to the Pentagon for the first time after the security adviser started in his job. “I have heard that you are actually the devil incarnate and I wanted to meet you,” Mr Mattis joked. If the Democrats are successful in convincing the Republicans — who have a 53-47 majority in the Senate — to allow witnesses, Mr Trump will he hoping that Mr Bolton leaves that reputation at the door of the Senate chamber.

Monday 27 January 2020

BUSINESS DAY

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Saudi Arabia takes £350m shot at Newcastle United Fans cheer prospect of Ashley exit but obstacles remain to getting deal across line Murad Ahmed, Arash Massoudi, Caroline Binham and Tabby Kinder

s Newcastle United were held to a goalless home draw on Saturday in an FA Cup match against third-tier side Oxford United, there was a strangely celebratory mood among the English Premier League club’s fans. Earlier that day it emerged that Saudi Arabia’s sovereign wealth fund was the leading backer of a move to acquire the team from UK retail tycoon Mike Ashley for slightly less than £350m. The Public Investment Fund, controlled by Crown Prince Mohammed bin Salman, was brought to the table by Amanda Staveley, a wellconnected British financier. Over the past six months, talks between the PIF, Ms Staveley and Mr Ashley have intensified, according to people familiar with the discussions. The optimism in the stands at the club’s home stadium of St James’s Park is at the prospect of Mr Ashley’s departure. The founder of the Sports Direct retail chain is reviled by fans because of a perceived lack of investment in players that has led to mediocre performances on the pitch. Ms Staveley’s PCP private equity firm would put in 20 per cent of the consideration for the club, according to the people with knowledge of the talks, with 10 per cent of the funds coming from her directly. The majority of funding would come from PIF. The prospective buyers have also earmarked a further £200m for

Newcastle midfielder Nabil Bentaleb (in the stripes) in Saturday’s FA Cup match against Oxford United at St James’s Park © NurPhoto via Getty Images

new investment in the club. Talks are at a delicate juncture. While one person said a deal could be completed as early as Tuesday, others warned that discussions may yet drag on for weeks or collapse altogether, particularly given the involvement of mercurial figures such as Mr Ashley, Ms Staveley and Prince Mohammed. Two years ago talks between Mr Ashley and Ms Staveley collapsed in acrimony over leaks to the media after a cash offer of £250m was rejected. In the past year Sheikh Khaled bin Zayed Al Nahyan, a member of the United Arab Emirates’ ruling family, and an investment group led by former Chelsea and Manchester United chief executive Peter Kenyon

have also made unsuccessful approaches over an acquisition. “I’m just very cautious,” said one person with knowledge of the talks, adding that Mr Ashley “can change his mind on a sixpence”. Newcastle, PCP and the Premier League declined to comment. PIF and Mr Ashley did not respond to requests for comment. The involvement of PIF, which has more than $300bn in assets under management and has made high-profile foreign investments including the acquisition of stakes in Tesla and Uber, means the discussions are being taken seriously. Accountants involved in auditing Mr Ashley’s retail businesses were told in recent weeks that Newcastle was “disappearing from

the book”, according to a person with knowledge of the matter, in another sign that the British billionaire is finally moving to offload it. Saudi Arabia is looking to follow a playbook adopted by neighbouring Gulf states that have already gained entry into the world’s most popular sport. A person with knowledge of Saudi plans said the acquisition had already been “blessed” by the state, with plans to introduce “KSA-type branding” on Newcastle’s black and white striped shirt. Ms Staveley, known for her Rolodex of Gulf royals, rose to prominence by brokering the 2008 sale of Manchester City to Sheikh Mansour bin Zayed Al Nahyan,

the billionaire businessman and member of the Abu Dhabi royal family. In 2011 state-backed Qatar Sports Investments acquired France’s Paris Saint-Germain. This year Prince Abdullah Bin Mosaad Bin Abdulaziz al-Saud, a Saudi prince and grandson of the late King Abdulaziz, secured full control of Premier League side Sheffield United. The business justification for these deals is that the valuations of leading football clubs continue to rise, in part thanks to multibillionpound media rights contracts across Europe. But critics argue these sports investments are really designed to project soft power and distract attention from negative coverage of Middle Eastern states. In preparation for an expected backlash about misgivings over an acquisition by the kingdom’s regime, following the international outcry after the killing in Istanbul of dissident journalist Jamal Khashoggi by Saudi agents, officials have begun drafting a letter to fans in an early bid to get supporters on side. Another concern is whether Saudi backing could fall foul of the Premier League’s ownership rules, which were tightened in 2017 and can bar potential owners if they have committed an act in a foreign jurisdiction that would be considered a criminal offence in the UK, even if it was not considered illegal in their home territory. Such considerations are sure to complicate any transaction. “Football deals should be straightforward,” said one person with knowledge of the talks. “But they aren’t.”

