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Nigerian companies binging on debt face low growth risk R A
COVID-19 throws up new challenges on relevance of insurance to cushion business losses
ENDURANCE OKAFOR & MICHAEL ANI
s a lot of Nigerian businesses tap the low-interest environment to ramp up borrowing to offset liquidity challenges fuelled by the effect of COVID-19, there is a growing worry that the risk of low economic growth is going to constrain future revenues and increase the burden of debt servicing for firms. Hit by a double challenge of COVID-19 and collapsing oil price, Nigeria’s slow economic activities, declining revenue, job losses and dampen purchasing power are expected to affect the bottom line of most companies and even worse, make many handicap in repaying their debt. “It is not about having funds, it is about if there is demand. What use is producing when Continues on page 31
As corporates issue N466bn CPs in H1 Q2 revenues drop to record low
Modestus Anaesoronye ecent losses occasioned by COVID-19 pandemic have thrown up questions about the relevance of insurance to businesses and institutions. This is because many sectors of the economy, especially aviation and hospitality, have been in comatose since the last week of March 2020, when the Nigerian government ordered lockdown to contain the spread of the pandemic ravaging global economies. In this regard, these sectors have had to deal with payment of salaries, lay off of valuable Continues on page 31
Inside
Third Mainland Bridge, Lagos, closed for repairs midnight Friday, July 24, 2020. The repair works to last till January 23, 2021. Motorists are advised to take alternative routes.
Inefficiency, long dwell time, others make sea freight into Nigeria most expensive globally P. 30
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At 60, my life’s journey and impatience for a transformed Nigeria global Perspectives
OLU FASAN
F
ellow Nigerians and dear readers, I am 60 this month; precisely last Friday, on 24 July. I am utterly grateful to the Almighty God, my creator, to whom be all the glory, honour and adoration. Thanks to everyone who sent me birthday wishes. Huge thanks, in particular, to Vanguard for celebrating my diamond jubilee with a pre-birthday tribute last Thursday and a two-page feature on my birthday. It was really thoughtful of the newspaper! Being 60 this month, of course, means I was born in July 1960, a few months before Nigeria’s independence. That, effectively, makes independent Nigeria my agemate! And that fact, of being born in the same year as independent Nigeria, of being, as it were, its agemate, creates an emotional bond, a strong affinity, between me and this country. Truth is, I am desperate and impatient for Nigeria to succeed. I want this country to achieve its full potential and become a truly great country that is strong at home and respected abroad. There is absolutely no reason why, 60 years after independence, Nigeria should be a problematic or fragile state or one verging on state failure. It’s precisely the desperation to see Nigeria succeed that led me to put my head above the parapet and join, as a columnist, the public discourse on the future of Nigeria. I will come back to all that. But, first, a few words about myself, my life’s journey! Well, I was born in Ondo Town – now called Ondo City! – to a father who played a role in building the first Niger Bridge as a foreman and later became a farmer, and a mother who was a trader. Not a typical middle-class background, and certainly not a privi-
leged one. But with determination and God’s grace I charted a path forward through education. Along the way, some people played important roles in my life’s journey. I would mention two. Yemi Akeju, former president of the Institute of Directors Nigeria, who was very supportive during my long period of study in the UK; and Muyiwa Akintunde, a respected journalist, who encouraged me to take up column-writing in Nigeria. I left Nigeria in 1989 after obtaining an HND in Business Administration from Yaba College of Technology and following a Youth Service in Rivers State, where I taught economics and commerce in a secondary school. My main motivation for going overseas can be captured in a simple mantra: education, education, education! Arriving in the UK in 1989, I studied journalism at the London School of Journalism. Being an active student journalist in Nigeria, the initial urge to study journalism was irresistible. After graduating, I freelanced for some newspapers and then established a magazine called Marketfinder International. I am grateful to the then General Managers of Nigerian banks in the UK, such as Mr F Abiola-Cudjo and Mr Jacob Ajekigbe (First Bank), Mr T.O Akinola (Union Bank) and Mr Harvey Warmann (UBA), who supported the magazine by placing adverts in it. But, despite advertisements from the Nigerian banks, the magazine needed an injection of huge capital to be sustainable. An encounter with Cheif MKO Abiola in early 1992 would probably have been a game-changer. He offered a chance of a meeting, but I didn’t pursue it. In truth, I didn’t pursue the seeming funding opportunity from Chief Abiola and others that came up later because my heart was somewhere else. I wanted to go for further studies; after all, that was why I left Nigeria. And focusing on the magazine business, especially with other people’s money in it, would have frustrated the plans. So, after about six years, I gave up publishing and returned to school. But once I returned to school, I never looked back. From LLB to LLM to BL (Barrister-at-Law, of the Inner temple) to MSc (Econ) in Political Economy
and, finally, PhD in Law – the last two from the London School of Economics. After the studies, opportunities beckoned. I worked at the World Trade Organisation in Geneva, lectured at the LSE, and consulted for the Commonwealth Secretariat before I was appointed as a policy and regulatory reform adviser with the UK Cabinet Office. I subsequently represented the UK at the EU Trade Policy Committee in Brussels. The LSE appointed me as a Visiting Fellow, enabling me to engage in cutting-edge research, and to teach, write and consult. With all sense of humility, I have been at the heart of policy-making in a major Western country, advising ministers on complex policy and regulatory issues; have been involved in serious diplomatic discussions and negotiations in international organisations and have taught and undertaken high-quality policy research and analysis at a world-class university. What these experiences have exposed, however, is, in stark contrast, the utter shallowness and crudity of governance in Nigeria and the miniscule traction this country has abroad. In my 30 years abroad, government effectiveness and state capacity have rapidly declined in Nigeria; its government is so mediocre it can hardly get anything done. What’s more, Nigeria’s reputation is at rock bottom worldwide; nowhere is Nigeria viewed or treated with respect or deference. However famous you are, the Nigerian passport can cause you huge embarrassment at most foreign airports! In virtually every international forum, whenever discussions turn to Nigeria the air of despondency is always so tick one could cut it with a knife. The questions everyone asks are: why can’t Nigeria generate prosperity, engender stability and guarantee the safety and wellbeing of its people? Why can’t Nigeria stand tall in the comity of nations? Baroness Chalker, then Britain’s Overseas Development Minister, once told me when I interviewed her that Nigeria should be part of the world’s solutions, not part of its problems. For me, this is hurtful. Why is Nigeria a laughingstock in the world? Why has it put itself in a position where it’s not seen as a solution but a problem? Why is it that individual Nigerians
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At 60, I remain impatient for a restructured and transformed Nigeria, and won’t give up on the idea. The change will come!
have done great things, but collectively Nigerians can’t run their own country well? Why is Nigeria synonymous with government failure, corruption, insecurity, abject poverty, social tension? I asked these questions, but also wanted to make a contribution. Yet what, how? But Tony Blair, the former British prime minister, articulated the answer well. He said there are two obvious ways to make a difference: you either have power or vast amounts of resources. But then, he added: if you have neither, “you can establish influence by the force of your ideas.” Well, that’s precisely what I was seeking to do as a public intellectual through weekly interventions in newspaper columns. And the encouragement has been inspiring! About six years ago, on November 8, 2014, I began writing for this newspaper, BusinessDay. Within a year of starting the column, the then editor, Philip Isakpa, sent me an email. “People are following you and your articles are deep”, he said, adding: “and you are contributing your quota to Nigeria’s development through your thoughts and insights.” Four years later, in October 2018, I started the “State of the Nation” column in Vanguard and have received similar positive comments. Last week, I spoke with the legendary Uncle Sam Amuka, the iconic publisher of the Vanguard newspapers. He wanted to wish me a happy birthday. He was full of effusive praise. “You don’t know how much we appreciate you. We admire you; we appreciate you. Happy birthday!”, he said. I was deeply honoured! So, Tony Blair was probably right. You can establish influence by the force of your ideas. Yet, ideas are not enough; they need receptive ears. Unfortunately, Nigerian leaders are not receptive to ideas; they are impervious to reason. But, at 60, I remain impatient for a restructured and transformed Nigeria, and won’t give up on the idea. The change will come! 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
Insights for leading
Strategic positioning: How powerful relationships are formed
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few years ago, I heard one of my business mentors of inestimable worth, Niyi Adesanya, say that “success is based on your relationships.” I have found that to be very true. If you have good relationships with powerful people, you too will become powerful! To fulfil purpose, you need to be a problem-solver; you need to have a solution and a platform to execute your solution. You need a lamp and a lampstand. Solutions are rooted in skills and relationships are the most strategic platforms. You don’t need to serve everybody. Just serving one powerful person can earn you a fortune and attract the attention of the crowd to you. To unlock the big platforms that you desire, you need to establish strategic relationships and service them accordingly. Relationships are established based on the exchange of value in the form of little favours. Our labours are never enough. At best, they help us to survive; but to succeed, we all need favours. This is why we establish relationships. But whether people will be
interested in having a relationship with you or not is determined by the value that you bring to the table. Do you know that by just being in the presence of someone, you are stripping him of his privacy? By talking to him, you are placing a demand on his listening ability – he has to give you his ears. The problem is even amplified if he is busy with something else that he considers more important or he is just not in the mood to listen. To get him committed, you must have a strong reason that is not self-centred. We will always have problems but rather than expecting others to solve our problems for us, we must first think of solving theirs for them. Consider any person that many people look up to today, they are solving other people’s problems – not just their own. Skilful men have the capacity to do favours to powerful men. Because of this, kings have no choice than to favour them. This is how strategic relationships are earned and sustained. In the royal chronicles of Israel, it is obviwww.businessday.ng
ous that David did a favour to Saul by killing Goliath because to Saul and the entire Israeli army, Goliath was a big deal. The Goliath episode was the beginning of David’s relationship with Saul. It also marked his transition from the wilderness to the palace (the big platform). By interpreting the king’s dream, Joseph did a favour to Pharaoh. Although he did it quite easily, that dream was a big deal to Pharaoh and the entire wise men and magicians of Egypt. Joseph’s favour of Pharaoh established his relationship to the throne. Previously, his platform was the prison. What problems do you observe among people? What array of skills do you have to solve both small and big problems? What strategic relationships are you building with your skills? If you must climb fast and far, you must be known for the problems that you are solving. When it is said in the corridors of power that “I know a man,” let that man be you! That is why you need to be consistent. Don’t give up just because things are not
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BRIGHT UKWENGA
working the way you planned. Kings are not merely interested in you because you are good at what you do, they want to know how good you are! Therefore, every skilful man needs to master his skill and establish a track record through continuous output and improvement. This is what gains him the trust of the public and the powerful. Skills get you attention; track record gets you traction! Ukwenga is an esteemed Author, Conference Speaker, Leadership Development Consultant, and the CEO, ScribeTribe an innovative media and publishing enterprise helping individual and corporate brands to express their ideas creatively and effectively.
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For Chief JK Randle – it’s thanksgiving time again (1)
Bashorun J.K Randle
O
n Tuesday 28th July 2020, it will be time for the annual Thanksgiving and Memorial Service for late Chief Joseph Koshoniola Randle, MBE; MVO, who was born in Lagos on 28th July 1909. If he was alive, we would have been celebrating his 111th (one hundred and eleventh) birthday. The number 111 is magical but he died on 17th December 1956 at the age of 47 years. He lived half-way through a century that witnessed the following epochal events: 1. 1914, World War I began and ended in 1918 with 22 million dead. 2. Soon after a global pandemic, the Spanish Flu, appeared, killing an average of 50 million people. 3. 1929, the global economic crisis that started with the collapse of the New York Stock Exchange, causing inflation, unemployment and famine began and lasted for four years. Suicide rates rose drastically during this period. 4. 1933 the Nazis came to power in Germany. 5. 1939, World War II began and ended in 1945 with an average of 60 million dead. In the Holocaust roughly 6 million Jews died. 6. 1950, the Korean War began and ended in 1953. 7. 1955, the Vietnam War began and ended in 1975. It reportedly claimed over 4 million lives. 8. 1967, the Nigerian civil war began with as many as 3 million casualties. It saw horrific ethnic cleansing of the Ibos and lasted for three years ending in 1970. 9. 1979, Soviet-Afghan War began and till its conclusion in 1992 claimed an estimated 1.5 million lives. 10. 1984-1985, Ethiopian peasants perished in the terrible African drought and thousands died while being forcibly resettled in less arid
areas far from their homes. For those who are interested in knowing about the history of Lagos, here are a few highlights: a. 1886 – Telephone cables connect Lagos to London b. 1888 – Lagos Chamber of Commerce established c. 1889 – CourtHouse built d. 1894 – Lagos Echo and Lagos Standard newspapers begin publication of the Bank of British West Africa established. e. 1898 – Electric Street lighting commences operation. The choice of the theme of this year’s Thanksgiving is “My vanishing country” – to borrow a leaf from Bakri N. Sellers because of all those values that prevailed in our nation’s life when Chief J.K. Randle was alive and virtually vanished. They have been buried and forgotten. As the march towards Independence commenced, everyone knew the boundary – between the sanctity of the public treasury and private property. If indeed there was corruption, it was fiercely condemned without any recourse to self-serving ethnic jingoism or religious bigotry. In essence, law and order was taken for granted and by extension, the safety of lives and property were the staple diet for all and sundry. Politics was strictly (or by and large) for those who genuinely wanted to serve and pay their dues to society. It was not that they all amassed huge fortunes with which to bedazzle the gullible public that was already overwhelmed and emasculated by oppression. Most of that generation were truly committed to Nigeria and there was no limit to their
generosity of spirit, vibrant patriotism and allencompassing goodwill as they strove valiantly to give back to society, as a sacrifice for the benefit of future generations. What was uppermost in their minds was what they could bestow as an enduring legacy towards the development of our nation – education, health, infrastructure (particularly roads, railways, electric power etc.) to galvanise Nigeria into a country that future generations would be proud of. Selflessness (and selfless service) prevailed over private greed. Alas, not anymore!! The prevailing culture ensured that government plans were spelt out in the Budget and copies thereof were readily available at the Government Printing office, on Broad Street, Lagos and the regional capitals – Ibadan; Kaduna; Enugu etc. Coincidentally, the Telephone Directory listed the names, addresses and telephone numbers of all officials of the government, as well as the politicians along with the captains of industry and commerce in every major city. Now, our nation has vanished. What is left of our country is under siege in a vicious contest by Boko Haram against the others – armed robbers, bandits, treasury looters, kidnappers, “419 advance Fee” fraudsters, money-launderers, ritual murderers and fake pastors/mallams (clerics). We now live in an age of suppressed rage and fury and mutual distrust. Compassion is dead. Integrity and uprightness were buried long ago. Our ancestors savoured the beneficence of the Almighty and his grace which enabled them to look out for the best in every soul regardless of race, religion or gender. Hence, no one batted an eye-lid when Chief Ernest Ikoli and Ijaw (from Niger-Delta) won
election in Lagos in the heartland of the Yorubas – against a Yoruba opponent! Mind you, Chief Ikoli was a great journalist (the first African editor of “The Daily Times”) in addition to being an old Boy if King’s College, Lagos. He contested against Oba Samuel Akisanya (a.k.a General Saki). After Abayomi resigned both Ikoli and Samuel Akisanya ran for the NYM nomination to be the party’s candidate. Akinsanya had also sought the party’s candidature for the 1940 by-election, but had lost to Jibril Martin. Akinola Maja joined the contest as a third candidate at a late stage. An internal party primary was held in which Akinsanya received 108 votes, Ikoli 60 and Akinola Maja 37. However, the NYM central committee, which had the power to review the result, chose Ikoli as the party’s candidate. Although Akinsanya initially congratulated Ikoli, he later changed his mind and decided to run as an independent with the support of Nnamdi Azikiwe. There was also a Fulani from the North, Mallam Umaru Altine who was elected as the Mayor of Enugu in the heartland of the Igbo. The North reciprocated by electing Yorubas and Ibos as their representatives in various capacities. Even in the Mid-Western Region, Chief J.S. Mariere, an Urhobo who was elected to represent Agbor, the heartland of the Anioma. Time and space will not allow us to list all those who were the beneficiaries of the mutual trust and respect which cut across their tribal origin or religion. It is sufficient to add that in the Western Region, Chief Obafemi Awolowo the Premier, a devout Christian, set up a Pilgrims’ Board to cater for Muslims who wanted to go on pilgrimage to Mecca. Similarly, Sir Ahmadu Bello, the Premier of the North (a devout Muslim) not only had Christian ministers, his personal physician Dr. Ishaya Audu was a Christian. His personal assistants such as Chief Sunday Awoniyi, Chief Silas Daniyan and several others were Christians. Their devotion to duty and loyalty to their boss were never questioned.
J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services. Email: jkrandleintuk@gmail.com
COVID-19: Business right-sizing and statutory obligations
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usinesses across the world have been severely affected by the COVID-19 pandemic. And while many governments have put together packages to tide the most affected sectors through this very difficult time, there is no doubt that some businesses will simply not survive this period. Back home in Nigeria, many companies are expectedly developing their survival strategies. Business rationalisation, especially right-sizing the workforce is an item that is on the table, either for immediate implementation or for implementation in the not too-distant future. Naturally, contract staff are the first set of staff considered for lay-off, as the services they provide are deemed non-core to the business. Some companies are considering converting some of their permanent staff to ‘contract staff’ in the hope of reducing compliance cost of statutory requirements. Therefore, some companies have managed this by outsourcing the provision of contract staff to a third party company (which therefore takes on the statutory obligations of an employer for such workers), while others have simply engaged some of the workforce as ‘contract staff’ and on that basis, considered themselves absolved of the duties that an employer owes an employee. The reality, however, is that it is more complicated than that. The first question that needs to be answered is whether the contract is a “contract of service” or a “contract for service”. Afterall, even the so-called permanent staff are
employed under “contract”. A contract of service (also known as employment contract) is one between an employer and an individual who then becomes an employee. The Black’s Law Dictionary defines an employee as “a person who works in the service of another person (the employer) under an express or implied contract of hire, under which the employer has the right to control the details of work performance”. This infers that there is a scope of employment within which the employee performs his obligations. A contract for service on the other hand, is defined by the online Law Dictionary as “a deal for a work taken upon by anyone who is selfemployed. He or she is free to employ others to complete the job, he or she will be the only one responsible for completing it in a satisfactory manner”. This implies that the independent contractor is not under the control of the service benefactor, but he is responsible for delivering the service as requested. From the above, the determination of whether a contract is “of service” or “for service” is a matter of fact and not necessarily what type of contract the parties say they have. Some of the conditions that are evaluated in determining the type of contract that is in operation are: Where the individual is subject to the control of the contracting party, he is likely to be deemed an employee while where an individual works autonomously and is not subject www.businessday.ng
Victor Onyenkpa & Adedolapo Adebayo
to such control, he is likely to be an independent contractor. When a contracting party determines the details of an individual’s work and specifies the conditions of the work, the individual is more likely an employee. However, if the individual is only obligated to provide the finished/completed product to the contracting party, he is more likely to be a contractor. When the contracting party provides the required materials or training needed by the individual to perform his service, he is typically seen to be an employee. On the other hand, a contractor is expected to be an expert and would therefore not require training or materials from the contracting party. Aside from the above, another widely accepted test in determining an employee and a contractor is the ABC test. Similar to the differences highlighted above, the ABC test uses three (3) major conditions to determine if an individual is an employee or a contractor. The 3 conditions as found in the Black’s Law Dictionary are where the individual “… (A) is free from the control of the employer, (B) works away from the employer’s place of business, and (C) is engaged in an established trade.” Judicial precedence Although this has not been a matter for adjudication in Nigeria, there are several established cases in other jurisdictions. In a recent ruling in India in the judgement between Bharat Heavy Electricals Limited (“BHEL”) vs.