Why BlackRock is facing backlash in France World’s biggest fund house becomes prime target as questions are raised over its political Siobhan Riding

he grandiose entrance hall of BlackRock’s Paris office in the historic Centorial building is often used for fashion shows and high-end cocktail parties. But earlier this month the dometopped room was host to chaotic scenes when leftwing activists stormed the building brandishing flares and chanting slogans attacking the New York-based group. The protests were in response to France’s sweeping pension reforms, which have sparked unrest and strike action across the country. Waving trade union flags, the demonstrators directed their anger at BlackRock, which has become a scapegoat following claims it played a role shaping the reforms. Shortly afterwards, Olivier Besancenot, a far-left candidate for the 2007 French presidency, tweeted a video with the caption: “Surprise visit to BlackRock’s office today to denounce the insidious capitalisation [pension system] hidden behind the proposed law!” The controversy swirling around

BlackRock highlights the growing reputational challenge for the world’s largest asset manager. BlackRock’s size, status as a shareholder in most of the world’s listed companies and influence in the corridors of power are fast turning it into a prime target for anti-establishment anger. It is also an ominous sign of how vulnerable asset managers are in general to populist, anti-capitalist rage as the sector continues on its growth march and takes on roles left vacant by banks. As their public profile grows, asset managers are making a concerted effort to position themselves as responsible investors and showcase the role they play holding companies to account, partially in a bid to appeal to a wider pool of investors. Yet the French protests — along with demonstrations by Extinction Rebellion activists outside BlackRock’s London office last year — suggest that fund groups have some way to go to improve their image. The confusion about what asset managers do explains why a small number of people have used BlackRock’s name to express their anxiety

about the [pension] reforms Arnaud de Bresson The demonstrations at BlackRock’s Paris office were the culmination of a testing time for the company in France, where it has been the subject of hundreds of thousands of negative tweets — mostly from the far-left campaigners — and dozens of press articles questioning its influence over the French government and the country’s corporate sector. The situation was further inflamed this month when the chairman of BlackRock France, JeanFrançois Cirelli, who previously worked as an adviser to former French president Jacques Chirac, was named an officer of the Legion of Honour, the French order of merit. BlackRock has been defended by the likes of French finance minister Bruno Le Maire, who has sought to dispel misinformation surrounding the company’s role. BlackRock declined to comment for this article but has repeatedly denied that it lobbied for the pension changes. A senior executive at BlackRock, who asked to remain anonymous, said that the company was caught in the middle of a domestic furore, adding that its

role was “a red herring”. Jean-Louis Laurens, former international ambassador for the French asset management association, says the recent backlash highlights a lack of understanding among the public about what BlackRock does. “It underlines the need for fund managers to make themselves better known and draw attention to their role as long-term shareholders,” he says. The rapid global expansion of passive investing has made some observers nervous about the clout of the so-called big three — BlackRock, Vanguard and State Street — and given rise to misconceptions about the asset management industry. This scepticism found fertile ground in France, where there has long been a conflation between asset managers, pension funds and “speculators” such as private equity funds, says Mr Laurens, who describes the backlash as “a bit of a setback” for France as it seeks position itself as Europe’s top investment management hub post-Brexit. “The confusion about what asset managers do explains why a small number of people have used BlackRock’s name to express their anxiety

about the [pension] reforms,” says Arnaud de Bresson, chief executive of Paris Europlace, the lobby group responsible for promoting Paris as a financial centre. Although Paris Europlace believes the impact of the BlackRock controversy has been “limited”, Mr de Bresson says that the organisation recognises the need to “explain how [asset managers] serve the needs of the people and the wider economy”. BlackRock is a relatively small player in France, managing €27.4bn of assets, a fraction of its $7.4tn global asset pool and significantly less than the level of assets controlled by France’s largest asset manager, Amundi. Yet its clout as a shareholder has led some to exaggerate its role in shaping policy in France. The circumstances of BlackRock’s creation of its French investment business added fuel to this misconception. The company picked Paris as the location for its European alternative investment hub in 2018, following a concerted charm offensive by the French establishment, including a meeting between Mr Macron and Larry Fink at the Elysée Palace.