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Mahendra Prasad Jakhmola & Ors (Civil Appeal No. 1799-1800 of 2019), the Supreme Court of India reiterated the basic tests to be applied in determining whether contract labourers can be classified as direct employees. BHEL had entered into an agreement with a contractor to engage contract labourers in its factory in North India. The employment of certain contract labourers was then terminated by BHEL, following which the contract labourers approached the Labour Court seeking reinstatement. The Apex Court, in order to decide the dispute, relied on two of the well-recognized tests to find out whether the contract labourers were the direct employees of the principal employer: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee”. It was determined by the Supreme Court of India that the contract labourers are not direct employees of BHEL on the basis that the contractor was responsible for paying them and that BHEL only exercised secondary control over the employees since the contractor was responsible for assigning the labourers to BHEL.
Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Onyenkpa is a Partner & COO, KPMG while Adebayo is a Manager, Senior, KPMG
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Hyperbolic discounting – our lives of self-sabotage EIZU UWAOMA
I
n 1976, a man, Ronald Wayne gave up on his work. He was frustrated at the way things were going, so he sold his 10 percent stake in a company called Apple for $800. I guess he was excited, but today he regrets it, because his shares are worth $58 billion but it now belongs to someone else! From the biblical story of Esau and Jacob, to that of Ronald Wayne and Steve Jobs in the modern yet early days of Apple, I’ve seen people price themselves away. It’s hard to comprehend that of the three people who started the first trillion-Dollar business we call Apple (Ronald Wayne, Steve Wozniak and Steve Jobs), that Ronald Wayne sold his 10 percent for less than $1000. In other words, he threw away a golden meal ticket, that’s the self-sabotage of Hyperbolic Discounting. We’ve all been there, a place where we have loads of chapters to read up before an exam or an important company task to complete but we instead go out to party, or turn on the TV or even turn to social media, only to have that decision cost us the next day. Hyperbolic discounting is a cognitive bias, where people choose smaller, immediate rewards rather than larger, later rewards — and this occurs more when the delay is closer to the present than the future. Hyperbolic discounting happens when people would rather receive N5,000 right now than N6,000 in a month’s time. I bet you too will. That’s it. That’s a cognitive bias. People value the immediacy of time over the higher value of money. If this makes any sense to you, you’d realise that in negotiation, you can charge or price that client more by just giving him the option to stagger or spread the payment over time. Expressed another way, hyperbolic
discounting is a person’s desire for an immediate reward rather than a highervalue, delayed reward. We are victims to Hyperbolic discounting even in the marketing tactics of our business model – I mean don’t we overly market when we should just engage without selling. Sometimes we even oversell because of today’s anxiety for revenue. We engage every prospect as if they’re at the bottom of the sales funnel. We chokingly sell to those we shouldn’t yet. Whenever we do this, we miss tons of opportunities to build brand awareness and trust with the people who aren’t quite ready to buy. Hyperbolic discounting gets in the way of our saving for retirement too. It’s a major part of behavioural economics. It’s what happened when our parents bought the Volkswagen Beetles in the 80s over buying a piece of land that could have been worth hundreds of millions today. The clothing store, Everlane, is known for: Exceptional quality. Ethical factories. Radical Transparency. And it’s an example of a business that uses hyperbolic discounting to its favour too. It has an e-commerce sales method called After pay, where customers can buy now and pay later. They pay a portion of the balance up front and the rest is paid in quarterly instalment. Unknowingly to their subjects, they tend to buy more that way. It’s what happens when we borrow on credit cards- we play now to pay later. We hate to pay now to play later. This is pronounced more evidently in the concept called procrastination. Hyperbolic Discounting explains addiction too. I mean how else can one explain higher intakes of alcohol or cocaine by a very intelligent and health conscious persona, having full awareness, knowing fully well the damage it causes our body, still we engage with it for the feeling it gives. Hyperbolic discounting has also been offered as an explanation of the divergence between privacy attitudes and behaviour. It’s the same theory we see between a sexual urge that leads to rape or unwanted pregnancy. All around us, in different versions and degrees of the same thing, we self-sabotage ourselves. Hyperbolic Testing happens with our relationships with people too. In this case, we once in a while discount our all-important long-term goals with
a person when we get into short-term conflicts with them. It’s what you see happen when you engage someone with a regret of a divorce from a good marriage. It happens when we put selfcentered opportunities and ideas over what’s best, when we choose being right over being together. As executives in organisations, we sometimes are more interested in an idea, or in being right than being leaders. It is easy to forget that a team is made up of individuals having a piece of the supreme idea in them. But the greatest of ideas don’t come within but between; I mean they don’t come mainly from within us, but can only be found between us. It takes only a true leader to cultivate them, putting together all the pieces of the puzzle through others. Every day we see the pitfall of hyperbolic discounting in team building. There seems to be a workplace trade-off between tasks and people, resulting in relationships. When there is high demand to get things done quickly, the task at hand becomes of greater priority, people become less and less important. Goals and results are set above all things including people. We must avoid Hyperbolic Discounting in the workplace. Take for example, Google, one of the world’s top brands, sets its best performing team aside and then pays even better attention to teams of failed projects. It celebrates them for the team they are first of all, for even trying and contributing to the firm’s lessons learnt. They do this for their own safety. This Psychological safety refers to that shared belief held by team members that the team is safe for interpersonal risktaking. There is a sense of confidence that the team gets from knowing that it doesn’t embarrass, reject, or punish someone for speaking up with ideas, questions, or mistakes. This paradigm is powerful. The truth is, no one wants to look, ignorant, incompetent, intrusive, and negative. It is important to note that this ideology is not a trade off of excellence. What Google does to failed teams when it celebrates them isn’t just about them, it’s also about the winning teams. It kills any chance of them having an illusory superiority. That Illusionary Superiority is referred to as the Dunning-kruger
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No matter what you’re going through, hang on. Fight! Perseverance is the handwork you do after you get tired of doing the hard work you already did
Uwaoma is a start-up, corporate restructuring and strategy consultant. contacteizu@gmail.com
Money and why it makes Nigerians uncomfortable
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erhaps there is nothing as crucial yet, equally as sensitive as the money conversation in Nigerian circles. We need money for basic sustenance, yet we refuse to talk about it. We cavort and spray crisp notes on one another at parties, but that’s as loud as the conversation gets. We love to spend it, so why don’t we talk about it? A mix of superstition, miseducation and competition fuels this continued silence in our community. It is common for close relatives, close friends, even colleagues to be in the dark about one another’s income. Ask Nigerians why and they’ll tell you they’re protecting themselves. You see, letting people know how much you earn is inviting them to do one of two things: Ask you for help Inflict a curse on you Family ties are very close in our communities hence, many of us stretch our income to support several family members as often as possible. While this is admirable, guarding
your income figure means that no one can harass you to give more than you want to. After all, how do they know you can afford it? If nobody knows how much you make, they’ll leave you be. Na all of us dey hustle. On the other hand, keeping your income a secret protects you from the forces of darkness out to get you. The stories of rich folk who fortify themselves with charms are not uncommon. The principle behind this is simple: what they don’t know, they can’t use against you. For many, financial literacy is something attained much later in life. Those privileged to grow up in comfortable homes only hear about budgets and money management within the classroom. Talk about the economy, inflation, credit facilities and debt are all theories until we enter the labour market. Even then, each person struggles in silence to understand the reality. Sometimes, it takes more than one mistake to learn the lesson, but nobody hears about it. And the cycle continues. www.businessday.ng
Social media has popularised the term “DM for prices”. Vendors are unwilling to publicly disclose their selling prices, they say, to keep their prices hidden from competitors. The desired outcome is that no one knows what the market price for that item is and sellers can set prices at their whim. This is contrary to the rules of economics which order price through the forces of demand and supply. Similarly, in the creative service industry, the culture of secrecy ensures that service providers have a lower negotiating power with clients. Many such providers agree that negotiating rates is the most unpleasant part of any contract, and it is because there are no public conversations about what these services are worth. Clearly, this taboo surrounding money conversations needs to be broken. We can only be empowered if we take charge of our finances and the first step is to share what
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effect- a type of cognitive bias in which people believe that they are smarter and more capable than they really are. In other hands, failed teams are not as bad as they are, especially when they can admit and work on that supposed failure. That in itself is strength. Essentially, low ability people do not possess the skills needed to recognize their own incompetence. So, for recognising it, is competence in itself. What this does buttresses the words of the 80’s rapper Chuk D, “don’t let a win get to your head and a loss to your heart.” Also, it encourages that the words of Julie Andrews, “perseverance is failing 19 times and succeeding the 20th.” It’s the mark of the executive to walk people past the present to the future, to replace Hyperbolic Discounting with sacrifice. Sacrifice is deeply needed to grow. Going through stress, pain and sacrifice now for what you want later shows the powers of creation, the forces of life, an inner proof of desire. Really pushing more, at the point of breaking comes your breakthrough. Reengineer yourself and team to have a state of mind that every sacrifice counts. That pain creates value. In the words of one of the greatest European thinkers and philosophers, Frederick Nietche, he says that “most times, the value of a thing is not in its worth, it’s in what it costs us to get it.” I concur. No matter what you’re going through, hang on. Fight! Perseverance is the handwork you do after you get tired of doing the hard work you already did. In the words of the Somalian singer K’naan ft Nas, he says, “difficulty is an excuse that history never accepts.” Quit going for small rewards over the chances of bigger achievements. To me, a good business and a good life are like a natural spring. And like a natural spring, to drill a well or to have pipe borne water, you have to break through hard ground, move away all the rocks and after a great level of work the thirsty ground becomes damp. And just a little deeper you begin to uncover a beautiful underground stream that washes away everything in its path. This is clean water, at that point comes a good spring! Have a taste with us!
Money Brain with JR
JR Kanu we know as a community. Learning from one another brings us closer to achieving the financial independence we all seek. Kanu holds an MBA from Stanford University, a master’s in Journalism from NYU and a bachelor’s in Engineering from Calvin College. His career has included time at Konga, Amazon, The United Nations, Esquire, CNN, and Black Enterprise magazine. Armed with a strong conviction that you can live a great life no matter how much money you have, JR founded REACH Technologies, www. reach.africa. His company builds software to help young people and companies to manage and grow their money.
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12
BUSINESS DAY
Monday 27 July 2020
EDITORIAL Publisher/Editor-in-chief
Frank Aigbogun
Fixing the health sector to avoid further brain drain Issues are crystal clear, fix it
editor Patrick Atuanya DEPUTY EDITORS John Osadolor, Abuja Tayo Fagbule NEWS EDITOR Osa Victor Obayagbona NEWS EDITOR (Online) Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude 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
GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu
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he relocation of Nigerian medical doctors to other countries on a yearly basis is worrisome and must not be taken with levity. In search for greener pastures and an environment that works, Nigeria is gradually losing “assets” that should serve as a line of defence when the need arises. The health sector of any country is very fundamental to its economy. The current COVID-19 pandemic has proven to all that even stronger healthcare systems in advanced economies can be overwhelmed not to mention weaker ones in developing economies like Nigeria. In line with the thoughts of the World Health Organisation (WHO), better health is central to human happiness and wellbeing. It also makes an important contribution to economic progress, as healthy populations live longer, are more productive, and save more. Studies have proven that there is a strong correlation between improved health and economic growth. Hence, how do we talk of improved health for Nigerians
when their doctors aren’t satisfied with conditions in the Nigerian health sector? How do we talk of economic growth in Nigeria when its healthcare system is fast deteriorating? The brain drains in the Nigeria health sector – as well as other sectors – spells an impending doom for a country whose health sector is dilapidated and should be reinventing ways to change the narrative. According to the United Kingdom’s (UK) General Medical Council (GMC), no fewer than 7,875 Nigerian doctors are currently practising in the UK. The GMC’s statistics shows that Nigeria is the African country with the highest number of doctors in the UK. Currently, there are 74,543 doctors registered with the Medical and Dental Council of Nigeria. With 7,875, it means 10.5 percent of doctors registered to practise in Nigeria are currently practising in the UK. This is excluding those practising in other countries of the world. Also, Nigerian immigration to Canada has tripled in recent years, and is poised for further increases post coronavirus. In 2019, Nigeria became the fourth-leading source country of new immigrants to
Canada in pursuit of economic opportunity. This means lots of potential medical students, doctors and professionals have relocated and will relocate. To those immigrants, it is just the best decision, however, very detrimental to Nigeria and only time will tell how grave the consequences are. The Nigerian Medical Association (NMA) says it all. According to the NMA, “This is the second peak of doctors’ mass exodus from the country. In the 1990s, doctors left Nigeria for Saudi Arabia and they are leaving again. They are not receiving the satisfaction they deserve. The work environment is not encouraging, the equipment for practice is inadequate. The salary is meagre. They go to where their service is appreciated. “The issue of insecurity is also there; many doctors have been kidnapped. We don’t know maybe the kidnappers are targeting them or it is just a coincidence. What we think should be done holistically is for the government to conduct a research and find out why the doctors are leaving.” Statistics from the WHO shows that Nigeria currently has a short-
age of medical doctors with a physician-to-patient ratio of 4 doctors to 10,000 patients. This ratio may decline further if the federal government does not attend to the challenges in the health sector. Nigerians are dying everyday from chronic health conditions. We need more doctors not less. Meanwhile, despite being at the frontline of the battle against the COVID-19 pandemic, Nigeria doctors have had reasons to go on strike over welfare and inadequate protective equipment amid a spike in COVID-19 cases. Also, the 2019 and 2020 budget had healthcare sector budgets account for just 4.2 percent of total budget, a proportion below the 15 percent commitment made at the WHO’s 2001 Abuja declaration. This has left public healthcare infrastructure decrepit. The FG must not be silent over this and must take necessary actions. We think the issues are crystal clear and only wish the government will be proactive or risk a total collapse of the health sector if another crisis hits. Crises are sometimes inevitable but the degree of damage is dependent on a nation’s preparedness.
HEAD, HUMAN RESOURCES Adeola Obisesan
EDITORIAL ADVISORY BOARD Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo Wiebe Boer Paul Arinze Boye Olusanya Ayo Gbeleyi Haruna Jalo-Waziri Clement Isong
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Monday 27 July 2020
BUSINESS DAY
13
COMPANIES&MARKETS EQUITIES
Covid-19 pandemic, foreign exchange clarity to test market depth in H2 OLUFIKAYO OWOEYE
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nlike the past, when the dynamics of crude oil prices in the i nt e r nat i o na l market played a critical role in the performance of Nigeria’s equity market, due to the nation’s over-reliance on the commodity, the continued lack of clarity around Nigeria’s foreign exchange outlook, and concerns around the second wave of covid-19 pandemic are set to test the long-standing correlation between Nigeria’s equity market and oil price. The Central Bank has continued to maintain capital control resulting in illiquidity for current foreign investors to pull out their funds thereby discouraging investors despite cheap valuations. Against the apex bank’s defiant initial stand not to devalue the naira, it recently adjusted the naira at official window by 15 percent to N360, I&E window by 5.5% to N381, more confusing is the fact that the Central Bank’s website still shows N360 as at the time of writing. “Foreign exchange uncer-
tainty is a major concern for foreign investors, despite opportunities in the market as most of the stocks are currently underpriced, investors are wary of fx uncertainty that could wipe off their gains, the fx crisis is not even oil related but cause by the CBN’s policy around the control of Fx,” Yinka Ademuwagun, equity & fixed income research analyst at United Capital plc said. Ademuwagun said Egypt experienced a massive downturn in H1 2020 but the market has recovered because the
market is free for investors to exit and enter into the market. “With clarity coming back into system on the back of IMF’s $2.7billion emergency support to Egypt and adjustment in the price of petrol, investors are back to Egypy after taking a flight during the pandemic, unlike Nigeria that did the opposite by locking foreign investors from leaving due to capital control of the CBN,” he said. After tumbling by over 20percent in March 2020, the Nigeria’s stock market recovered by more than half the
initial downturn in the month of May amid increased demand by local investors, who have since dominated activities by taking advantage of cheap market valuation in fundamentally strong stocks; attractive dividend yield and sizable market liquidity; increasing indications that governments around the world will reopen their economies regardless of the anxiety around with foreign investors remaining on the sidelines. According to Ademuwagun local institutional investors such as pension funds
and insurance companies have very low risk appetite while local retail investors are quick to take profit while foreign investors have a massive risk hunt because of their fund size. “It would take a lot of convincing to bring the foreign investors back to the market,” he said. In his view, Segun Olakoyenikan, a Lagos-based financial journalist said beyond the fluctuating oil prices, attention has shifted to issues such as fx liquidity crisis which has
made repatriation of existing assets by foreign investors difficult; lack of clarity in the foreign exchange market, thereby creating uncertainty in the already volatile market and pandemic fears which have put businesses at risk as most businesses were designed to function in pre-covid. Nigeria’s equity market kicked off the year on a high note with investors launching a sector-wide demand for stocks in the first month of the year, with the Nigerian stock market jumping 10.7percent in the first three weeks of the year, to emerge as the global best performer. However, this was shortlived as the spread of the COVID-19 disease across the world precipitated into an unanticipated financial market volatility, the reality of the COVID-19 pandemic also hit the crude oil market from late February and was exacerbated by a breakdown of the agreement between Saudi Arabia and Russia in March, the Nigerian stock market joined the rest of the world in a global financial market crash, tumbling more than 20percent by the end of Q1-2020.
Veritas Kapital Assurance returns to FDHIC champions investment growth, profitability, posts N253m PBT opportunities in healthcare sector HEALTHCARE
MODESTUS ANAESORONYE
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eritas Kapital Assurance Plc has recorded improvement its bottom line, moving from a loss position of 50 million in 2018 to N253 million Profit Before Tax (PBT) at the end of 2019 financial year. This is even as it recorded a decline in management expenses by 4 percent to N1.462 billion in 2019 from N1.530 billion with a two percent increase in net assets hitting N7.947 billion as against N7.781 billion in the previous year. These were disclosed during the Company’s 43rd Annual General Meeting (AGM) as contained in its 2019 Annual Report and Accounts, held at the Corporate headquarters of the company in Abuja. During the meeting held in line with the COVID-19 rules and guidelines, the Chairman of the Board of Directors, Thomas Etuh, in an opening statement while applauding the improvements, said the focus of the company for the year 2020 is “simply innovative” According to him, “Innovation is how we will win in the highly competitive environment that we operate in that is
also further challenged by the effects of the novel Coronavirus pandemic. “This will include innovation in processes, enhancement of our product portfolio, development of mutually beneficial partnerships and collaborations, while ensuring simplicity in all areas of your company’s operations. We are confident that the future remains ours to shape.” He said in spite of the pandemic, and the associated lockdown imposed on a significant portion of economic activities by the Federal Government, the “Company has been providing seamless and uninterrupted service to customers and stakeholders. “We activated our Business Continuity Plan by asking staff to work from home starting on Tuesday 24th March, 2020. Our offices have reopened since the ease of lockdown as directed by the Federal Government. “Even though Nigeria’s insurance industry has yet to exceed a penetration rate of 1%, we expect that several non-regulatory growth drivers will reverse these trends. Micro-insurance and index insurance in the Agriculture sector are potential growth
areas for the industry.” Also speaking, the Managing Director, Kenneth E. Egbaran, said that the Company’s 2019 record was a great improvement when compared to where the company is coming from. According to him, “I think it is a great improvement when compared to where we are coming from in the year, 2018 when we declared a loss position and in 2019, we lifted up to a profit position. So, I believe that it is an encouraging development “In the area of top line, there was an improvement and there was also improvement in the middle line in terms of underwriting profits. What I mean is that a lot of care was taken by the company to ensure that the classes and qualities of businesses are accepted. Even the profit also showed that the company is doing well. “In all indices, I believe that the company did well and that is what we are trying to build on to ensure that we are not going to drop the ball even in this situation where everybody believe that not really much can happen because of the COVID-19 pandemic, the CEO said.
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TEMITAYO AYETOTO
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lying Doctors Healthcare Investment Company (FDHIC) has championed efforts for growth in trade and investment opportunities in the Nigerian healthcare sector. Ola Brown, FDHIC founder, leading this movement said years of research and close monitoring of activities in the sector revealed to her that healthcare is an investment, not a cost. “Healthcare is trade. Healthcare is an industry. Healthcare is business”, she said hosting the Minister of Industry, Trade and Investment of Nigeria, Otunba Adebayo during the first edition of ‘The Conversation’ with the company. Speaking on the investment potential in the healthcare sector, Brown pointed out that in a world healthcare sector grossing $5.8 trillion, 70 to 90 per cent of all the drugs used in sub-Saharan Africa is imported. The market for pharmaceuticals in Nigeria can hit about $4 billion by 2026, she said citing a
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McKinsey report. “For every single additional year of life expectancy, we can increase Nigeria’s GDP per capita by 4 per cent,” she added. She queried efforts being made to make the sector more enabling, saying 70 per cent of Nigerians, for instance, pay out-of-pocket for healthcare while 7 per cent of people in South Africa do the same. She hence called for new ways to provide healthcare insurance, digitise the process and also use the internet to reach remote places which can be explored to create affordable healthcare. Abimbola Olufure, rep-
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resenting the Minister of Industry, Trade and Investment during the webinar admitted that COVID-19 has exposed the fragilities in Nigeria’s healthcare system, with huge gaps apparent from infrastructure to equipment, data system and supplies ─ all areas which provide ample investment opportunities. Addressing the concern that investment in the healthcare sector on the continent is largely seen as charity, Olufure said “large segments of the healthcare value chain, like pharmaceutical, healthcare logistics as well as primary and secondary healthcare already deliver significant returns to investors.”
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Monday 27 July 2020
BUSINESS DAY
COMPANIES&MARKETS BANKING
FCMB takes SMEs in Nigeria to global community MICHAEL ANI
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eading financial services provider, First City Monument Bank (FCMB), has provided a platform for Nigeria-based Small and Medium Scale Enterprises (SMEs) to expand beyond the shores of the country. Recently, the bank organised virtual seminars for SMEs aimed at connecting them with globally recognized experts and business entities. The match-making seminars which were organised in collaboration with the Nigeria-Belgian Chamber of Commerce (NBCC), recorded a number of quality businesses in attendance. In a statement signed by the Group Head, Corporate Affairs of FCMB, Diran
Olojo, the Bank explained that the seminars served as a platform to expose and connect SMEs to lucrative global opportunities with European and Middle East based businesses. This is to enhance growth, competitiveness and sustainability of Nigeria based SMEs in the global environment. The first virtual seminar, tagged “Energy Catalyst”, held from June 1 to 5, brought together over 50 SMEs based in Nigeria and 12 United Kingdom based ones to explore opportunities and partner in the execution of renewable energy projects along with the possibility of receiving grants from Innovate UK , a research and innovation agency in the UK. The webinar featured informative discussions cover-
ing topics like; Energy access situation in Nigeria, how to do business in Nigeria (etiquette, environment, culture). Among the experts that provided insight and solutions were the Chief Executive Officer, All On, Wiebe Boer; Partner, Tax, Regulatory & People Services at KPMG Adewale Ajayi; Executive Director, Business Development, FCMB, Bukola Smith: group head, business banking, of the Bank, George Ogbonnaya, among others. The second seminar, which took the form of a virtual trade fair, was held on July 7. It focused on enlightening SME on the vast opportunities of manufacturing in Qatar and the numerous partnership possibilities with leading manufacturers in construction, building
materials & plastic industries based in the Middle East region. A total of 34 SME businesses were exposed to new markets and relationships in Qatar and the Middle East. The speakers urged SMEs in Nigeria to look beyond their immediate environment by forming alliances with other businesses across the world to tap from the vast opportunities that globalisation offers. FCMB remains a top player in the SMEs segment. The Bank emerged as the best in customer experience for SMEs in the year 2019, based on the Nigeria Banking Industry Customer Experience Survey (NBICES) report from KPMG, a leading international consulting firm, published in December 2019.
COMPANY RELEASE
Airtel Africa partners with Mukuru to facilitate cross-border money transfers within Africa
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irtel Africa plc [Airtel Africa], a leading provider of telecommunications and mobile money services in 14 countries across sub-Saharan Africa and Mukuru, one of Africa’s largest remittance organisations, today announced a partnership which will enable Mukuru customers to instantly send cross-border transfers directly to Airtel Money customer wallets in 12 African countries. This partnership will be particularly beneficial for customers making intra-Africa payments from Southern Africa where Mukuru has a leading presence. Customers also benefit from no longer having to physically go to an Agent to receive cross-border payments. Once Airtel Money customers receive the funds, they can be used to pay utility bills, goods and services, transferred to family or can be cashed out at any of Airtel Africa’s exclusive branches, kiosks and agents. Raghunath Mandava, CEO, Airtel Africa, commented “This partnership empowers those without a bank account to be included in the formal financial ecosystem and to move money
conveniently, seamlessly and securely. At a time when intraAfrica cross-border payments are of strategic importance, we are pleased to be working together on cross-country mobile money transfers, while also supporting local economies.” Andy Jury, CEO, Mukuru, confirms, “This partnership exemplifies the collaborative spirit in which Mukuru is engaging with other industry leaders to provide universal access to cash and digital financial services across the continent. The enablement of digital money transfers between Mukuru and Airtel Africa customers means we can offer greater choice to the hardworking diaspora when providing for their families back home. The freedom to choose the solution best befitting your personal circumstances is pivotal to true economic empowerment” The partnership, subject to local regulatory approvals, will initially launch in Malawi, Zambia, Uganda, Tanzania, Kenya and the Democratic Republic of the Congo. It will then roll out to subsequent Airtel Money markets.
NSE welcomes Champion Breweries managing director with Digital closing Gong
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L-R: Fidelis Ayebae, MD/CEO ; Segun Adebanji, chairman of the board, and Yomi Adebanjo, company secretary, all of Fidson Healthcare Plc, at the 21st AGM (Virtual) meeting of the company in, Lagos. Pic by Pius Okeosisi
Allianz Nigeria Insurance pays N1.8bn claims Q1 MODESTUS ANAESORONYE
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llianz Nigeria Insurance Plc, a local operating entity of the global insurance Company Allianz, one of the leading integrated financial services providers worldwide, has displayed resilience in its business strategy in spite of the impacts of the Covid 19 pandemic in the global and Nigerian economy. The Company in the first quarter of 2020 recorded a claims pay-out of 1.8 billion naira to its customers, which is over a 130 percent increase from N800 million the amount paid out the same period in 2019.
On a related note, the Company also in the first quarter of 2020, reported a Gross Written Premium (GWP) of N4.2 billion which is a 47 percent increase when compared to the 2.9 billion naira in GWP recorded during the same period in 2019. The Company has so far recorded an investment income of N301 million despite the fall in investment and treasury bill rates. Owolabi Salami, the chief operating officer(COO) of the Company said the success attained so far can be attributed to the tenacity and bravery of the people who work in the organization, adding that he was proud to see how fast his people adapted and rose www.businessday.ng
to the challenge in these unprecedented times. He further stated that, “the Company will remain unwavering to deliver on its promise of paying claims despite the present economic downturn”. Earlier this year, the Company launched a nationwide campaign to settle motor claims within 60 minutes, and to date scores of claims has been settled within the stipulated time. It is clear that Allianz Nigeria Insurance Plc is at the forefront of revolutionizing the insurance industry especially in the area of satisfying customers’ needs. Recording these achievements in a time of extreme decline in sales
and corresponding decline in profits, they have scaled through Q1 with promising results all keeping their promise to serve their customers. The Allianz Group is one of the world’s leading insurers and asset managers with more than 92 million retail and corporate customers. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 764 billion euros on behalf of its insurance customers.
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he Nigerian Stock Exchange honored the newly appointed Managing Director of Champion Breweries Plc, Georgios Polymenakos by having him perform the digital closing gong to close the market on Thursday, to formally welcome him to the stock market. Speaking at the ceremony, the Chief Executive Officer of The Nigeria Stock Exchange, Oscar Onyema said as part of the Exchange’s business continuity plan, the digital closing gong was launched on Instagram in April this year and has since then hosted several webinars, virtual events and interactive sessions. He said the Exchange is committed to providing issuers the platforms that allow them to achieve their business and strategic objectives. According to Onyema, the closing gong ceremony is organized to support and recognize milestones and accomplishments of listed companies and also allow newly appointed Boards and Chief Executive Officer of listed companies to be introduced to the Nigeria Capital Market ecosystem. Onyema congratulated the Champion Breweries Managing Director and assured him the NSE’s continued commitment to offer issuers opportunities to derive great value from their interaction with the market. He also assured the leadership of Champion Breweries that the @Businessdayng
NSE will remain a trusted business partner in achieving their strategic business objectives. Commending the leadership of the NSE for the opportunity, the Managing Director Champion Breweries Plc, Georgios Polymenakos said he was deeply honored to participate at the event. He described himself as a passionate advocate of the Nigerian economy and the future of Nigeria. He added that Champion Breweries will soon be fifty years old and has had its ups and downs over the years and one of the company’s glorious events was the listing on the Nigeria Stock Exchange in 1993. Polymenakos said in spite of the ups and downs, the company has remained steadfast in producing top quality products that can be compared with any company or brand all over the world at affordable prices. He said it is the quality of the products the company is offering that has translated to being the most preferred brand by the consumers in the areas they operate. He added that the company’s beer brand has during the last two years grown with over one hundred and fifty percent which led the company to profitability in 2019 and the momentum continued in the first quarter of the year 2020. This momentum has also enabled the company to navigate the turbulence in the economy successfully.
Monday 27 July 2020
BUSINESS DAY
15
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Monday 27 July 2020
BUSINESS DAY
In Association With
Macroeconomics
Governments must beware the lure of free money
Budget constraints have gone missing. That presents both danger and opportunity
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T IS SOMETIMES said that governments wasted the global financial crisis of 2007-09 by failing to rethink economic policy after the dust settled. Nobody will say the same about the covid-19 pandemic. It has led to a desperate scramble to enact policies that only a few months ago were either unimaginable or heretical. A profound shift is now taking place in economics as a result, of the sort that happens only once in a generation. Much as in the 1970s when clubby Keynesianism gave way to Milton Friedman’s austere monetarism, and in the 1990s when central banks were given their independence, so the pandemic marks the start of a new era. Its overriding preoccupation will be exploiting the opportunities and containing the enormous risks that stem from a supersized level of state intervention in the economy and financial markets. This new epoch has four defining features. The first is the jaw-dropping scale of today’s government borrowing, and the seemingly limitless potential for yet more. The IMF predicts that rich countries will borrow 17% of their combined GDP this year to fund $4.2trn in spending and tax cuts designed to keep the economy going. They are not done. In America Congress is debating another spending package (see article). The European Union has just agreed on a new stimulus funded by common borrowing, crossing a political Rubicon (see Leader). The second feature is the whirring of the printing presses. In America, Britain, the euro zone and Japan central banks have created new reserves of money worth some $3.7trn in 2020. Much of this has been used to buy government debt, meaning that central banks are tacitly financing the stimulus. The result is that long-term interest rates stay low even while publicdebt issuance soars. The state’s growing role as cap-
ital-allocator-in-chief is the third aspect of the new age. To see off a credit crunch, the Federal Reserve, acting with the Treasury, has waded into financial markets, buying up the bonds of AT&T, Apple and even Coca-Cola, and lending directly to everyone from bond dealers to non-profit hospitals. Together the Fed and Treasury are now backstopping 11% of America’s entire stock of business debt. Across the rich world, governments and central banks are following suit. The final feature is the most important: low inflation. The absence of upward pressure on prices means there is no immediate need to slow the growth of central-bank balance-sheets or to raise shortterm interest rates from their floor around zero. Low inflation is therefore the fundamental reason not to worry about public debt, which, thanks to accommodative monetary policy, now costs so little to service that it looks like free money. Don’t fool yourself that the role of the state will magically return to normal once the pandemic passes and unemployment falls. Yes, governments and central banks may dial down their spending and bail-outs. But the new era of economics reflects the culmination of long-term trends. Even before the pandemic, inflation and interest rates were subdued despite a jobs boom. Today the bond market still shows no sign of worrying about
long-term inflation. If it is right, deficits and money-printing may well become the standard tools of policymaking for decades. The central banks’ growing role in financial markets, meanwhile, reflects the stagnation of banks as intermediaries and the prominence of innovative and risk-hungry shadow banks and capital markets (see article). In the old days, when commercial banks ruled the roost, central banks acted as lenders of last resort to them. Now central banks increasingly have to get their hands dirty on Wall Street and elsewhere by acting as mammoth “marketmakers of last resort”. A state with a permanently broader and deeper reach across the economy creates some opportunities. Low rates make it cheaper for the government to borrow to build new infrastructure, from research labs to electricity grids, that will boost growth and tackle threats such as pandemics and climate change. As societies age, rising spending on health and pensions is inevitable—if the resulting deficits help provide a necessary stimulus to the economy, all the more reason to embrace them. Yet the new era also presents grave risks. If inflation jumps unexpectedly the entire edifice of debt will shake, as central banks have to raise their policy rates and in turn pay out vast sums of interest on the new reserves that they have created to buy bonds. And even if inflation
stays low, the new machinery is vulnerable to capture by lobbyists, unions and cronies. One of monetarism’s key insights was that sprawling macroeconomic management leads to infinite opportunities for politicians to play favourites. Already they are deciding which firms get tax breaks and which workers should be paid by the state to wait for their old jobs to reappear. Soon some loans to the private sector will turn sour, leaving governments to choose which firms fail. When money is free, why not rescue companies, protect obsolete jobs and save investors? However, though that would provide a brief stimulus, it is a recipe for distorted markets, moral hazard and low growth. Fear of politicians’ myopia was why many countries delegated power to independent central banks, which wielded a single, simple tool— interest rates—to manage the economic cycle. Yet today interest rates, so close to zero, seem impotent and the monarchs who run the world’s central banks are becoming rather like servants working as the government’s debt-management arm. Free markets and free lunches Each new era of economics confronts a new challenge. After the 1930s the task was to prevent depressions. In the 1970s and early 1980s the holy grail was to end stagflation. Today the task for policymakers is to create a framework that allows the business cycle to be managed and financial crises to be fought without a politicised takeover of the economy. As our briefing this week explains, this may involve delegating fiscal firepower to technocrats, or reforming the financial system to enable central banks to take interest rates deeply negative, exploiting the revolutionary shift among consumers away from old-style banking to fintech and digital payments. The stakes are high. Failure will mean the age of free money eventually comes at a staggering price.
AMaids Balkan betrayal for sale
Bigotry against black people poisons the Arab world, too Protests in America have shone a new light on an old problem
D
AY AFTER day, week after week, the cars pulled up outside the Ethiopian embassy in Beirut and ejected their passengers: tired-looking black women, their modest possessions stuffed into cheap suitcases (pictured). With the economy in free fall, many Lebanese families could no longer afford to pay their domestic workers. Nor could they easily send them home. The price of repatriation flights had surged because of covid-19. So their solution was to dump the women outside their embassy. Dozens were left to fend for themselves. The protests in America over racism and police brutality have
drawn much interest in the Middle East. Some people reacted with shock, some with Schadenfreude. For others, though, America’s unrest was an opportunity to discuss the problems with race in their own countries. Most Arab states have a black minority. Black communities in north Africa trace their roots to antiquity: the Nubians, for example, called Egypt home long before their country acquired its Arab identity. In the Levant and the Gulf many people are the descendants of slaves taken by Islamic empires, or of African Muslims who made pilgrimages east and decided to stay. All face discrimination. Darkskinned people are referred to with terms like abd (“slave”). Egypt’s dark-skinned former president, Anwar Sadat, was called his predecessor’s “black poodle”. Blackface is a common sight on Arabic television. In a widely shared video a Continues on page 17
Monday 27 July 2020
BUSINESS DAY
17
In Association With
Pulling together
Europe’s€€750bn rescue package sets a welcome precedent Even if the details are fraught
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HEN THE leaders of the European Union agreed this week on a €750bn ($869bn) package to help members’ economies recover from covid-19, they answered a looming question: whether Europe was too divided to handle the pandemic. As in earlier crises, the virus’s economic ravages split the EU’s members. Rich countries with low government debt and fewer infections (such as Germany and the Netherlands) can cope on their own. Some of the heavily indebted and infected countries (such as Italy and Spain) cannot. Without fiscal aid, they face recessions deep enough to drag down the whole of the EU. The programme agreed to in Brussels does not just avert that danger. It does more to strengthen the union than anyone would have imagined a few months ago (see article). The total is equivalent to nearly 5% of the EU’s annual GDP, to be spent over several years, much of it in grants rather than loans. More important is how the money will be raised: through bonds issued by the European Commission. For the first time, the EU will collectively borrow large sums, piggybacking on the creditworthiness of stronger members to help weak ones. By raising total spending by the EU itself (as opposed to member states),
from nearly €1.1trn to €1.8trn over seven years, it gives the club a potent fiscal weapon against recession to complement the monetary tools of the European Central Bank. This is especially important when near-zero interest rates are forcing a shift in emphasis from monetary to fiscal policy. To pay the debts back, and avoid direct responsibility, EU countries may be tempted to grant the European Commission more taxing authority. All these moves to strengthen the EU are welcome. Yet it is an exaggeration to say that the summit was a “Hamiltonian moment”, analogous to the creation of a centralised borrowing capacity for the United States’ new federal government in 1790. The recovery fund does not pool countries’ existing debts, nor does it create new
institutions like those set up during the euro crisis. On the one hand it sets a precedent for collective borrowing during an emergency that will probably be repeated. On the other, whereas a sovereign government borrows automatically when revenues do not meet expenditures, the EU will have to endure gruelling negotiations each time it wants to do so. In part this is no bad thing. The summit showed that Europe is not ready for a Hamiltonian moment. It reflected splits between members over what policies are desirable and what sort of club the EU is. A group of wealthy, net-contributor countries nicknamed the “frugals” (led by the Netherlands, along with Austria, Denmark, Sweden and Finland), which had misgivings about propos-
als for collective debt, cut the grant portion from €500bn to €390bn. Mark Rutte, the Dutch prime minister, was lambasted as a skinflint by southern Europeans. Meanwhile Viktor Orban, Hungary’s autocratic leader, infuriated people who care about good governance by demanding that ruleof-law conditions for disbursements be diluted—not a great invitation to a fiscal union. Given such mistrust, the EU’s leaps forward tend to require a lot of grubby horse-trading. The frugals were bought off with bigger rebates on their budget contributions. Enforcement of the rule of law was watered down sufficiently to appease Mr Orban. Yet the deal gives satisfaction at long last to the EU’s hard-pressed south. And the heroes are the EU’s two driving partners, France and Germany, which looked past narrow national interests and strived for a European solution. In April Angela Merkel, Germany’s chancellor, was still on the frugals’ side in opposing collective debt. It was her decision to join Emmanuel Macron, the French president, in backing this sort of debt that shifted the centre of gravity. Such unity among the big members makes smaller ones nervous: what Mr Macron sees as a hardwon precedent looks to Mr Rutte like a slippery slope. But it is Mr Macron and Mrs Merkel who are building the EU’s future.