Monday 27 January 2020

BUSINESS DAY

ANALYSIS FT Why big pharma sees a remedy in data and AI Billions are being invested into mining patient records in a bid to aid drug discovery but backers are impatient Sarah Neville

hen Mac Holmes noticed a lump in the middle of his chest it took him a year to mention it to his physician. The 55-yearold, who flew packages for FedEx after a 28-year career with the US Air Force, appeared a picture of late middle-aged vigour. But, immediately suspecting the worst, his doctor ordered tests. Days later he was diagnosed with breast cancer, a disease that has spread to his bones. With women accounting for 99 of every 100 cases of the condition, Lt Col Holmes became an unfortunate member of the 1 per cent club. Yet eight years since his diagnosis he also stands as a symbol of an idea fast gaining traction in the pharmaceutical industry, that data itself can be the drug that unlocks faster cures, bigger markets and higher profits. Lt Col Holmes’s disease is kept in check by Ibrance, a medicine developed by Pfizer in the US. Data from other men whose insurers, like that of Lt Col Holmes, had agreed to pay for the medicine, despite guidelines limiting its prescription to “post-menopausal” women, proved pivotal in persuading the US medicines regulator to approve its use in men afflicted by the condition. Customarily securing permission to prescribe an existing drug to a wider group of patients would have required full-blown clinical trials that might have delayed the change for several years. In a world where big pharma and big tech collide, investors are pouring billions of dollars into companies that offer access to the clinical insights contained in vast troves of anonymised patient records. Combined with artificial intelligence, data offer hope of expanding the number of patients who can benefit from existing medicines, or even unearthing entirely new drugs. “The concentration and the sexiness started in discovery but the digital health world has grown exponentially in the past year,” says Niven Narain, co-founder of biotech group Berg. “18 months ago if I sat here I couldn’t even tell you what a chief digital officer was,” he adds, reeling off the names of big pharma companies, such as Novartis, Pfizer and Sanofi, that now have digital experts on their leadership teams. Chris Boshoff, chief development officer for Pfizer’s oncology division, says that by taking the conventional randomised control trials they had performed in women, and supplementing them with data generated by male users — so-called real world evidence — Pfizer was able to demonstrate to the US Food and Drug Administration as well as authorities in Canada and Egypt that it was safe and effective for both sexes. “To conduct a study in men, because we didn’t include them in [the initial studies], would have taken us another three to five years and here we could do all the work within 12 months and get the expansion,” says Dr Boshoff. For executives preoccupied with improving pharma’s poor record on productivity, the power of data to accelerate drug discovery and reduce research costs represents fresh hope for corporate profits as well as patients. Taking a drug from bench to bedside can cost $2.6bn, according to the Tufts

Center for the Study of Drug Development, and take up to 14 years. Zach Weinberg, co-founder of Flatiron Health, which aggregated and analysed part of the data underpinning Ibrance’s label expansion to men, believes two major shifts in the landscape are driving pharma’s fascination with data. The first is a demand from insurers and other payers for more detailed evidence about the performance of a drug once it is in regular use. The other change, especially evident in cancer treatment, is the increasing complexity of drug discovery, as scientists’ greater understanding of individual biology drives the search for more personalised treatments. Mr Weinberg, whose company operates from offices in New York’s SoHo district, says: “If you wanted to launch a drug in breast cancer 20 years ago, we would have thought of it as breast cancer. But now we think of it as multiple subtypes of disease, so the need to generate evidence in each individual subtype means there are more questions [to be answered].” These developments have placed a premium on high quality data, shorn of mistakes and inconsistencies, that will be trusted by regulators such as the FDA and European Medicines Agency. Securing access to data from electronic health records “is really not that complicated. Making that data fit for research, that’s the hard part. It’s in the data curation,” he adds. It is just over a decade since the American Recovery and Reinvestment Act spurred the widespread take-up of electronic patient records, by allocating almost $20bn to health technology. The Twenty First Century Cures Act, which endorsed the use of real-world evidence in drug approvals, was passed just over three years ago. Medical applications for data and AI have rapidly become attractive to investors. Calculations for the Financial Times by Rock Health, a US venture fund focusing on digital health, suggest that in the five years to the third quarter of 2019 a total of $1.5bn across 69 deals has been invested in companies that use AI or machine learning, and that “either sell to biopharma or have biopharma as an end user”.

The sum represented 25 per cent of all AI funding and 21 per cent of all AI deals in the US. Other recent deals include Merck’s $40m investment last year in TriNetX, a clinical data and analytics company, while Roivant Sciences in 2018 committed $40.5m to Datavant, which connects fragmented health data sets to aid researchers. Even five or six years ago, only about half the 20 biggest companies working on cancer drugs were deploying real world data, says Mr Weinberg. “Now, when we walk into any of the 20 [businesses], there’s a group that has been identified which at least owns the area for that.” Previously, some companies had been uncertain as to where in the business it belonged. “Is it my drug development team? Is it market access? Is it my biostats group?’ Now, there’s more organisational maturity,” he says. “It’s about augmenting and complimenting clinical trials where we don’t have enough trial data,” he adds. “That’s really the big idea.” Basel-based Roche has embraced that approach. In 2015 it took a 12.6 per cent stake in Flatiron, going on to buy the company outright in 2018. Flatiron retains operational independence and works with an array of other pharma companies — including Pfizer, with which it has a strategic collaboration. The relationship with Flatiron has delivered clear dividends, suggests Bill Anderson, the Swiss company’s head of pharma. He cites Rozlytrek, a treatment for metastatic non-small cell lung cancer approved by the FDA in August, which targets genetic mutations seen in only about 1 per cent of all patients with the condition. The rarity made it difficult to find participants for a conventional clinical trial, in which one group receives the medicine and the other does not. First it used Foundation Medicine, a US company which genetically sequences tumours, to identify a group of patients with the right genetic make-up on whom to test the medicine. It then created the equivalent of another trial using the Flatiron database to find a group of patients with the same mutations who were taking what had been regarded, up to that point, as the

best treatment. The data were submitted to “regulators so that they could compare what they saw in the single-arm study of Rozlytrek to what they might have seen in a similar patient with that mutation who hadn’t received Rozlytrek”. Mr Anderson says: “We needed a 2mpatient Flatiron data set to find approximately 50 patients that had [the relevant] mutation, and it fit the trial criteria.” Would the medicine ever have come to fruition without access to this database? “Certainly without the genomic testing it wouldn’t. I think, in the case of the Flatiron real-world evidence, some regulators would have probably approved it without that, just based on the compelling benefit in the single-arm study, but it certainly provided important context.” Such data may also help reassure payers about the value of a new drug, no small advantage at a time when governments and insurers are exercising ever-tighter control of health budgets. At Novartis, Switzerland’s other global drugmaker, Vas Narasimhan describes his business as “a data science company”. While identifying molecules that could turn into money-spinning drugs is the traditional business of big pharma, the key insight, on which he has sought to reposition the company since becoming chief executive in 2018, is that the data generated around those molecules is also a core asset. Novartis is increasingly looking to integrate anonymised data from clinical trials with other information about patients, such as their genetic make-up, to find the “super-responders” most likely to benefit from new treatments. Dr Narasimhan says: “If you look at the tech companies that’s the pivot they made; they realised that actually the core asset for them is the data-mining [of ] all of that experience.” Take Canakinumab, a medicine for heart disease that had disappointed in initial trials. Rather than writing off hundreds of millions of dollars in investment, Novartis took the data of the 10,000 patients involved in these initial studies and “discovered that this drug has a significant impact on lung cancer”, he says. Continues on page 66

Monday 27 January 2020

BUSINESS DAY

NATIONAL NEWS

Vladimir Putin hands new PM mandate to begin spending spree Former tax collector will tap Rbs8tn war chest to lead sweeping government overhaul Henry Foy and Max Seddon