(or even negative) growth.” Its report should have sparked debate. It did not, because Mr Magufuli blocked its release. If Tanzania’s economy grew by almost 7% in the fiscal year to the end of June 2019, why did tax revenue fall by 1%? And why has bank lending to companies slumped? Private data are bad, too. In 2019 sales at the biggest brewer fell by 5%. Sales of cement by the two biggest producers were almost flat. None of these things is likely if growth is storming ahead. The discrepancies are so large that it is hard to avoid the conclusion that the government is lying. Yet Tanzanians are terrified to suggest anything so scurrilous. Two years ago Mr Magufuli’s government wrote a law (since amended) under which
people could be locked up for three years for disputing official statistics. The government has arrested Zitto Kabwe, an opposition MP, for questioning GDP numbers and closed a newspaper for publishing accurate exchange rates. Lying is bad for democracy: without reliable numbers, it is hard for voters to hold governments to account. Lies are also bad for governance: it is hard to craft good policies without knowing what works. Because accurate numbers matter so much, donors spend almost $700m a year helping poor countries collect them. The World Bank even gave Tanzania a $30m loan to improve its statistics bureau. What was the point, if the IMF buckles to political pressure and professes to believe codswallop? Some argue that international financial institutions can do more good by staying close to iffy governments and gently nudging them towards reform. If the IMF picks a fight with Mr Magufuli, he may send it packing. But in accepting junk statistics, the fund harms its own credibility, and stores up economic trouble for Tanzania. Mr Magufuli is running for a second term in October, so bad data also undermine the democratic rights of Tanzanians, who should be allowed to vote for politicians based on their actual record, rather than a fictitious one.
You say bullish, I say...
Tanzania’s statistics smell wrong And the IMF should say so
B
Y OFFICIAL MEASURES Tanzania is doing brilliantly. Covid-19 may be devastating its neighbours, but Tanzania is completely free of the virus—and safe for tourists—says President John Magufuli. Sub-Saharan Africa’s economy will shrink by 3.2% this year, predicts the IMF, but Tanzania forecasts GDP growth of 5.5%, making it one of the world’s star economies. This month the World Bank promoted it from “low income” to “lower-middle income”. That implies that income per person has surpassed $1,036, five years ahead of the government’s schedule. Were these figures true, Tanzania would have much to celebrate. But the closer you look, the less plausible they seem (see article). For more than a decade from 2000 Tanzania’s economy, east Africa’s second-largest, was indeed among Africa’s best-performing. After ditching one-party rule and “African socialism” in the 1990s, the government opened up the economy and welcomed foreign investors. GDP grew by a cracking 5-8% almost every year. However, when Mr Magufuli came to power in 2015, he turned a hopeful country into a fearful one. Journalists were jailed, opposition MPs have been arrested or shot. The “bulldozer”, as he is known, has scared off investors by ripping up agree-
ments, arresting employees and demanding arbitrary sums from companies. Acacia Mining, the largest foreign investor, was ordered to pay $190bn—more than three years of Tanzania’s GDP—though this absurd figure was later scaled back. Investment has slumped. Tanzania has fallen by ten places in the World Bank’s ease-of-doing-business ranking. Business folk think the economy slipped into recession well before covid-19. But official numbers show it galloping ahead. IMF staff smelt a fish last year. Official GDP numbers seemed out of step with other gloomier data. The IMF raised concerns about the numbers and noted that the government’s “unpredictable or interventionist policies...could lead to meagre
Bigotry against black people poisons the Arab Continued from page 16
black Palestinian actress, Maryam Abu Khaled, recounted the casual bigotry she encounters, such as a mother telling her daughter to get out of the sun lest she, too, turn black. Skin colour can make marriages fraught when families see it as a marker of socioeconomic status or pedigree. Discrimination exists in the workplace, too. Black Iraqis, a community with more than a thousand years of recorded history, struggle to get government jobs and are typically relegated to menial work. The worst treatment, though, is reserved not for citizens but for migrants. In wealthy Gulf states it manifests in a tacit racial hierarchy. Fancy hotels might employ black migrants as security guards or porters. They are less common in jobs that require interaction with customers, like waiters or hairdressers. Those better-paid roles often go to lighter-skinned workers from Asian or Arab countries. Egypt is thought to host around 5m African migrants, many of whom fled war and oppression in places like South Sudan and Eritrea. They have faced years of abuse. About two dozen Sudanese were killed in 2005 when police raided a protest camp. In years past some tried to reach Israel, a long journey across Sinai’s desert that left them prey for human traffickers. Those who crossed the border met discrimination and frequent attempts to deport them—regardless of conditions in their home countries. Some Lebanese advertise their housekeepers on Facebook as if they were property. A post in April offered a Nigerian maid, “very active and clean”, for 1.5m Lebanese pounds ($1,000 at the official exchange rate). Bigotry can trump class: a black diplomat recalled being pursued in malls by security guards who thought her a housekeeper and wanted to know why she was shopping without her madame.
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Monday 27 July 2020
BUSINESS DAY
Harvard Business Review
ManagementDigest
A better way to Onboard AI Boris Babic, Daniel L. Chen, Theodoros Evgeniou and Anne-Laure Fayard
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n a 2018 Workforce Institute survey of 3,000 managers across eight industrialized nations, the majority of respondents described artificial intelligence as a valuable productivity tool. It’s easy to see why: AI brings tangible benefits in processing speed, accuracy and consistency, which is why many professionals now rely on it. But respondents to that survey also expressed fears that AI would take their jobs. These fears are echoed by academics and executives we meet at conferences and seminars. AI’s advantages can be cast in a much darker light: Why would humans be needed when machines can do a better job? The prevalence of such fears suggests that organizations looking to reap the benefits of AI need to be careful when introducing it to the people expected to work with it. Just as when new talent joins a team, AI must be set up to succeed rather than to fail. A smart employer trains new hires by giving them simple tasks that build hands-on experience, and assigns them mentors. This allows the newcomers to learn while others focus on higher-value tasks. As they gain experience and demonstrate that they can do the job, their mentors increasingly entrust them with more substantive decisions. Over time an apprentice becomes a partner, contributing skills and insight. We believe this approach can work for artificial intelligence as well. In this article we draw on our own and others’ research and consulting to present a four-phase approach to implementing AI. It allows enterprises to cultivate people’s trust — a key condition for adoption — and to work toward a distributed humanAI cognitive system in which people and AI both continually improve. PHASE 1: THE ASSISTANT This first phase of onboarding artificial intelligence is rather like the process of training an assistant. You teach the new employee a few fundamental rules and hand over some basic but time-consuming tasks you normally do. The
trainee learns by watching you, performing the tasks and asking questions. One common task for AI assistants is sorting data. An example is the recommendation systems companies use to help customers filter thousands of products and find the ones most relevant to them. More and more business decisions now require this type of data sorting. When, for instance, portfolio managers are choosing stocks in which to invest, the information available is far more than a human can feasibly process. Software can make the task more manageable by immediately filtering stocks to meet predefined investment criteria. Another way AI can lend assistance is to model what a human might do. As anyone who uses Google will have noticed, prompts appear as a search phrase is typed in. This kind of user modeling can easily be applied to decisionmaking. AI would use it to identify the choice an employee is most likely to make, given that employee’s past choices, and would suggest that choice as a starting point when the employee is faced with multiple decisions — speeding up, rather than actually doing, the job. PHASE 2: THE MONITOR The next step is to set up the AI system to provide real-time feedback. Thanks to machine-learning programs, AI can be trained to forecast what a user’s decision would www.businessday.ng
be in a given situation. If a user is about to make a choice that is inconsistent with his or her choice history, the system can flag the discrepancy. This is especially helpful during high-volume decision-making, when human employees may be tired or distracted. Of course, AI is not always “right.” Companies should set rules about designing and interacting with AI to ensure organizational consistency. These rules might specify the conditions under which an employee should either follow the AI’s instruction or refer it to a superior. To help employees retain their sense of control in phase 2, we advise managers and systems designers to involve them in design: Engage them as experts to define the data that will be used; familiarize them with models during development; and provide training as those models are deployed. In the process, employees will see how the models are built, how the data is managed and why the machines make the recommendations they do. PHASE 3: THE COACH In a recent PwC survey nearly 60% of respondents said they would like to get performance feedback on a daily or a weekly basis. The trouble is that the only way to discover opportunities for improvement is through a careful analysis of key decisions and actions. That requires documenting expectations about outcomes and then compar-
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ing those expectations with what actually happened. Thus the feedback employees get usually comes from hierarchical superiors during a review — not at a time or in a format of the recipient’s choosing. That is unfortunate, because, as found in a recent study, the more people feel that they are in control of the conversation, the better they respond to it. AI could address this problem. The capabilities we’ve already mentioned could easily generate feedback for employees. A monthly summary analyzing data drawn from their past behavior might help them better understand their decision patterns. The data can reveal interesting and varying biases. Some people may be more loss-averse than others. Others may be overconfident. The analysis identifies these behaviors and — like a coach — provides personalized feedback that suggests how to improve decisions.
and create what is known as a “coupled system.” In line with this thinking, in the final phase of the AI implementation journey (which to our knowledge no organization has yet adopted) companies would develop a coupled network of humans and machines in which both contribute expertise. We believe that as AI improves through its interactions with individual users, a community of experts (humans and machines) will naturally emerge in those organizations. Because of its potential impact, artificial intelligence may be perceived as particularly difficult to implement. Yet if done mindfully, adoption can be fairly smooth. That is precisely why companies must ensure that AI’s design and development engage the people who will be working with it. Otherwise workers will quite reasonably fear being constrained — or even replaced — by machines.
PHASE 4: THE TEAMMATE Edwin Hutchins, a cognitive anthropologist, developed what is known as the theory of distributed cognition. It is based on his study of ship navigation, which, he showed, involved a combination of sailors, charts, rulers, compasses and a plotting tool. The theory posits that cognitive processing is not necessarily limited to the brain. External tools and instruments can, under the right conditions, play a role in cognitive processing
Boris Babic is an assistant professor of decision sciences at INSEAD. Daniel L. Chen is a professor at the Institute for Advanced Study at the Toulouse School of Economics and lead investigator at the World Bank’s Data and Evidence for Justice Reform program. Theodoros Evgeniou is a professor of decision sciences and technology management at INSEAD. Anne-Laure Fayard is an associate professor of innovation, design and organization studies at NYU’s Tandon School of Engineering.
@Businessdayng
Monday 27 July 2020
BUSINESS DAY
19
real sector watch
We collect 40,000 litres of milk a day from local farmers— FrieslandCampina MD FrieslandCampina WAMCO started its Dairy Development Programme (DDP) in Nigeria in 2010. It was targeted at setting up backward integration projects in order to source raw milk locally and upscale the country’s dairy industry. Ten years down the line, the DDP has been a humongous success, extending from Oyo to four other states and impacting the lives of 7,000 farmers and their families. Ben Langat, managing director, FrieslandCampina WAMCO Nigeria plc, spoke with Odinaka Anudu, Industry Editor, on the achievements of the DDP and how it has helped to grow the Nigerian economy. Your Dairy Development Programme (DDP) is going on in five states. Tell us how it started 10 years ago. n 2010, we started with Shonga Farms in Kwara State by supporting the farm to meet our quality standards. Then we began offtake of milk from them. We then moved to Oyo state, putting infrastructure in place for our pilot Dairy Development Programme (DDP). We built milk collection centres in several communities in Oyo. The first milk collection centre was built in Fashola in 2011. We started from scratch. Today, we have a total of 16 milk collection centres and 10 new ones are being constructed as we speak, with one bulking centre in Iseyin, where the raw milk goes into big cooling trucks and moved to Lagos.
d e v e l o p m e n t . We hav e e v e n moved beyond just surpassing our target to setting up a complete business line with the Peak Yoghurt. We are committed to helping to grow the economy as the clear leader in the dairy sector. We are training dairy farmers in line with international best practices, improving their livelihood and quality of life, and improving quality of livestock and pasture for better milk yield. We are building and sustaining new ecosystems. The DDP model has proven to be sustainable. We have a factory that is producing yoghurt and is going to need a lot of fresh milk. We still need more and that is why we are building more capacity. Perhaps over the next 12 months, the factory can run at full capacity.
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What quantity of raw milk are you currently getting per day? We are collecting about 40,000 litres a day. Our actual storage capacity is 85,000 litres, which means there is still a lot of room for this to increase. Presently, we are in Oyo, Ogun, Osun, Kwara and we have just launched into northern Nigeria with a large project that is going on in Niger state at Bobi Grazing Reserve. We have a milk collection centre there with plans to engage a third party processor. We are doing full backward integration with the DDP, which is also supported by government through the Central Bank of Nigeria and the Federal Ministry of Agriculture and Rural Development. How do you utilise the raw milk you source through your DDP? In 2019, we built a new factory and the bulk of fresh milk that is collected is what we use in producing our Peak yoghurt range. It is a brand new factory, which was commissioned last year. So, you see, we are not only collecting some raw milk, it’s a full business strategy. It is adequate to run a full production and manufacturing process. We also use some of the fresh milk in manufacturing the evaporated milk. How has the DDP engaged local dairy farmers? We work with 7,000 farmers presently; 950 of them are women and we are targeting to work with a lot more. We have established dairy cooperatives for a sustainable dairy value chain. What are the most consistent challenges confronting the dairy programme? We have faced a lot of challenges, having started from scratch. We don’t have quality dairy breeds in the country and have to build stock from very low mother stock.
Ben Langat
A key part of the DDP effort is in the crossbreeding programme to ensure we build enough dairy stock for farmers. There is the challenge of poor infrastructure. There are also normal challenges of cow diseases, water supply to farms and nomadic lifestyle of pastoralists, among others. So there was a need to educate the farmers on how to improve their feeds, get veterinary support for the cows, all in a bid to improve the milk yield. The challenge around animal husbandry is really getting the right animal that can give the right yield. The cows that are in Nigeria are largely beef cattle. Overtime, they have to be improved. Progress is slow and that is one big challenge. Are there areas government can help the dairy sector? There is a lot more that needs to be done to improve infrastructure - road networks, power and water supply in rural locations. Security is also a challenge. Each community comes with its own challenges, like communal clashes over land resources, among others. The biggest challenge that dairy development will face in the north is security in addition to low quality pasture. We are focused on getting the yield per cow up to the right level. We have the traditional beef cows that produce one to two litres per day. But with artificial insemination and crossbreeding, we can get more than 10 litres per cow over time, and that would be a lot better. At your 47th annual general meeting, your company announced N161.8 billion turnover. How much has the DDP contributed to that figure? The DDP is still at infancy. It was difficult to call out DDP’s percentage in the turnover reported because the yoghurt factory built for that was done mid-year 2019. Perhaps at the next AGM, it would be easier to call out its impact on turnover. www.businessday.ng
I am sure it would be disclosed in the financial report. Right now, it is still at infancy stage. We have accelerated quite a great deal, but it will still be a long time before the expected returns on investment start to come in. Are SMEs benefitting from the DDP? Yes. To produce a litre of milk from any cow, a lot of processes are involved. In all our DDP locations, there are a lot of small and medium businesses that have developed different things around those areas. They sell feeds and animal nutrition boosters to the farmers; they offer veterinary and consultancy services, even pasture cultivation, fertilizers, herbicides, and drugs, among others. Others offer logistics – trucks, farm equipment, tools. At every DDP location, we have a laboratory that requires suppliers of lab equipment, chemicals and disposables. Even the motorcycle riders transporting milk from farmers to the milk collection centres are part of the value chain. We also have institutional partners - organisations, universities and government ministries. It is an ecosystem that is developing just like in other countries where we have DDP. Farmers are giving up their nomadic lifestyle and they are settling around FrieslandCampina WAMCO DDP locations, where their wives have also set up cooperatives and established various businesses. The women have more time for themselves now because of having an income source. They don’t have to walk long distances to hawk items or fetch water anymore. In 2016, you set a target of 10 percent local input sourcing. So with 85,000-litre storage facilities, how soon do you think you would outgrow that facility? We have achieved and surpassed the target we set in 2016 on dairy
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What measures are you putting in place as a company to mitigate the challenges of COVID-19 as well as enhance productivity and continued growth? Every day you plan to do something different, and the following day something new comes up. We review all that we do daily and weekly, and we are ahead of the game. What we try to do is to make sure our people stay safe because at the end of the day, it’s about lives. Within our premises, we have very strict guidelines to follow in terms of social distancing, wearing face masks, using sanitisers, and washing of hands, among others. If you come, it is strict protocol to get in here. We have had to let some people work from home. For those who need to work in the office, we have protocol for that. We have also provided for our staff to access medical services when necessary. So far, we have been lucky. We don’t pray for it, but the effects of the pandemic will be here for a long time. Business continuity is key. In terms of workplace psychology, we have built around our people, we have designed protocols for different kinds of journeys and have tried very hard to secure partnerships that ensure business continuity in areas like raw materials and packaging, among others. While, the pandemic has an effect on logistics and the like, the cows still continue to produce milk daily. So the challenge is how to get the milk down here. The cows and the farmers are in fairly isolated locations, so milk production is not impacted. It’s just the little disruption that we see in the movement of milk. All things considered, we have a stable business and we remain committed to Nigeria and to making quality dairy nutrition available and affordable for all Nigerians. To what extent do you think COVID-19 would affect your 2020 financial projection? COVID-19 brought about a lot of @Businessdayng
changes and challenges. We have felt the impact of the coronavirus pandemic in the same manner that every other company has felt it. From the safety point of view, having to take precautions, have people work from home. We have felt all that like everybody else. But we provide essential services being in the business of nutrition. So we have been allowed to operate throughout this period. Our factories have been running, we’ve been working very closely with government to ensure the movement of raw materials coming in and finished products around the country. We have been working together with industries that have similar products, food and pharmaceuticals, and other key essentials. Our production has been steady; consumers are focusing on real essentials; they are not buying luxury items. Dairy is important to a healthy nutrition and lifestyle, more so at this time when a strong immune system is important. Since CBN restrictions on foreign exchange (FX) to dairy import were announced, how has it been accessing FX? We have felt the impact of COVID-19 on global oil prices. This has significantly affected the sourcing of foreign currency locally to bring in equipment and materials that we need. We are one of the six companies that have been granted access to FX and it is because of our steady investment in the dairy development programme, which we have been doing for the past 10 years. The fact that we are expanding and scaling fast in the north doesn’t mean that there is enough raw milk. We need a lot more for production and it will take many more years of committed dairy development. In terms of local milk production, what other policy direction do you expect from government? I can’t tell what government policies would be, going forward. But I think the intention behind backward integration in any country is always good, and policies are best formulated in a manner that is consultative and allows input from stakeholders so that they do not create more pain or difficulty in the country. There is a big difference between backward integration that affects crops that can be grown in a fairly short period of time, like perennial crops that take three to six months to grow, and one that involves life, which needs to be developed like dairy. It takes a long time and it’s a lot more sensitive. Dairy cows need constant attention; you must treat, clean and feed them properly. It takes time.