ikhail Mishustin, Russia’s new prime minister, made his reputation collecting money for Vladimir Putin. His next challenge will be working out ways to spend it. Mr Putin tapped Mr Mishustin from relative obscurity to lead a sweeping government overhaul. The former tax collector now has a mandate to throw cash at the country’s moribund economy, tapping an Rbs 8tn ($128.5bn) nest egg he helped build in a bid to stimulate growth and shore up public support for Mr Putin’s administration. Analysts say Mr Putin is changing Russia’s constitution to allow him to retain power indefinitely after he is required to step down as president in 2024. The Kremlin is rushing to approve the desired changes at breakneck pace: parliament voted unanimously to approve a first draft on Thursday, though they may not be finalised until Russia puts them to a “people’s vote” later this year. Mr Putin is also mindful, however, of the need to tackle a fall in living standards that pushed his approval ratings to record lows in 2019. To this end Mr Mishustin has overhauled the leadership of Russia’s social ministries and demoted fiscal conservatives in favour of officials who advocate more public spending. “Putin thought some more energetic people would be able to get things done. He knows there is a problem and really wants them to push for economic growth,” a person familiar with the discussions told the Financial Times. The new prime minister sacked some officials so quickly they did not have time to gather their belongings, the person added.

The cabinet changes are a bid to make headway with a $515bn state investment programme that failed to take off under Dmitry Medvedev, Mr Mishustin’s predecessor. “The formation of the new government seals the case for ramped-up spending,” said Ivan Tchakarov, chief Russia economist at Citi. “The [new] cabinet has strengthened concerns that a long-held tradition of fiscal prudency may need to be sacrificed.” We expect an intensification in construction activity across the country to take place already this year Natalia Orlova, chief economist at Alfa-Bank Since 2014, when western economic sanctions in response to Russia’s annexation of Crimea and an oil price slump hit the country’s economy, the Kremlin has shown fiscal conservatism, cutting back budgets and hoarding cash even as crude recovered. The consequent healthy reserves and two years of budget surpluses have impressed economists and foreign analysts. But the resulting five years of falling real incomes and annual growth below 2 per cent in gross domestic product have hit households. Partly as a consequence, Mr Putin’s trust ratings have fallen to decade lows — a situation the Kremlin wants to rectify before critical parliamentary elections in 2021. The new cabinet demonstrates the intent. Anton Siluanov, the hawkish finance minister, has kept his ministry — but his powerful title of first deputy prime minister has gone instead to Andrei Belousov, a former Kremlin adviser who supports fiscal stimulus. The demotion of Mr Siluanov means that “fiscal consolidation is no longer a priority”, said Natalia Orlova, chief economist at Alfa-Bank. “[But] while we expect budget expenditure to grow faster, we do not expect this will

Vladimir Putin, right, tapped Mikhail Mishustin from relative obscurity to lead a sweeping government overhaul © SPUTNIK/AFP via Getty Images

necessarily lead to a shift from the budget stability.” “Siluanov, in our view, is a recognised fiscal conservative,” said Stanislav Murashov, economist at Raiffeisenbank, pointing to Mr Siluanov’s support for the “budget rule” — a policy that since 2017 has led Russia to squirrel revenues from any oil sold at more than $40 a barrel into a national wealth fund. Officials in the previous government had discussed spending some of the Rbs 8tn accumulated through this process but were wary of stoking domestic inflation. “Belousov spoke out several times against the budget rule in its various incarnations precisely because it limits budget stimulus,” Mr Murashov added. “In his new position he may raise the issue of weakening the rule.” If the threshold for accumulating revenues were raised by $3 to $4 a barrel, it could mean an additional Rbs500-600bn for the budget at the expense of the fund, Mr Murashov estimated. Mr Mishustin’s key task is to

get a grip on Russia’s so-called national projects, a Rbs 25.7tn ($415bn) spending programme over six years to revamp infrastructure and modernise the country’s economy. Official data show that spending last year fell well short of targets. The appointment of Mr Belousov, an architect of the programme, and the transfer another proponent, former economic development minister Maxim Oreshkin, into the Kremlin as a powerful adviser, reinforced the sense that Mr Putin still views National Projects as the best way to drive growth, Ms Orlova said. “We expect an intensification in construction activity across the country to take place already this year,” she said. Mr Mishustin, cognisant of the need to move quickly, on Wednesday ordered his cabinet to propose revamped plans for implementing the national projects programme by February 20. But some warn that the new premier will soon realise that

ramping up Russia’s tax collection through improved technology and digital tools was an easier task than opening the spending valves amid cabinet infighting, bureaucratic inefficiencies, and disagreements over the role of private companies in the national projects. Valentina Matvienko, speaker of the upper house of parliament, said last year that the main programmes had only about 15-35 per cent of the allocated funding and called them a “complete mess”. Alexei Kudrin, a Putin confidant who heads the audit chamber, said in December that more than half of provincial governments believed their goals to be impractical or even impossible. “The new government is left with 1.2tn roubles unspent last year by the previous government — what should have gone into national projects,” said one foreign ambassador in Moscow. “That is in addition to the planned spending this year. It has a Herculean task to spend [it all].”

that has been generated around AI and medicine. Founded just over a decade ago, the biotech group has carved out a distinct path by testing hypotheses developed through computer modelling in an experimental laboratory setting. The aim is to produce a biologically-validated finding that can then be further tested in animal and human clinical trials — a process that takes time, he emphasises. “It’s not like you pool public data and you’re going to cure cancer in three months,” he says. It has teamed up with several large pharma companies, including AstraZeneca and Sanofi, in work that Mr Narain believes

can eventually lead to new drugs by yielding fresh insights into how they produce their effects. However, he warns against the notion that AI is a short-cut that can circumvent all the hard work of understanding patient biology. “AI is not just like a magic wand that dismisses all the iterations of the science that are so necessary to get to a really verifiable answer. Because at the end of the day we’re dealing with patients,” he adds. Investors may soon become impatient for tangible results, in the form of stronger R&D pipelines, swifter approvals or drugs repositioned for new categories of patients — with costs cut in the process.

Mr Narain says: “We are at a ‘come to Jesus’ moment because people have put lots of money into this and for the VC community, the [private equity] community, it’s been two to three years [of expectation].” For Lt Col Holmes, in the vanguard of this health data revolution, Ibrance has provided a lifeline. More than five years after his cancer first spread, he is leading what he calls “75 per cent” of his pre-cancer life. Deploying a phrase that pilots use when they have to adjust the controls for new crosswinds, he adds: “That’s my new normal. Sort of like flying [the plane] with something wrong, but you’re still OK. I still have control.”

Why big pharma sees a remedy... Continued from page 65 The company has now embarked on several late-stage trials of the drug among people with non-small cell lung cancer, the most common form of the condition. Recent moves attest to Dr Narasimhan’s belief that big pharma must increasingly leverage the skills and approach of tech specialists. Bertrand Bodson, an Amazon alumnus appointed as the company’s first chief digital officer, has been elevated to the senior executive team. And in September Dr Narasimhan announced a five-year collaboration with Microsoft that aims to apply AI to all areas of the Swiss pharmaceutical com-

pany’s business, from finance to manufacturing. The most profitable outcome for many pharma companies would be to find a brand new drug by applying AI to big data sets — but Dr Narasimhan strikes a note of caution. He says: “Can we use this technology to find the drug, to actually unlock the underlying science? I still think we’re a long way away [from that] because we don’t understand so much about human biology. And to define how a machine would solve that for us would require significant advancement still.” Berg’s Mr Narain believes this year will deliver a reckoning that could explode some of the hype www.businessday.ng

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Company IN FOCUS

BUSINESS DAY Monday 27 January 2020 www.businessday.ng

These are the challenges ahead for Unilever’s new MD SEGUN ADAMS

hares of FMCG Unilever on Friday plunged by nearly the most allowable in a day after the company announced it made an annual loss for the first time in over five years. Unilever shares declined by 9.77 percent to N17.55 in Friday’s trade, the most since November last year, as negative investors sentiment weighed on the consumer goods maker so that it emerged the worst performing on the Nigerian Stock Exchange (NSE) in the trading session.Lagos bourse gained 0.13 percent Friday. Unilever had published its unaudited full-year result which showed a loss of N4.22bn compared to a profit of N10.03bn in 2018. On a quarterly basis, sales fell by about 58 percent in Q4 while loss stood at N4.765bn, a result Unilever said reflects challenging trading conditions and its decision in Q3 to prioritize tightening of credit terms and minimize exposures on trade receivables. ‘‘The adverse impact on revenue was expected to spill over into subsequent quarters. Management retains a positive outlook for the business in the long term,’’ Unilever said. The loss in 2019 full-year was preceded by three years of decelerating bottom-line growth which had seen Unilever grow by an average of 112 percent a year. Profit fell following a 34 percent decline in the sales, the unaudited company result showed. The top-consumer brand said it raked N60.758 billion in revenue last year, a value which is the lowest level since it made