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Monday 27 July 2020
BUSINESS DAY
MARKETS INTELLIGENCE Supported by Asset Management Corporation of Nigeria (AMCON)
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Watchlist
Presco Cost to income ratio worsens for the fourth consecutive year
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After a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312 million in full-year 2019 for the period ended 31 December. Revenue dipped 13.5 percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn
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Q1 to N5.34 billion in 2020 Q1, while the company’s cost of sales marginally dipped by 0.19 percent from N1. 177 billion to N1.775 which has allowed the company to grow gross profit by 109.60 percent within the period under review. In 2020 Q1 Presco for the first time in 4 years recoded a decline in
gross profit. The company posted a gross profit of N4.19 billion which showed a 4.17 percent decline compared to the N4.38 billion the company posted in 2019 Q1. Though operating expenses also dropped in 2020 Q1, the 0.29 percent decline in operating expenses was quite slower than the 4.17 percent
decline in gross profit. Meanwhile, EUA analysts perceive that Presco might not buck this trend in the coming year as the global pandemic outbreak of COVID-19 in Nigeria which led to total and partial lockdown of states in the country would impact cost negatively.
US equity fund outflows rise above $20bn for the year Big withdrawals at start of pandemic have seen many investors miss out on market rally Richard Henderson, Colby Smith and Joe Rennison, FT
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nvestors have pulled more than $20bn from US equity funds since the beginning of the year, highlighting lingering unease over re-entering the market after a sharp pandemic-linked sell-off. Withdrawals from mutual funds and exchange traded funds for the week to July 22 came to $3.2bn, according to data from EPFR Global, nudging the year-to-date total over $20bn even as the S&P 500 index rose another 1.5 per cent. The redemptions mean that many investors have missed out on much of the rally that has added about 45 per cent to the value of the S&P 500 since late March, bringing the benchmark above the level at which it began the year.
SHORT TAKES N312m
BALA AUGIE and Ifeanyi John resco cost to income ratio worsens for the fourth consecutive year since 2016 Q1, the agricultural company in Q1 2020 recorded its highest cost to income ratio of 64.01 percent in 5 years. Presco since 2016 Q1 has recorded a 460.79 percent growth in operating expenses. Presco’s operating expenses comprises of selling, general, administrative and distribution expense. Selling, general and administrative expenses grew by 199.60 percent moving from N424.49 million in 2016 Q1 to N1.27 billion in 2020 Q1 while distribution expenses grew by 16.91 percent moving from N52.21 million to N60.96 million between 2016Q1 to 2020Q1. The sporadic growth in the company’s operating expenses, which is much faster than the growth in its gross profit explains the consistent and persistent growth in Presco’s cost to income ratio which has been weighing on the company’s profitability as the agricultural firm has seen net profit decline by 15.91 percent in the past year, 30.69 percent in the past 3 years and grown only 28.67 percent in the past 5 years. Presco in the past 5 years has recorded a revenue growth of 68.95 percent from N3.18 billion in 2016
P.E
Investors have added just $17bn to US stock funds since the end of March — less than two-fifths of the $45bn that was pulled between the market peak in February and the trough five weeks later, according to EPFR. “It’s really easy to go to cash when you’re scared but it’s almost impossible to come back out at the right time,” said Liz Young, director of market strategy for BNY Mellon Investment Management. The increase in valuations may also make it hard for investors to find undervalued corners of the market to put money to work, she said. “The big tech names and the sectors that have driven the rally so far are not going to look as attractive.” Investor caution has increased appetites for safer parts of the fixed-income market. US invest-
ment grade corporate bond funds had $1.6bn in inflows for the week, pushing the amount of new money that has flowed into the funds above $50bn this year. The inflows helped squeeze down the yield on investment grade debt below 2 per cent this week for the first time, according to an index from Ice Data Services. “Even as corporate bond yields hit new all-time lows, dropping below 2 per cent for the first time ever, the demand backdrop for credit looks strong,” said Shobhit Gupta, head of US credit strategy for Barclays. “After outflows in March and early April, inflows to credit funds have remained elevated despite declining yields, given the lack of more attractive alternatives.” Investors have pointed to the recent drop in real yields on US Treasuries, which measure bond returns
once the effects of consumer-price movements have been stripped out, as a signal that the Federal Reserve will continue to be supportive of financial markets for the foreseeable future. The Fed has already rebuffed the idea that it will raise interest rates any time soon and in recent public appearances officials have hinted at the need for additional stimulus. Some investors think new policies could be announced as early as the central bank’s meeting next week. Additional support from the Fed could provide a boost to equity markets, investors say, pouring fuel on the recent rally. “Fixed-income valuations are even less attractive than stock valuations,” said Ms Young. “If we get a vaccine you’ll see a steepening of the yield curve and another huge move from cash into equities.”
The stock market declined for the fifth-straight trading session on Friday to end its worst week after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run. Nigerian equities fell for all five trading sessions last week to close 2.65 percent lower weekon-week, and end January on a very different tempo than it began the month. Bank stocks shed 5.17 percent to push Year-to-date return to 7.46 percent, down from around 10 percent at the beginning of the week, while analysts say the bearish sentiment will likely extend to trading this week. “Next week, we expect bearish pressures on the equities market to remain, as investors continue to selldown on banking counters,” said analysts at Lagos-based Chapel Hill Denham in a note to clients.
N23bn Interswitch Limited has listed its N23bn callable senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date. In essence, a callable bond allows the issuing company to pay off their debt early. According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc.
BusinessDay MARKETS INTELLIGENCE Team Lead: BALA AUGIE, IFEANYI JOHN; 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 balaaugie@yahoo.co.uk; augiebala@gmail. www.businessday.ng
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Monday 27 July 2020
BUSINESS DAY
Live @ The Exchanges Market Statistics as at Friday 24 July, 2020
Top Gainers/Losers as at Friday 24 July, 2020 LOSERS
GAINERS Company
Company
Opening
Closing
Change
JBERGER
N15.5
N17.05
1.55
STANBIC
N29
N30
1
N5
N5.5
0.5
UNILEVER
DANGSUGAR
N11.7
N11.9
0.2
UBA
NAHCO
N2.03
N2.2
0.17
CUSTODIAN
SEPLAT BUACEMENT
LEARNAFRCA
Opening
Closing
Change
N386
N347.4
-38.6
ASI (Points) DEALS (Numbers)
N40
N39
-1
N12.85
N12.25
-0.6
VOLUME (Numbers)
N6.1
N6
-0.1
VALUE (N billion)
N1.06
N1.01
-0.05
MARKET CAP (N Trn)
24,427.73 3,723.00 174,199,020.00 2.384 12.742
Nigeria’s stock market closes week in green
Global market indicators FTSE 100 Index 6,290.30GBP +39.61+0.63%
Nikkei 225 22,696.42JPY -73.94-0.32%
S&P 500 Index 3,215.60USD +0.03+0.00%
Deutsche Boerse AG German Stock Index DAX 12,919.61EUR +44.64+0.35%
Generic 1st ‘DM’ Future 26,558.00USD +5.00+0.02%
Shanghai Stock Exchange Composite Index 3,214.13CNY +4.03+0.13%
Airtel Africa berths with Q1’20 financial scorecards ...grows voice, data, mobile money revenue ...revenue from Nigeria up 17.1% Iheanyi Nwachukwu
A
Iheanyi Nwachukwu
D
espite session on ups and downs in the trading week ended July 24, the stock market still closed on a positive note. The Nigerian Stock Exchange (NSE) All Share Index (ASI) advanced by +0.58 percent while the negative return year-todate stood at -8.99 percent. Stock investors gained N72billion in the review trading week. The market defied the odds of mixed trading session to close in green zone following gains in largely capitalised stocks ( NSE 30 increased most by +0.72 percent). The NSE All-Share Index and Market Capitalization both appreciated to close the week at 24,427.73 points and N12.742trillion respectively as against week open low of 24,287.66 points and N12.670 trillion. “Though the index ended the week with a positive
L-R: Babangida Ibrahim, chairman, House of Representatives Committee on Capital Market and other Institutions; Lamido Yuguda, director general, Securities and Exchange Commission and Dayo Obisan, executive commissioner operations SEC, during a Meeting between chairman, House of Representatives Committee on Capital Market and other Institutions and SEC in Abuja .
performance (+0.58 percent week-on-week), the market however remained pressured evidenced by four of the five major sectors closing south, while
also settling at the negative territory in four of the five trading sessions of the week”, said equity research analysts at Lagos-based Vetiva Securities.
The analysts believe the direction of the market in a new week will largely be dictated by the tone of earnings results released by bellwether stocks.
Robust sales drive boosts African Alliance market share ...as premium grows 41% Modestus Anaesoronye
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oremost life insurer, African Alliance Insurance Plc has reported a 41 percent rise in gross premium written (GPW) according to its 2019 financial statement. According to the details of the statement, the 60-year-old company recorded N7.29 billion premium in 2019 against N5.17 billion in 2018 representing a 41 percent growth year on year while its life fund grew by 16 percent from N38.99 billion to N45.33 billion in the same period under review. The increase in both premium generated and the
life fund lend credence to the company’s strong customer base, continued acceptance as well as a robust sales drive across both retail and corporate lines of business. The firm demonstrated relentless commitment to its teeming consumers by paying claims totalling N9.36 billion as against N8.78 billion the previous year, a 7 percent increase year-on-year rise. While speaking to the financials, Olabisi Adekola, executive director, finance, credited the increased revenue to shrewd underwriting and better communication of the value of insurance to the retail market. “We have grown our retail business to become much www.businessday.ng
more profitable and have supported their sales efforts with targeted communication both above the line and below the line. Unfortunately, while we obviously made more sales, we paid much more claims which impacted negatively on our balance sheet,” She said. “The bulk of our claims was in annuity the business of which has been affected by our operating environment vis-à-vis the average market rate and limited investment vehicles. We all know annuity business is basically about hedging assets against contract liabilities, so when the market forces are unfavourable, returns on investment will be affected too.” She further expressed con-
fidence in the firm’s ability to turn the bend going by its corporate strategy. “Our strategy has been to keep growing our market share via aggressive sales drive, adoption of digital technology and capital injection. We own viable assets home and abroad which we are certain would aid our quest to capitalize. Indeed, our recapitalization plans is key to our bounce-back strategy,” she said. African Alliance Insurance Plc is one of Nigeria’s oldest insurers having been established in 1960. The firm pioneered the sales and marketing of takaful insurance in the Nigerian insurance market and has presence pan-Nigeria.
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irtel Africa Plc has released its first-quarter (Q1) results for the period ended 30 June 2020. The company is witnessing a good start to the year despite impact from Covid-19. Key highlights of the results show customer base grew by 11.8percent to 111.5 million; revenue increased by 6.9percent to $851m, with constant currency revenue growth of 13.0percent. Constant currency revenue growth was recorded across all key business segments, with voice revenue up by 2.2percent, data by 35.7percent and mobile money by 26.3percent. Underlying Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 7.9percent to $375million, with constant currency growth of 14.6percent. Reported underlying EBITDA margin was 44.1percent, up by 40 basis points (bps) (61 bps in constant currency). Operating profit increased by 12.9percent to $210million, an increase of 21.5percent in constant currency. Free cash flow was $96million compared to $62million in the same period last year. Earnings per share (EPS) before exceptional items was $1.0 cents and basic EPS was $1.1 cents. Net debt to underlying EBITDA was 2.2x, compared to 3.0x in June 2019. In July 2019, after the announcement of Initial Public Offering (IPO), the company issued 676,406,927 new shares. EPS has been restated considering all the shares as of 30 June
2020 had been issued on 1 April 2019 for like comparison. Revenue Reported revenue grew by 6.9percent, with constant currency growth of 13percent. The constant currency growth of 13percent was partially offset by currency devaluation, mainly in Nigeria (6.9percent), Zambia (28.3percent) and Kenya (4.4percent). The revenue growth was largely driven by the growth of the company’s customer base, up by 11.8percent to 111.5million and Average revenue per user (ARPU) growth of 1.6percent in constant currency. Revenue growth was recorded across all the regions: Nigeria up 17.1percent, East Africa up 17.5percent and Francophone Africa up 2.2percent. Notably, revenue growth was broad based across all our key segments: voice up 2.2percent, data up 35.7percent and mobile money up 26.3percent in constant currency terms. Operating profit Reported operating profit amounted to $210million, up 12.9percent and 21.5percent in constant currency. Net finance costs Net finance costs increased by $17million, driven by higher other finance costs which more than offset reduced interest costs of $5.5million as a result of lower debt. The increase in other finance costs was primarily driven by the higher impact of devaluation on foreign exchange denominated liabilities and borrowings largely as a result of devaluation in Zambian kwacha, Madagascar Ariary and Seychelles Rupee.
Dangote Cement grows H1 profit by 5.8% to N126.14bn Iheanyi Nwachukwu
D
angote Cement Plc has released its earnings report for the first-half (H1) of year 2020. The unaudited result for the H1 to June 30 shows revenue of N476.85billion as against N467.73billion recorded in H1’19, up 2 percent. The company’s cost of sales @Businessdayng
went up to N202.42billion in H1’20 from H1’19 level of N193.17billion, up 4.8 percent. The cement maker’s gross profit stood flat at N274.43billion. Profit Before Tax in H1’20 increased to N162.85billion from N155.48billion in H1’19, up 4.7 percent. Profit After Tax rose to N126.14billion in H1’20 from H1’19 level of N119.24billion, up 5.8percent.
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Monday 27 July 2020
BUSINESS DAY
This is MONEY
• Savings • Travel • Debt & Borrowing
A guide to your Personal Finance
• Utilities • Managing your Tax
Don’t waste the long vacation time to learn whether or not it is a good fit without a long-term commitment. If you have not yet decided which direction to go, try various sectors during each vacation; different careers demand varying skill sets. This way, you get a wide range of experience under your belt and can begin to narrow down your choices as it highlights your strengths and where you tend to struggle. Apart from the formal roles, there are numerous other opportunities to consider; from volunteering and community service, helping at a summer camp, waiting tables in a restaurant, sales clerk at a local store. This is also an ideal time to consider setting up and running your own business, which impresses employers no end. Relevant work experience Ideally, an internship you are choosing should be related to the field that you wish to pursue. If you already have an idea of the path that you wish to pursue, select a firm in that field which will help equip you to prepare for future interviews and direction by gaining invaluable industry knowledge. Employers prefer to choose candidates that have some experience that is relevant to the position they are actually hiring for; this puts you up on the learning curve and helps you settle into a new role with ease.
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‘
Going to work every day, even if it is online, is usually the first step to financial responsibility. It is not the amount of money your child earns, but the lessons learned that count
‘
T
he long vacation is here and many parents and their teens and young adults need to figure out how best to utilise this break. What a very unusual academic year it’s been with the huge changes and them having been home and online for three months already! Yes there is a need to unwind, rest and rejuvenate, but it is also a good time to take advantage of the close to 2 months or more at their disposal to improve skills and build new ones and to learn to earn. The long holidays, where used appropriately can be a major career opportunity as well as an investment in their talent. Grades and work experience From a very young age, students are trained and expected to get the best grades possible. However, the truth is that having good grades doesn’t necessarily translate into a job or make you a great employee. Employers don’t consider academic grades as the be all and end all for candidates anymore. Of course, your ‘A’ grades will win you accolades (particularly from Nigerian parents), but employers look for work experience in addition to exam or coursework grades and an array of extracurricular activities and interests in their search for top candidates. An internship often gives students an edge. Get a feel for the workplace In the classroom, your focus has been largely on the theoretical. Nothing compares to living the actual experience. It is on the job that you can truly hone some professional skills and gain hands-on real-world experience outside the classroom. Theory is important but it comes alive when you are given an opportunity to put that knowledge into practice, reinforcing classroom concepts.