N59.221 billion in 2015. The performance put peak revenue in the last five years at N92.026 billion in 2018, while peak revenue growth is 22 percent in 2017. A challenging Consumer Goods industry The real growth of the consumer goods sector, measured by Food, Beverage and Tobacco GDP picked up in the third quarter of 2019 to 2.98 percent compared to the broad economy expansion of 2.28 percent in the quarter, as improving economy and the border closure supported players in the space. While growth in the economy has remained at an upward trajectory, population expansion faster than GDP meant income per head in Nigeria was not growing. The third quarter of 2019 also saw inflation reverse pattern after it had steadily declined from 11.4 percent in May to 2019 yearlow of 11.02 percent in August. The rate of increase in price

level continued to accelerate till it reached 11.98 percent in December owing majorly to the border closure and the festive season. The effect of low GDP per head and rising inflation was that consumer purchasing power remained weak-if not eroding- with a negative impact on demand for company sales. Cash-strapped Nigerians have resorted to cheaper alternatives favouring unlisted brands over listed peers, and causing the latter much headache since the 2016 recession worsened income levels. A report by Coronation Merchant Bank last year explained the shift in preference of Nigerian consumers, many of whom live below $2 a day, towards cheaper brands. The effect of this price sensitivity has been a decline in sales of the ‘big’ brands and has forced some players across sub-sectors of the consumer goods industry to repackage their products to

smaller sizes that can be sold at cheaper rates. For Unilever, the availability of cheap alternatives to its Home & Personal Care segment (HPC) and intense competition in the Food Business space continues to dampen sales. Unilever’s Home & Personal Care includes the sale of skincare and oral care products, fabric care and household cleaning while Food segment includes the sale of tea, savoury and spreads. In 2019, HCP segment revenue declined by 40 percent compared to 28 percent fall in the Food Product segment. T h e u n d e r p e r f o r ma n c e brought the contribution of HCP to total revenue to 47 percent, making last year the first time since 2016 HCP is not the major cash spinner for Unilever. Unilever’s new MD to turn the tide? The 2019 result means Carl Cruz, Unilever’s new Managing Director has his work cut out for him when his appointment takes effect 1, February 2020. The Board of Unilever Nigeria had earlier in January announced the appointment of Carl Cruz as its new Managing Director, according to a statement by Soromidayo George, Director, Corporate Affairs & Sustainable Business, Unilever, Ghana & Nigeria. Carl who has extensive career in Unilever D & E Markets in Asia (Philippines, Thailand, India and Sri Lanka) until the appointment served as Chairman, Unilever Sri Lanka and boasts of over 26 years’ experience working in Customer Development, and in Marketing roles across Home Care, Beauty & Personal Care and Foods.

As Chairman of Unilever Sri Lanka, Carl successfully steered the business to a sustainable and competitive growth trajectory, Unilever said in the note published by NSE. Meanwhile, Cruz has expressed optimism about his new challenge steering Unilever in Nigeria. According to him, “Nigeria is an important market with exciting opportunities. Unilever Nigeria has a great team and our ambition is to satisfy consumers’ needs and make sustainable living commonplace.’’ Snapshot of Unilever 2019 financials Unilever’s unaudited report for 2019 showed that revenue (N60.76bn) declined by 34 percent compared to a 16 percent drop in the cost of sales (N54.09bn). This resulted in gross profit paring by 76 percent with Unilever earning N11 from every N100 sales in 2019 compared to N30 per hundred naira sales. Selling and distribution expenses plunged 26 percent in the period, marketing expenses eased by 10 percent while impairment loss on trade receivable surged 132 percent. A big decline in other income resulted in an operating loss of N10.35bn compared to an operating profit of N10.453bn in the preceding year. Net finance income also shrunk on the heels of a 20 percent drop in finance income to N2.86bn while finance cost rose by 82 percent to N824m. Unilever recorded a loss before tax of N8.32bn compared to a pre-tax profit of N13.56bn in 2018. Information from the company’s financials suggests a tax credit of N4bn which improved bottom-line to a loss of N4.22bn. Earnings per share (EPS) of loss of N0.74 compared to N1.77. The total asset of Unilever declined 18 percent year-onyear to N107bn in 2019 while total liabilities fell 23 percent to N37.6bn resulting in a 16 percent reduction in total equity at about N70bn. Unilever Nigeria Plc manufactures and markets consumer products primarily in the home, personal care and foods categories. The Company sells products such as Omo washing powder, Key soap, Royco bouillon, Lipton tea, Blue Band margarine, Pears baby care goods, Vaseline petroleum jelly, Lux soap, and Close Up toothpaste.

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