You will know what don’t you like At the end of an internship experience, you should have a fair idea of the sort of job or career that you might want to pursue or what you absolutely don’t like. This helps you to hone in on your strengths and gives you a better chance of not accepting an unsuitable job if there are alternatives. Get a foot in the door An internship can lead to a full-time job at your host company. If you’ve left a great impression that you are hardworking, committed, intelligent and capable, you are certainly in a more competitive position to be considered than even those with far superior grades since your bosses are already familiar with your work ethic. Internships have been described as an “audition in disguise”, an ideal way for both employer and intern to test the waters for a short time before committing to it fully. If you’ve impressed them, you’ll probably make the final list. Is this the right path for you? So many young people embark on a path only to find after considerable time and expense, that they do not wish to pursue that direction. It’s best to know as early as possible. An internship usually lasts for about 3 – 6 months. This is a great opportunity to test out a job or career path with enough
Valuable connections Sadly, you often find that when you look for a job, it’s not only what you know, it’s also who you know. Professional connections are among the most valuable networks that you can have in your life. Even if you are not retained for a full-time position, the networks that you build from the stint can be invaluable whether for providing mentoring and support as you grow, or for career advice, references or recommendations for your next job. Find a mentor, but remember that a senior colleague will take an interest
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in an interested, committed, hardworking intern and not someone that it always late, unresponsive, and adds little or no value. Should you work for free? Naturally, some students might have to turn down an excellent but unpaid internship opportunity simply because they cannot afford to work for absolutely nothing; this significantly limits available opportunities. As far as possible, try not to let money be the deciding factor when you are thinking of interning. Gaining useful experience should be your goal for the value it will bring to your resume and your personal life; see it as an investment if you can. Financial responsibility One of the great benefits of interning is learning to earn and managing your own money. Hard work builds a sense of frugality; when the money comes out of your own pocket, from your own hard work, you tend to be more selective about purchases and are less likely to spend it frivolously, as you might tend to do when it is doled out by generous parents. Time is a fundamental ingredient of successful investing as funds set aside have time to appreciate in value. This presents a wonderful opportunity to set aside at least part of your income and begin the journey to financial independ-
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ence. Mutual funds are ideal for small savers with entry as low as N5,000; the key is to be consistent and to think long-term. Many internships will be virtual given the important social distancing protocols. In this new way of work, self-discipline and responsiveness will be even more important than ever. Virtual internships offer diverse possibilities, but some positions lend themselves to remote work better than others. Roles such as social media, content creation, graphics design, etc. provide a great fit for virtual interns who want work experience without having to work from an office. A virtual internship will provide your child with an opportunity to be fully immersed in a professional experience all from the safety of your home. Going to work every day, even if it is online, is usually the first step to financial responsibility. It is not the amount of money your child earns, but the lessons learned that count. The sense of independence and accomplishment provides a child with a solid foundation for their development and when they leave home, you can be confident that they can step out into the world and face a bright future. 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 July 2020
BUSINESS DAY
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24
Monday 27 July 2020
BUSINESS DAY
Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 24 July, 2020 Company
Market cap(nm)
Price (N)
Change
Trades
Volume
Company
Market cap(nm)
Price (N)
PRICES FOR MAIN BOARD SECURITIES (Equities)
www.businessday.ng
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@Businessdayng
Change
Trades
Volume
Monday 27 July 2020
BUSINESS DAY
Start-Up Digest
25
In association with
Okonoda: Fashionpreneur catering to needs of professional women Odinaka Anudu
B
unmi Okonoda is not your everyday fashion entrepreneur. She believes that being in business is not just for profit-making but also for creating value. Her foray into entrepreneurship came because she saw a void in the women fashion space and decided to come in to fill that. Her Bufoles Collection, a retail fashion outfit, caters to the clothing and styling needs of professional and business women. She also focuses on assisting women fashionpreneurs improve their selfworth from within and outside, to enable them attract new level of success. She says her perception about beauty and fashion stems from the words of Salma Hayek, who noted that beauty was in the eyes of the beholder. Bufoles Collection start-
ed trading as a business name in 2008 but was later registered as a limited liability company in 2013. It started as a result of a difficulty in finding trendy and affordable outfits for women in Jos, Plateau State. Her journey has been embellished with success so far. Speaking on how her brand has contributed to Nigeria’s economy, she explains that her business turnover has contributed to the gross domestic product, providing employment for a number of young women who have engaged with the brand over the years. “Our customer base has greatly increased, and we are also present in the online space on Facebook and Instagram sharing useful tips to our followers and marketing our products and services,” she says. The fashion stylist is the convener of a bi- annual event, ‘Recontre de Style,’ a fashion workshop which aims to inspire and enlighten women on confidence-
Bunmi Okonoda
building, self-esteem, personal styling, and dressing. “The theme of our last styling class focused on plus-size styling, which was
chosen based on the fact that there are stereotypes about plus-size women and many face difficulty styling their body type or even
How Azinge founded ELYA to boost youth entrepreneurship Odinaka Anudu
E
meka Azinge has a background in Law. He recently concluded Doctorate of Business Administration (DBA) from the University of Liverpool. He has a passion to make a difference through coaching and mentoring, fostering youth entrepreneurship, empowerment and national development with organisational and personal development programmes. His dream of making a difference in the lives of others began from his days in school when he coached and mentored his classmates and seniors in informal settings. He is now a business consultant, founding Emedith Consulting in 2011. “I founded Emedith Consulting just after my one year compulsory work placement at a law firm. My experience there was morale-shattering and discouraging, to say the least. This led me to entrepreneurship and a heightened desire to make a difference,” he says. “I considered my areas of strength and eventually chose to start up next initiatives that bother on personal, organisational and national
development, and also focus on youth- life skills development, youth entrepreneurship, training and mentoring. These all led to the birth of Emedith Consulting.” He says his brand offers three interrelated service offerings that include personal and organisational development; entrepreneurship training and mentoring, as well as robust and holistic human resource services. He notes that Emedith Consulting has been involved in tackling the scourge of youth unemployment by bringing low-cost, high-quality youth entrepreneurship training and mentoring to aspiring and budding youthpreneurs who need it the most. “We have equally contributed to closing up the graduate and employee skills gaps by providing targeted personnel and organisational development training. Not also forgetting our annual financial grants for indigent secondary school students in Nigeria via the Emedith Essay Competition for Secondary School Students in Nigeria. We also create opportunity for mentoring via @mremedith on social media.” The youth entrepreneurship advocate says he believes www.businessday.ng
that Nigerians are the only ones that can better solve their own challenges using available resources to challenge existing assumptions and biases. He says since inception, Emedith has trained about 1,000 or more individuals in the area of youth entrepreneurship as well as personal and organisational development. According to the Emedith founder, certain factors contributed to his success today including hybrid strategy development and implementation, and global scaling via international collaborations. He has just established the Global Coalition of Scholar-
Emeka Azinge
Practioners (GCSP), made up scholar-practitioners from different countries, with the aim of engaging in global consulting to tackle and solve problems through ‘Action Research.’ Explaining what stands his firm out in the industry space, he says, “An area where we are most competitive is youth entrepreneurship training and mentoring via our winning brand project known as the Emedith Low-Cost Youthpreneurship Academy (ELYA) Initiative.” He notes that ELYA is an ongoing Initiative offering low-cost, high-quality youth entrepreneurship training and mentoring to aspiring and budding entrepreneurs. He has a six-month youth entrepreneurship academy, which is conducted virtually. He says it is open to government and private sponsorship, with the next two cohorts beginning on August 27 and September 14th respectively this year. He says an ELYA slot has been subsidised for participants at N5000 ($13) per month and slot registration is upon payment for the first month of the cohort. To register virtually, he urges intending participants to visit www. emedith.com
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finding the right outfits,” she says. “Our fashion styling classes started last year and we have equipped over 100 women, including professionals, with personal styling knowledge. This is to help boost their confidence, enhance their attractiveness and project more power with their style,” she further says. The fashionpreneur explains that styling used to be the exclusive preserve of celebrities as well as the rich but her brand has helped to change the narrative by successfully democratising fashion styling. On how she has been able to thrive in difficult times, she says the support from her husband, a few friends and loyal customers have kept her in business. “During the Covid-19 lockdown, our business was closed physically but we still had to pay our staff and other bills. We could still survive without the sales during that period as we
have learnt that a business must be able to stay afloat for six months to a year even without income. We, however, quickly went into sales and branding of face masks and shields which are fast becoming a fad due to Covid-19. This ensured we continually got some income into the business and paid bills during the lockdown.” She encourages other entrepreneurs to stay prayerful and hopeful, while understanding their business environment and customers well. “Find innovative and creative ways to solve their problems. Deliver those solutions excellently and speedily and be in their faces all the time,” she admonishes. The stylist adds that fashion business is highly competitive and very easy for new entrants, saying that she has been able to surmount challenges by staying focused, creative, resilient and solution-oriented.
Gold West Africa to link small-scale miners to investors at conference Odinaka Anudu
W
hen Gold West Africa launched in June 2019 as a conference to develop the West African gold economy, bringing Nigerian, regional and international gold stakeholders together, it was obvious the conference would return in 2020 for its second edition. It is now expanding its scope and presence to other West African countries. Gold West Africa has evolved and expanded its offering. It is not just an event but also a gold renaissance celebration, with planned festivities like markets and an art exhibition and auction to bring role players, policy makers, stakeholders, investors, jewelry makers, goldsmiths and even artists together, whether in real time or digitally, as a way of underscoring the pivotal importance of developing the region’s gold value chain. The calendar commences with Gold Durbar from 1-22 August 2020 at the Ado Bayero Mall in Kano. Gold Durbar is a curated marketplace for trading and purchasing gold @Businessdayng
jewelry as well as showcasing inspired design and lifestyle products. It pays tribute to Kano’s rich heritage while integrating economic development and cultural tourism through the corridor of gold in history and for commerce in Northern Nigeria. This is followed by another market in Ouagadougou, Burkina Faso, at the end of September, this time serving as a meeting point for artisanal gold producers with jewelers and traders. November sees the culmination of the gold festivities with Gold West Africa Conference and Gold House art exhibition and auction in Lagos. Speaking on the upcoming Gold West Africa initiatives, Nicole Smith, event manager, said, “In 2019, we called 2020 the year of gold renaissance for Africa. As part of the gold value chain development in West Africa and renaissance of the West African gold markets and ancient trade routes, we began working with the governments of Nigeria and Burkina Faso and other stakeholders in West Africa on several gold initiatives including gold duty-free week in Nigeria and Burkina Faso.”
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Monday 27 July 2020
BUSINESS DAY
Start-Up Digest
Onyekwelu: Beautifying homes with touch of unique apparel MICHAEL ANI
Oladoyin Phillips
U
che Onyekwelu is the chief executive officer (CEO) of St Uche (Stuch), an interior and apparel company. Onyekwelu is a Nigerian businesswoman motivated to succeed in a clime where more than 20 million people are jobless. St Uche started years back as a small business involved in buying and selling of bed covering. It has speedily become a household name involved in the production of various types of apparel in the country. After concluding her National Youth Service, Onyekwelu went into the business of buying her and selling of bed covering and housing interiors. Her decision to enter into the business was borne out of her love for beautiful bedrooms. This love and passion for the business gave her the courage to take the bold decision of resigning from her job as an administrative manager in one of the renowned real estate companies. When Onyekwelu started the business, she was moving from street to street in the local government where she served, selling her products to friends, neighbours and other NYSC members. She was able to leverage various social media platforms in growing her business and, today, her page on Instagram has over 20,000
L Uche Onyekwelu
views and loads of messages from people inquiring about her bed sheets. Ha i l i ng f ro m Nn e w i , Anambra state, and being the eldest child in a family of 10, Onyekwelu has succeeded in growing her company into a multi-million naira enterprise, with its production hub and a store located in Lagos. For her, the future of Stuch Interiors and Apparel is bright. She is currently working on opening stores in different states in the country and overseas. Despite the numerous challenges businesses face in the country—from high inflation and interest rate environment to power shortages down and inefficient logistic system— she has been able to come up with a mode of operation that works. Her business made its first million in 2017, and since then, it has evolved from buying and stocking bedding
to producing all sorts of bed covering, bed sheets, and duvets, among others. The brand also gave birth to a subsidiary, The Stuch Pyjamas. Currently, her rich interior and apparel have over 5,000 clients locally and globally. A graduate of Estate Management from Kwara State Polytechnic where she obtained her first degree, she now lives in Lagos with her husband, Paul Ogumka. They are both blessed with a daughter. In 2018, she wrote and published her first book, ‘How I Grew My Business from Zero to Millions’ to give aspiring entrepreneurs insights. Over the years, she has been nominated for several awards and recognitions for her passion and tenacity. She emerged the winner of the Keeping Marriage Alive (KMA) awards (role model category) in 2018.
How Emerge Fashion Challenge plans to groom next generation of designers ODINAKA ANUDU
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reoluwa Soetan, founder of A+ Fashion Academy, is set to unveil the Emerge Fashion Challenge in the South-South part of Nigeria to groom the next generation of fashion designers in the region. Forty South-South fashion entrepreneurs will be selected and trained by experts on fashion and digital skills, with 10 chosen for possible funding and incubation. The 10 incubated designers will debut their collections with b i g g e s t e-c o m m e r ce r e t a i l e r s i n A f r i c a. Three winners will be rewarded w i t h cash and tools . According to Soetan, the project will involve practical fashion training, fashion exposure training, fashion styling, brand launch and market entry. It is open to unemployed and young adults that have
Hiring and training talent for the long Haul
been affected by the Covid-19 and have decided to start a career in fashion. “The project seeks to give the various actors and sponsors the opportunity to create post-covid opportunities, develop creative businesses, develop CSR initiatives and further improve the local content through skills acquisition in the fashion industry, job creation and poverty alleviation,” she said. It also aims to create value in Rivers State and other states in the South-South region. “Over 3,000 fashion brands over the past 10 years in South- South Nigeria have been unable to scale up their businesses outside the region and build digital Brands,” she further said. “However, foreign investors are identifying various opportunities in the continent’s fashion industry,” she noted. She explains that the Emerge Fashion Challenge www.businessday.ng
attempts to rewire and find solutions for the fashion market value & sustainability gap in the Niger Delta region based on global best practices. The winner of the Challenge will walk off with N500,000, industrial sewing machine and iron, while the runner-up goes home with N300,000, industrial sewing machine and iron. Also, the second runner-up will go home with N150,000 and industrial sewing machine. The programme is expected to last between August and December. All participants will be awarded a certificate of participation. All 40 participants will be personally mentored by A+ Fashion Academy instructions on a one-on-one basis, she said. Participants are eligible for internship with A+Fashion Academy partner factories based on certain criteria, she noted.
ast month, we wrote ab out hir ing and training staff systematically – experienced people with the capacity to teach and entry-level staff with a capacity to learn quickly. We also asked you to be patient, and to “start by accepting that a new junior hire’s first month or two will be a learning process.” What we neglected to add, is that it will not be easy, and that patience really is a virtue. You will, necessarily, have to develop your patience and resilience for the long-term growth of your people. Alas, this article follows up by walking you through some approaches to handling that. We continue to emphasise that you should hire for the individual’s attitude to learning. Nobody knows it all, so this is key. In addition to that, we have realised, over the course of our work with people, that aptitude matters as well. A person might never have heard of a hub-and-spoke model, for instance. However, you want to hire someone to whom you can explain it once, and they are quickly able to grasp what you are saying. Someone who knows how to ask the right questions, to guarantee their understanding of getting the job done. So this is another thing you will look for when assessing a candidate’s capabilities during their recruitment period. Do not get carried away by a person’s eagerness – it will quickly become annoying when you have to repeat the same instructions multiple times. That brings us to the next point– how you give instructions. So, you have hired a smart individual with little experience, but a can-do attitude. Until your entry-level people have gotten a handle of things and gone through a few projects or assignments – to the point where they more or less know what to expect from their typical work assignments – how you instruct them will have to change and become quite modular. This means that you have to do a lot of the thinking beforehand while bearing in mind the learning opportunities you have to leave in for them, while they execute. For example, imagine you are preparing a presentation for a client. At this early stage, your analyst has no clue what is relevant or irrelevant in terms of the expected content. They expect to follow your lead. You can approach this in a couple of ways. The first is by using an example, and walking them through
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what works and what doesn’t, then leaving them with the framework or outline for the presentation. You can also take the time to describe the end goal – what you are doing, why you are doing it, and how you think it should be done (leaving the floor open for suggestions – to get their buy-in and sense of ownership). Most managers do not take the time to do this and end up getting very frustrated when their junior staff comes back having done the wrong thing. What ensues is a lot of back and forth – leaving the Manager to do the work himself or herself. Don’t do that. It is unsustainable. For this manager-analyst training relationship to work from the beginning. It is best to start them out on lowstakes projects – whereby the missed deadlines (there will be a couple) will have little negative effect on the business. In this case, their working closely with senior staff will help them to un-
‘ It might seem boring to start with, but it is better than the alternative, which is a lot of rushing to finish everything badly derstand what is expected of them, in a low-pressure environment, leaving room for them to assimilate it all. By the time they are settled, and ready to work on more mission-critical tasks, they will have developed the ability to ask questions, ask for time extensions, manage expectations and be clear on their deliverables. Time builds confidence. This is why patience is important. Furthermore, start with giving small tasks at a time, or even one task at a time. It might seem boring to start with, but it is better than the alternative, which is a lot of rushing to finish everything badly. Having said all this, it will depend on the capacity of the individual. Some people learn quite quickly, and so will easily breeze through the tasks. That is fine. It only means that they will move through the process quicker, and not that they should skip any steps. As you build trust in their abilities, you assign @Businessdayng
more responsibility. Again, at the risk of being tiresome – slow and steady wins the race; patience is key. Having said all this, managing a junior person, requires that you take responsibility on their part. Nobody wants to mess up. And while there are people who could do better and have a bigger sense of ownership over their work, it does not release you from having to check yourself as well. So make sure that you are clear, and understood. Have them repeat the task back to you in their own words until it is clear that you are on the same page. Write things down, so that you too will be forced to confront the gaps in your thinking, which ultimately affect your ability to deliver coherent instructions. Basically, humility is important. So is a sense of responsibility. So, you must not have the attitude that the “staff are just bad”. You need to constantly be asking yourself – “how can I give better/clearer/more useful instructions?” This is a perfect opportunity for you to engage in conversation and get feedback on your management style. The feedback can’t only be one-way. So, to recap: - Hire for attitude, but also aptitude, specifically emphasising the ability to learn quickly and implement given instructions appropriately - Be clear about your desired output. Be able to answer the “what?”, “why?”, “for whom?”, “how?” about the work you want to produce. - Start with low-stakes/ pressure projects so that they can learn to and become comfortable with asking the right questions for direction on their work. - Be modular in your assignment of tasks – one task at a time and increase as their abilities improve. - Have a sense of responsibility and humility – refrain from blaming your analysts, especially if you have not taken the time to be sure the instructions you gave, in the first place, are clear. - Ask for and receive feedback on how you can be a better manager - Be patient. Be patient. Be patient. We successfully use this approach to train analysts in our Spurt! People Pipeline. While we can confirm that it is difficult, we have to say that it does, in fact, pay off in the end. Feel free to reach out to Spurt! about our analyst training services. Oladoyin & Kristin www.spurt.solutions admin@spurt.group
Monday 27 July 2020
BUSINESS DAY
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Monday 27 July 2020
BUSINESS DAY
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Monday 27 July 2020
BUSINESS DAY
Government Enterprise & Empowerment Program
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Brought to you by
GEEP: Lifting millions of Nigerians out of poverty odinaka Anudu
O
ne of the biggest challenges facing Nigeria is poverty. Eighty-two million Nigerians live on less than $1 per day, representing 40 percent of the population, according to a recent report done by the National Bureau of Statistics (NBS). Unemployment rate is estimated at 23.1 percent, meaning that almost one out of every four Nigerians is unemployed. With high poverty and unemployment, many Nigerians live from hand to mouth. This increase is most evident in the Northern part of Nigeria, especially the North East, where insurgence has displaced Nigerians from their homes and means of livelihood. The Federal Government does not live in denial, which is why it introduced the Government Enterprise & Empowerment Program (GEEP). The social investment programme is designed to cater to Nigerians at several levels: unemployed youths, petty traders, artisans, MSMEs and other categories of people that could do with an economic boost. GEEP was set up to start the economic revival from the bottom of the pyramid by providing access to credit for Nigerians who contribute to the economy but have been neglected over the years. In four years, Tradermoni, Marketmoni & Farmermoni have provided loans ranging from N10,000 to N300,000 to petty traders, artisans, small businesses and farmers. This has seen over 2 million Nigerians significantly receive boosts to their businesses. GEEP has been implemented in 36 states of the federation and the FCT with a spread of over 2,600 market clusters. These loans are not given out at random. Instead, they are done through existing clusters and associations in various markets across the country. This helps in proper tracking of the loans and provision of easy repayment options for the
Market activation at Jimeta Market, Adamawa State.
TraderMoni agents registering beneficiaries at Dutse Ultra-Modern Market, Jigawa
beneficiaries. GEEP has also been able to provide this access to credit to IDPs in the North East. This has provided the IDPs with a viable way to get back on their feet while also contributing to economic development. To ensure that these loans get to the target audience, market visits are done across the country to engage with beneficiaries as they go through the process. This has seen many beneficiaries speak about the impact of GEEP’s microcredit scheme on their businesses: Aisha Adamu is a local fruits
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seller at Jimeta Modern Market, Yola. The TraderMoni loan has helped her to expand her fruits businesses. “I sell local fruits like ‘dabino’ here in Jimeta Market. A relative of mine that sells in the market too told me about Tradermoni. They were registering people in the market and they told me how to go about getting the loan. I did it and I got the money some days after. It didn’t appear to be real at first, but I confirmed it. It is very true. I am grateful to God and to the Federal Government for giving us this loan
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Maimuna Abu, roasted corn seller at Old Market, Kebbi
to strengthen our business. It will assist my business by helping me to buy more fruits for sale and also enable me to pay back,” she said, urging the government to continue with the programme. Maimuna Abu sells roasted corn at Old Market, Kebbi State. She buys a few maize cobs every day to roast and sell. She explained what the loan has done for her: “When the Tradermoni team came to the market, I was among one of the first people to register and the next day, I got the loan. I can now buy more corns and also charcoal because apart from roasted corn, I also sell charcoal. The money has really helped me and I am so grateful for this financial assistance that has been given to me.” Another beneficiary Ali Ibrahim sells foodstuff at Monday Market, Maiduguri. He has been doing this for four years now. He said the loan has helped him in many ways. “On a fateful day, I came into the market to do business as usual when I saw the TraderMoni team. They were registering people and I got registered too. After some days, I received an SMS from TraderMoni confirming that I can receive the loan. I rushed to the where the people giving the loan were in the market to confirm whether it was true or not. Luckily for me,
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it was confirmed true and I was so excited. I got the money, and I have been using it for my business. What I have to say to the Federal Government is ‘thank you’ and keep up the good work so that other people can benefit from it too.” Makinde Helen sells palm oil at Oja Bisi market in Ekiti State. She has been in the business for over 10 years. Before she accessed the GEEP micro credit, she had been making little profit from palm oil because she sold in small portions. One day, she came to the market and overheard women saying that the Federal Government was helping petty traders. “They told me that the government wanted to add to our capital so we don’t sit idle at home,” she said. “One of the people came to register me. They asked me for my name, phone number and took a picture of me and my goods. They said I will get a text message the next day. I was so surprised I got the text message the next day and they came to give us the money,” she testified. Helen got N10,000, which has helped her get two extra kegs without having to buy on credit. “This means I can now buy three kegs. Also, my profit has increased. In fact, I am so happy,” she further said.
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Monday 27 July 2020
BUSINESS DAY
news Nestle, Dangote Sugar, GTBank deliver superior ROE in 10 years - Coronation Asset BALA AUGIE
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ver the past 10 years, Nestle Nigeria plc, Dangote Sugar Nigeria plc, and Guaranty Trust Bank have generated more profit from their shareholders investments than peers as evidenced in the consistent and superior return on equity, according to a recent report by CoronationAssetManagement, titled ‘Navigating the Capital Market:theInvestor’sDilemma’. The report studies the impact of the macroeconomic environment on earnings and valuations of Nigerian Stock Exchange (NSE) listed companies, and also beams its searchlight on investment returns, short-term government securities and inflations. The return on equity (ROE) indicates how effective management is at using equity financing to fund operations and grow the company. Over the past decade, companies have been operating in an unpredictable macroeconomic environment characterised by currency devaluation, deteriorating infrastructure, inflationary pressure, and volatility in oil price. Some sectors have not recovered from the sharp drop in crude oil price of mid2014 that stoked severe dollar scarcity and consequently tipped the country in its first recession in 25 years. According to Coronation Research, GTBank, the largest lender by market value, had superior and consistent ROE in the last 10 years, which means it is a worthwhile investment. The lender’s returns have
been consistently higher in the benchmark Fair Value Equity Return (FVER), a parameter the investment house uses to gauge the efficient and profitability of an entity. Theanalysisofthe2019financial statement of top tier banks shows GTBank recorded ROE of 28.64 percent, which compares to Zenith Bank (24.80%); Access Bank (15.98%), and United Bank for Africa (14.90%). Coronation Research, however, says the good news is that the trend (FVER) has been moving upwards. For instance, Zenith Bank has joined GTBank as a strong performer (i.e. its RoE exceeds the FVER) over the past three years, while Access Bank joined this fortunate group last year. The report observes that among the pure-play food manufacturing companies there is the remarkable exception of Nestle Nigeria, which has recorded an average RoE of 74 percent over the past 10 years. Analysts at Coronation Research attribute the success of the consumer goods giant to its product portfolio that has won consistent loyalty from Nigerian consumers; its operating margins have been high and consistent, thanks to a high degree of local sourcing; it pays almost all its Net Profits as dividends, keeping its equity level low. The analysts say majority of Nigerian listed companies do not return what they consider an adequate – 20.53 percetn RoE; but they add that there are notable exceptions and several bank stocks deliver returns above this level, while other bank stocks are trending towards this level.
Insurance industry to see increased activity as Enterprise, Stanbic IBTC, Heirs Holdings apply for licence Modestus Anaesoronye
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igeria’s insurance industry is about to witness increased activity and vibes, as Ghana’s largest insurer, Enterprise Insurance, alongside Nigeria’s Stanbic IBTC and Tony Elumelu’s Heirs Holdings have applied for licence from the National Insurance Commission (NAICOM). According to NAICOM in a an advertorial published on Thursday, the four firms will be called Heir Insurance Limited (General); Stanbic IBTC Insurance Limited; Heirs Life Assurance Limited, and Enterprise Life Assurance Company Nigeria Limited. “The National Insurance Commission (NAICOM) has received applications from the under listed companies for registration as Insurance Companies to transact insurance business in Nigeria. In fulfilment of the statutory provisions of extant laws for the registration/licensing of
insurance Companies, the general public is hereby informed that the Commission has commenced the process of registering the companies. Members of the public are requested to submit/report any objection or otherwise against these registrations to the Commission within 21 days from the date of this publication, please,” the publication said. Meanwhile, Heir Insurance Limited (General) has picked Olaniyi Stephen Onifade as its managing director; Stanbic IBTC Insurance Limited picked Akinjide Orimolade as managing director; Heirs Life Assurance Limited picked Abah Okoriko, and Enterprise Life Assurance Company Nigeria Limited picked Funmilayo Abimbola Omo. There are currently 55 registered (underwriting) insurance companies in Nigeria, with 28 as general business underwriters, 14 life underwriters and 13 composite underwriters. www.businessday.ng
Inefficiency, long dwell time, others make sea freight into Nigeria most expensive globally AMAKA ANAGOR-EWUZIE
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espite the ExecutiveOrderonEase ofDoingBusiness introduced by the Federal Government in 2017 to ease import and export flow, the cost of freight into Nigeria has remained one of the highest in world. The high cost of shipping into Nigeria, according to checks, is as a result of inefficiency at Nigerian ports due to longer cargo dwell time and slow as well as manual inspection process by the Nigerian Customs Service (NCS) and other government agencies. Presently, cargo dwells between 21 and 30 days as it becomes increasingly difficult to clear goods out of Nigerian ports due to bottlenecks, and this has demurrage implica-
tion on the cargo owner. A recent analysis on overseas cargo and freight costs by MoverDB, an online resource for international shipping, shows that high costs of shipping to Nigeria do not correlate with distance, as shipping from New York to Nigeria nearly doubled the cost of shipping to South Africa, even though Nigeria is closer. “The slow pace of inspection of cargo means that congestion and bottlenecks are nearly perpetual in Nigerian ports. The ports’ inefficiencies have for years enabled and incentivised corruption from official and unofficial middlemen that clear goods for a ‘fee’,” MoverDB notes. A recent report published by SBM Intel, Nigeria’s leading geopolitical intelligence platform, importers using Lagos port pay
more as shipping charges for bringing goods from European Union (EU) and high terminal charges when compare with whatimportersusingTemaPort in Ghana and Durban Port in South Africa, pay. AbreakdownofSBMIntelreport shows that importers using Apapa Port in Lagos pay about $374 as shipping charges on imports from EU countries; $457 as terminal handling charges and $2,055 on local transport to importers’ warehouses. Meanwhile, importers using Tema Port in Ghana, neighbouring West African port, pay $321 as shipping charges on import from same EU countries; $284 as terminal handling charges and $285 on local transport to importers’ warehouses. Also, importers using Durban Port in South Africa pay about $247 as shipping charges
on imports from EU countries; $180 as terminal handling charges and $208 on local transport to importers’ warehouses. Emma Nwabunwanne, a Lagos-based importer, says Nigerian port is losing track on efficient service delivery to cargo owners, as the Federal Government’s Ease of Doing Business policy has failed to ensure seamless cargo clearing. “The dwell time of containers in Nigerian ports is high due to bottlenecks that make it difficult for importers to take delivery of their consignments in good time. The NCS currently inspects shipments using 100 percent manual procedure rather than automated scanning machines. All these make our shipping and terminal charges high,”
Continues on page 31 Maryam Mario Aminu Tambuwal (l), wife of Sokoto State governor, receiving a copy of BusinessDay from John Osadolor, director, northern operations, during BusinessDay Media team visit to Maryam Mustapha Aminu Waziri Legacy Initiative (MMAWT) office in Abuja. MMAWT is Her Excellency’s project aimed at supporting children, women and vulnerable groups to improve their quality of life by expanding access to improved opportunities.
Eco-friendly ride-sharing companies meet opportunity in $30trn ESG fund STEPHEN ONYEKWELU
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n the 10 years since Uber, a ride-sharing company, launched, the personal transport industry has been revolutionised. The second wave of revolution is coming with the multitrillion-dollar trend of Environmental, Social and Go vernance (ESG) funds sweeping through Wall Street. Theglobalride-sharingmarket is already huge and set for explosive growth. This market is worth $235 billion, according to Canada’s commercial banking giant, Scotiabank. But the growth is also having a negative impact on the environment becauseofanincreaseincarbon dioxide (CO2) emissions. In this context, eco-friendly ridesharing companies are the new darlingsoftheglobalinvestment community. Bolt and Uber dominate the ride-sharing market in Nigeria. But about five years ago, the niche was non-existent in the country’s tech ecosystem. Now,
there are about 20 players in the e-hailing business in Nigeria. However, a new wind of change might be blowing across the ride-sharing market. Ontario-based Facedrive, Uber’s green competitor which launched last year, has positioned to take advantage of some $30 trillion Environmental, Social and Governance (ESG) fund on Wall Street. Uber fired the first shots in the ride-sharing movement, revolutionising a hundred-year-old dynasty, with the taxi industry forced to its knees in a matter of years. Now, Facedrive Inc. looks set to lead the green revolution in ride-sharing. ESG is a catch-all term for investing strategies that consider a company’s environmental, social and governance factors. While critics have called ESG investing vague and even fraud, analysts predict it will double in 2020 and become integrated into the investment decisions of every investor.
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Currently, ESG is going through an explosive phase. Goldman Sachs started a $1.5 billion ESG fund. Jeff Bezos, founder of Amazon, just launched his $10 billion Global Earth Fund. BlackRock is lookingtohaveover$1trillioninESG assets within the next decade. Facedrive spotted this boom and is determined to ride the wave. This is why the company is making moves to take advantage of Uber’s shortcomings. It is reported to have already secured major contracts with government agencies, celebrity superstars, and global tech titans – and it has done it all with just a few years on the scene. Facedrive claims to be a company that puts “people and planet first”. Its entire platform is supposedly built on this premise. It offers riders sustainable, conscious, and friendly service as it takes care of its drivers. “This approach ties in perfectly to the trillion-dollar ESG @Businessdayng
trend that has captivated Wall Street,” said Jason Eckerman, an analyst at OilPrice.com. Facedrive gives riders the choice to go electric or gas-powered without paying a premium for the option. Moreover, its innovative inapp algorithm calculates exactly how much CO2 was created on the journey, and sets aside a piece of the fare to help offset its carbon footprint. This puts Facedrive right in the middle of two disruptive mega-trends transforming the world as we know it. On one side, it is reimagining the $8 trillion transportation business and on the other, it is tapping into Big Money’s shift into the $30 trillion world of sustainable and responsible investing. General Motors, the auto giant, has launched a joint venture with Korea’s LG Chem to mass-produce innovative new battery cells for electric vehicles, together with investing $2.3 billion over the next few years.
Monday 20 July 2020
BUSINESS DAY
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abujacitybusiness Comprehensive coverage of Nation’s capital
Military uncovers, destroys several illegal refining sites in Niger Delta Godsgift Onyedinefu, Abuja
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Femi Gbajabiamila (r), Speaker, House of Representatives, holding a placard with the head of delegation UN-EU Spotlight Initiative, Ulla E. Mueller in solidarity with the UN-EU Spotlight Initiative that visited the Speaker over the House’s proactive stance against sexual and gender based violence at the National Assembly, Abuja.
Collapse building: FCTA plans ‘integrity test’ on 653 abandoned structures James Kwen, Abuja
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he Federal Capit a l Te r r i t o r y Administration (FCTA) said it is planning to conduct an integrity test on 653 abandoned structures in the Territory to reduce incidences of building collapse.
Director, FCTA Department of Development Control, Muhktar Galadima disclosed this in Abuja at a meeting with engineering consultants and professional bodies in the building industry. Galadima said a number of abandoned buildings have been identified, hence
ITF to expand activities, strengthen MSMEs in four years
... As Ari appreciates Buhari for reappointment
James Kwen, Abuja
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he Director-General/ Chief Executive Officer of the Industrial Training Fund (ITF), Joseph Ari said the agency would expand and deepen its activities especially in the area of skills acquisition and empowerment of the youths and indigent segments of the society. Ari assured that ITF would also strengthen the Micro, Small and Medium Enterprises (MSMEs)sector through need based training in view of the vital importance of the sector to national growth and development. He expressed appreciation to President Muhammadu Buhari for reappointing him for a second term of office as Director-General/Chief Executive of ITF. Ari viewed his reappointment, which takes effect from 26th September, 2020 as a validation of his efforts during his first tenure and an opportunity for him to consolidate on his achievements and pledged to work assiduously to ensure
the achievement of the Federal Government’s policy agenda especially with regard to job and wealth creation. The ITF Boss emphasized that he would not have achieved much without the total and unwavering support of the Minister of Industry, Trade and Investment, Richard Adebayo and the Minister for State, Mariam Katagum who stood by him. He said the agency would fully implement the 2nd Phase of its Reviewed Vision, which was unveiled recently, in response to the Covid-19 Pandemic and to reposition the Fund to effectively deliver on its mandate. A statement by ITF Head of Public Affairs, Fred Chagu said Ari who was first appointed into the position on 26th September, 2016 had through the ITF Reviewed Vision: Strategies for Mandate Actualisation, trained over 500,000 Nigerians, who are today earning sustainable livelihoods as paid employees, or as entrepreneurs that are employing others. www.businessday.ng
the move to engage consultants to conduct integrity tests on the structures to determine their stability or otherwise. According to him, there are about 653, abandoned buildings in the territory, a development that has also enhanced criminal activities in the city.
The Director said: “We want to be more proactive; we don’t have to wait to be caught napping, that is why we had to call the consultants and other stakeholders, so that we can have discussions and strategize on how to prevent structural failure, otherwise known as building collapse, in Abuja”.
COVID-19: CAC stops physical transactions, adopts courier services James Kwen, Abuja
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he Corporate Affairs Commission (CAC) has resolved that customers will no longer be required to physically visit its premises in Abuja and Lagos to carry out official transactions. TheCommissionitscustomers that the decision is in effort to provide efficient services in the face of the present realities of the COVID-19 Pandemic. In a public notice made available to journalists in Abuja, CAC said with effect
from 10th August, 2020 and 31st August, 2020, customers in Abuja and Lagos would be required to send and receive documents from the Commission through designated Courier Companies. “This is to control the physical presence of customers coming to submit or pick up documents in the premises and also ensure their convenience in getting access to our services. “The Commission will also put in place a process for sending/receiving documents/transactions to/from customers through e-mails.”
Commissioner calls on schools to intensify tree planting in Taraba Nathaniel Gbaoron, Jalingo
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he Taraba state Commissioner for Tertiary institution, Edward Baraya has called on institutions in the state to intensify tree planting in other to encourage aforestation. Baraya made the call at the Taraba state Polytechnic while performing the maiden tree planting organized by the polytechnic.
He said tree planting was not just for beautification of the environment but also highly economical as well as provide both shelter and conducive environment for inhabitants of the earth. The Commissioner while appreciating the polytechnic for the initiative pleaded that the polytechnic should partner with the state government so as to take the program to the local government areas.
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n continuation of it’s anti Crude Oil Theft (COT) and other economic sabotage operation in the SouthSouth zone of the country, the Maritime Component of Operation Delta Safe uncovered several illegal refining sites and intercepted nearly 500 barrels of crude oil in the Nigeria delta. John Enenche, Coordinator, Defence Media Operations (DMO) who disclosed this in Abuja said the successes were recorded in one week, from 17 to 23 July. The Coordinator disclosed thattheForwardOperatingBase, ESCRAVOS patrol team, intercepted a wooden boat without engine along Madangho Creek in Warri South West LGA of DeltaStateand anotherwooden
boat without engine laden with about 345.94 barrels of product suspected to be stolen crude oil Jones Creek general area. He sai the Nigerian Navy Ship Pathfinder patrol team, using drone, discovered an illegal refining site around Cawthorne Channel. According to him, the site had 2 metal reservoirs laden with an estimated 300,000 litres of illegally refined AGO and a large wooden boat containing 3.14 barrels of product suspected to be stolen crude oil. Enenche also said the NigerianNavyShipPathfinderinconjunctionwithForwardOperating Base Bonny located an illegal refining site at Bille Creek with one tarpaulin and 2 metal reservoirs stored with about 60,000 litres of illegally refined AGO and 125.7 barrels of product suspected to be stolen crude oil.
SWITCH Magazine set to build, promote the future of the Nigerian youths Cynthia Egboboh, Abuja
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witch Magazine has disclosed it plans to build, rebrand and promote the ambition of daring youths to shape the future of Nigeria. The Abuja based Magazine, in its recent edition adorned by Muhammed Nami, Chairman, Federal Inland Revenue Service of Nigeria, x-rayed taxation, revenue generation and the new normal in Federal Government’s revenue aspirations. The edition features young, bold and daring Nigerians who are focused on doing things differently, using global best practices and local realities to provide value addition in the economy”. “Among these young Nigerians featured are Samson Itodo, who earnestly works to fix
politics and ensure elections are done accordingly, also featured in the publication are Aisha Shuaibu, Dolly Balogun, an art curator showcasing Nigeria’s creative artists internationally, Damilola Anwo-Ade who focuses on projects with social impact, among others”. “The edition also provides a comprehensive understanding of the controversial 5G Network, using analogies, diagrams for better understanding of how 5G network works and possible potentials of the 5th generational network. “The magazine consists of young striving entrepreneurs who are working successfully in private and public sectors and aim to create a platform, both online and print, which speaks to majorly young entrepreneurs across the continent and one that fosters co-creation”.
BIPC begins work on 200 capacity Estate Benjamin Agesan, Makurdi
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he Benue Investment and Property Company (BIPC) has commenced work on Fountain Estate Phase 1 Nyorgyungu, Makurdi. The project which is in line with Governor Samuel Ortom’s vision of meeting the housing needs of the Benue populace is aimed at providing shelter for an estimated number of 200 people. The Nyorgungu Estate project consists of 30 unit detached bungalows which has been carefully designed to bridge the concept of luxury and affordability. It has Sporting facilities, Corner shops and Crèche, Children’s playground, CCTV and intercom, dedicated security posts, dedicated power @Businessdayng
transformer, dedicated water supply, 160sqm footprint walk through master bedroom closet, 12sqm minimum bedroom size, all bedrooms en-suite and so much more. Supervising the project, BIPC Managing Director, Alex Adum expressed satisfaction in the quality and pace of work done so far and acknowledged confidence in the ability of the contractor to deliver within the specified time. The Project Consultant, Terlumun Ayough expressed readiness to complete the work within the stipulated 180 days. He said the foundations of over 15 units of the Estate has being laid up to the point of down proof course (DPC) and that the project would be completed in no distant time.
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News COVID-19 throws up new challenges on... Continued from page 1
personnel, infrastructure
decay, debt servicing and loss of customers and wastage of other resources without any compensation from insurance. This is because many believe that it is at a time like this that insurance could come in to take care of the gaps, for example - paying workers for an agreed period of time during lockdown or providing projected profits for its insured. However, experts in insurance, giving insight into the matter, say though there is Business Interruption Policy that takes care of business losses, the case of Covid-19 is novel and fails to meet insurance principles. Business interruption insurance is defined as coverage that replaces income lost in the event that business is halted due to direct physical loss or damage, such as might be caused by a fire or a natural disaster. Even some all-risk insurance plans have specific exclusions for losses due to viruses or bacteria. Mayowa Adeduro, managing director/CEO, Law Union and Rock Insurance plc, explains that Covid-9 pandemic is novel; it is an unusual occurrence that affected all countries of the world, and there was no previous statistics or estimation of possible disruption and loss of economic values. Insurance being a business line on scientific modelling of probable loss will not dabble into pandemic loss, which cannot be quantified or ameliorated, Adeduro says, stating that in both life and non-life insurance there is no cover for pandemic event. According to Adeduro, the losses suffered by the aviation sector and hospitality businesses are not within the realm of fortuitous. This is a global loss affecting all strata of social and economic life of global community, he notes. “It is possible to have insurance cover for Covid-19 event in near future, but the principles underpinning insurance business or insurance interest must be present. That is, it would not be a global occurrence, it must
be fortuitous, and it must be capable of being remedied either by repair, replacement, reinstatement, reimbursement of losses quantified. For life insurance, there must be known cure for the sickness of Covid-19,” he states. He states clearly that there is no Covid-19 insurance in Nigeria; however, it is possible for a company to offer ex-gratis payment to a client who suffered Covid-19 losses out of commercial relationship not on the basis of insurance contract provided. And I should think that can come if only one or two clients are involved, he says. Gbenga Olawoyin, managing director/CEO, Prorisk Insurance Brokers, says for now there is no Business Disruption Insurance cover in Nigeria, stating that instead what you can fine in the market is Combined All Risk Insurance Cover, which adds as exclusion risks caused by riots or natural disaster. Olawoyin however notes that customers always decline to include Combined All Risk clause because it usually adds to premium amount. So, I can tell you that the business interruption policy is expensive, and the technical capacity for it is still lacking in our market, and such cover like Covid-19 could wipe out a whole market, he says. In the UK, for instance, this is already generating legal action against some insurance companies, as they claim that pandemics like Covid-19 cannot be covered. Rishi Sunak, UK Chancellor of the Exchequer had said, “For those businesses which do have insurance policy that covers pandemics, the government’s action is sufficient and will allow businesses to make an insurance claim against their policy”. But in practice, however, many policyholders have experienced difficulties in successfully accessing claims against insurers for business interruption losses. A number of major insurers and their representative bodies have stated their belief that, in most cases, business interruption policies will not respond to losses caused by Covid-19.
Inefficiency, long dwell time, others make... Continued from page 30
Nwabunwanne states. He calls for full automation of port operations to not only ensure efficiency and corruption free port, but to also reduce the cost and delays at the ports. Tony Anakebe, managing director of Gold-Link Investment Limited, who blames ineffective regulatory function of government for high pricing of shipping freight into Nigeria, notes that since the port was concessioned to private terminal operators, the government has failed to regulate the charges of service providers.
To Anakebe, there are manmade factors such as rentseeking syndrome and lack of 24-hour operations that delays timely clearance and delivery of cargo to importers. Using a Standards Organisations of Nigeria (SON) or the National Agency for Food and Drug Administration and Control (NAFDAC), regulated goods as example, he says when an importer has a consignment that concerns any of these agencies, it could take close to two weeks to get the necessary authorisation before the cargo would be released. www.businessday.ng
L-R: Leye Oyebade, deputy inspector general of police, research and planning; Seyi Makinde, Oyo State governor; Lamidi Adeyemi, Alaafin of Oyo; Saliu Adetunji, Olubadan of Ibadanland, and other state security chiefs, during the inauguration of Oyo State Community Policing Advisory Committee held at Government House, Ibadan.
Nigerian companies binging on debt face low... Continued from page 1
you cannot sell?” Ayorinde Akinloye, a research analyst at CSL Stockbrokers
asks. According to Andrew S. Nevin, partner and chief economist at PwC, “the economic impact of Covid-19 is just starting.” As a result, Akinloye says the biggest risk for many companies would be the inability to generate adequate cash flow to pay back on maturity because of the slowdown in business. “The reality is, we are now seeing the impact down the line in various industries. For us in Nigeria, it is going to be hard to get our economy restored to normal without regretting the trade ties and investment from groups around the world, but that still looks a long way off,” Nevin notes, adding that companies and government at all levels need to prepare for a long period of difficult economic times. Due to the high liquidity challenges of most Nigerian companies amid the decline in business activities, about 27 firms issued commercial papers (CP), bonds and rights issues in the first six months of 2020, as compiled from FMDQ data. While Nigerian companies took advantage of the lowinterest rate environment to raise capital, the short-term CP was most preferred by corporates to bonds and rights issue due to the low cost of finance and the short maturity period, according to BusinessDay analysis. Out of the total N658.5 billion debt issued in the first half of 2020, commercial papers accounted for 70.86 percent as against the 23.95 percent raised through corporate bonds and 5.19 percent rights issue. “It presents an opportunity for companies to raise cheap capital and those that have existing bonds raised some two or three years ago when rates were about 15-18 percent can call the bond,” Yinka Ademuwagun,
research analyst at United Capital states. While interest rates in Nigeria have always been high due to the monetary system in vogue since 2009, which sought to use FGN bonds/T-bills and OMO bills as a means of attracting US dollars into the country to stabilise the naira, the recent OMO policy by the CBN that prevents domestic investors from participating in the auction is the key driver of the low interest enjoyed today. Yields on both T-bills and bonds instruments have hit a bottom record from a double interest rate enjoyed some four years ago, and according to industry analysts, the low yield environment is an opportunity ready to be tapped. “The current state of the economy will affect the revenue stream of companies, and that is even the reason why they are raising funds because COVID-19 was a shock,” Ademuwagun says while projecting the COVID-19 shock to be short term. According to KPMG’s ‘COVID-19: A Business Impact Series,’ effective cash flow management is likely to be critical for many organisations during COVID-19 period as revenues fall, and potentially, debtors delay payments or become insolvent. In what could better describe the pains felt by the businesses due to the pandemic, consumer goods giant, Unilever reported an underwhelming performance in the first half of the year, after its revenue plunged by more than 40 percent to N14 billion, compared to the N23.4 billion it reported the same period last year. Across key product segments, revenue declined as both food and home/ personal care (HPC) businesses were down 28.5 percent and 43.3 percent, respectively, to N15.3 billion and N12.1 billion in H1 2020 from N21.4 billion and N21.3 billion, a pointer to how the pandemic has dealt a blow on the cash flows of businesses. Similarly, revenues of Cadbury Nigeria declined by
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18.2 percent to N15.9 billion in the first half of 2020 from a high of N19.5 billion the same period last year. To at least tame the impact of the crisis on their businesses, many companies, particularly those in the fast-moving consumer goods space, have increased their books of trade receivables, giving stock of goods on credits to customers with the hope of them paying back at a later date after the goods are sold. Irrespective, the move still does not hold waters due to weak purchasing power from consumers who the goods are meant for, thereby resulting in increasing firms’ books on goods returned inwards. For Unilever, its impairment loss on trade receivables surged by more than 3000 percent from N17.4 million in June 2019 to N597.2 million. More than 35,640 customers of Nigerian banks have restructured loans worth N7.8 trillion, after the pandemic crippled businesses and activities, Godwin Emefiele, governor of the Central Bank of Nigeria, said in its July Monetary Policy Committee meeting where members voted to leave benchmark interest rate and other key parameters unchanged. Emiefele noted that plans were underway to expand the forbearance levels for businesses, particularly those hard hit by the impact of the virus, to as much as 65 percent. However, this might still not be enough to get the fundamentals of these businesses to their prepandemic levels, according to analysts who spoke with BusinessDay. To a large extent, the success or failure of businesses mirrors macroeconomic realities of a country. When businesses thrive, there appears to be economic prosperity in a country and vice versa. For Africa’s largest economy, which for a larger part of the last five years has suffered stunted economic growth at an average of 2 percent, the scenario appears not different @Businessdayng
Since 2017 when oil-dependent Nigeria emerged from its economic recession, not only has the country’s economic growth been sluggish but only a few sectors triggered the expansion, further undermining the country’s capacity to create enough jobs to meet the growing number of labour market entrants. Africa’s top oil exporter who relies on crude sales for around 90 percent of foreign exchange earnings and more than half of government revenue is projected to post as much as 5 percent contraction in 2020. Analysts recommend government intervention in key sectors of the economy and right policy implementation as some of the stimulus needed to bail Africa’s largest economy from posting its worst recession in decades. But, according to the Wo r l d Ba n k, Nig e r i a’s planned fiscal and monetary policy stimulus targeted at addressing the economic challenges of the COVID-19 pandemic are modest compared to its peer countries. As a share of its 2018 GDP, Nigeria’s COVID-19 stimulus either as aid, grants, guarantees, CBN’s monetary liquidity injection, and interest rate is less than that of Brazil, Angola, Mexico, Russia, South Africa, Ethiopia, Ghana, Kenya, Senegal, and Uganda, the Washingtonbased lender said in its recent Nigeria Development Update (NDU) report. “Nigeria’s fiscal and monetary policy response has been modest by the standards of comparable countries, making it harder for the country to avoid recession,” the World Bank said in the report titled: ‘Nigeria in Times of COVID-19: Laying Foundations for a Strong Recovery.” The World Bank explained that the current challenges reflect long standing shortfalls in human capital, infrastructure and public services, women’s economic inclusion, the business environment, access to finance, and governance.
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Nigeria may not tap into OPEC’s 2021 boom Lagos restates commitment to ease of doing business, flags of Ileya farmers’ market forecast on delayed oil sector reform HARRISON EDEH, Abuja
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nability to take up bold and long-awaited oil sector reforms may hinder Nigeria from tapping into anticipated boom as being projected by the Organisation of Petroleum Exporting Countries (OPEC) in 2021. As OPEC sees demand for crude above pre-Covid-19 levels by next year, upbeat investors are already moving their investments to countries with better fiscal reforms in oil sector. This is in a move that could see Africa’s largest economy lose huge investments, despite dwindling revenue that has pushed government into a borrowing spree. Industry experts worry that the Petroleum Industry Bill (PIB) could have offered Nigeria the opportunity to explore advantages of the proposed 2021 crude oil market. But, Nigeria has been enmeshed in all manners of politics, a situation that has put the country in a poor condition ahead of its peers who have long embraced reforms.
“The PIB is critical for us to harvest more investment opportunities in the oil sector and ensure flexibility to the sector in such a manner that we can conveniently make the sector commercially viable by raising capital in the capital market,” Adeola Adenikinju, a professor of Energy Economics, tells BusinessDay. “The PIB is critical for us in terms of helping us take advantage and respond appropriately to market conditions in the oil sector. There are other national oil company with better fiscal reforms like Aramco of Saudi Arabia and Petrobrass that are doing well. The passage could help us without being held hostage by political interference,” he notes. OPEC has made a forecast that the need for its crude will surge by 25 percent in 2021 to average 29.8 million barrels per day, higher than the level enquired in 2019, according to its monthly report. The report notes that while the increase is partly driven by a recovery in global oil demand as eco-
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nomic growth resumes, an even bigger factor is the misfortune of OPEC’s competitors. For instance, after slumping 7.4 percent this year, the United States will see only limited production growth in 2021, the report shows. Hakeem Ali, an oil sector governance expert, informs BusinessDay that Nigeria without a better fiscal framework needs to ensure that the International Oil Companies (IOCs) go back fully into production. “First step that must be taken by the government preparatory to this expected surge is to ensure that the IOCs go back fully into production in deep offshore. In the deep offshore, there is less of interference and intrigues from oil communities in the Niger Delta. “We should work with the IOCs for a lot of them shut down their operational fields due largely to lockdown. The Federal Government should sit down with them in a roundtable and work towards what volume could be produced in different oil fields.
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agos State government has reiterated its commitment to the ease of doing business to ensure even development and create wealth for Lagosians amid the Covid-19 pandemic. The assurance was given by the acting commissioner for agriculture, Abisola Olusanya, at the Eko City Farmers’ Market (the Ileya edition) held on Sunday across 26 public schools in Lagos. According to Olusanya, the decentralised Eko City Farmers’ Market would enhance the upgrade of the agricultural supply value chain by connecting all the farmers with the markets. “The job of the Lagos State government is to create the enabling environment to ensure the ease of doing business across board. We also have the agribusiness department which has the mandate to do farmers’ linkages to consumers, producers and even the export community, and other stakeholders across the value chain,” said Olusanya.
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According to her, the essence of the decentralised farmers’ market was because of the Covid-19 social distancing measure being put in place by the government. “The essence is to give our producers the platform and create the enabling environment for them to make more money,” Olusanya said. The acting commissioner noted that the primary objective of the decentralised Eko
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City Farmers’ Market was to provide Lagosians access to a wide variety of fresh, local, in-season farm products direct from the producers. Gbolahun Yishawu, member, Lagos State House of Assembly, representing Eti-Osa constituency II, said the initiative was to ensure food gets to the people despite the lockdown, hence the need to decentralise the farmers’ market.
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NEWS
Oyo wins case against gaming company ‘Govt’s negligence costing Nigeria FMDQ Holdings holds 8th annual on business registration, regulation millions of jobs in maritime industry’ general meeting He stated, “FMDQ REMI FEYISIPO, Ibadan
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Federal High Court in Ibadan at the weekend ruled in favour of Oyo State government in a suit brought by a gaming company over business registration, right of regulation and statutory power to control gaming activities in the state. The case was instituted by Give ‘N’ Take Limited, a gaming company in Ibadan on November 12, 2018, challenging the authority of Oyo State government over regulations and control of gaming activities in the state. In the originating summons dated 12th of November, 2018, Give ‘N’ Take instituted a legal action against Oyo State Gaming Board and the state’s attorney general at the Federal High Court, Ibadan in suit No: FHC/IB/ CS/133/18 after the state wrote to the company, directing the management to obtain license and registration of its gaming activities from the board, urging the court to restraint the state from sealing off its office in the state. The state government, through the attorney general
and commissioner for justice, Oyewo Oyelowo, made its claim known to the court that by the virtue of section 4 subsection 3 and 4 of the 1999 constitution empowered the state House of Assembly to legislate on gaming activities, thus giving the state government the power of regulation and control over the business. Oyelowo in his reaction said the state government would always follow the line of social justice rather than autocratic tendencies in relating with its citizens. He hailed the company for following the legal process instead of fighting for Justice through illegal means. “The judgment has again shown that Oyo State government, under the present leadership of Governor Seyi Makinde would not do anything that to hurt the citizens in their social relationship or business activities in the state. “The state is open to legal businesses and commercial activities and same must be under the control and supervision of relevant agencies of government, this has been affirmed by the judgement and we are happy for it,” he maintained.
GODSGIFT ONYEDINEFU, Abuja
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espite the huge natural and human resources within the Nigerian maritime sector, negligence on the part of government is seen as responsible for the country’s inability to reap the economic gains from the industry and maximise its potentials, an expert in the sector has said. Bem Ibrahim Garba, MD/CEO of GOG Marine Ltd, regrets that the Nigerian government, despite having full knowledge of the potentials and economic benefits in the maritime sector deliberately fail to recognise its importance or apply the knowledge to the development of the economy. Garba also lamented that Nigeria still lags behind Greece despite having similar opportunities in the industry and has to depend on many other seafaring states including the smaller European state to meet her maritime and logistics requirement “If you are like me, and you think about situations
like this deeply, you will find that the difference is not about the lack of resources, manpower, or one country being better endowed than the other. The difference actually lies in what each country knows and how it chooses to make use of that knowledge”, he said. He added that “as a country, Nigerian government officials responsible for the shipping industry’s development theoretically know and understand the significance of a fully developed indigenous shipping industry. “They know about the millions of well-paid jobs that this industry can create for the locals. They know about the valuable taxes that the country could earn if this industry was fully optimised. They know about the pride that Nigeria would derive from having our national flag, proudly hoisted among the committee of well represented seafaring nations. The challenge lies in how well we have we choose to utilise this well-articulated knowledge.”
SEGUN ADAMS
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MDQ Holdings plc (FMDQ Group or FMDQ), Africa’s first vertically integrated financial market infrastructure (FMI) group, held its 8th annual general meeting (AGM) on Friday, July 24, 2020, following the respective AGMs of its wholly owned subsidiaries - FMDQ Securities Exchange Limited (FMDQ Exchange), FMDQ Clear Limited (FMDQ Clear), and FMDQ Depository Limited (FMDQ Depository), on July 23. In compliance with the COVID-19 directives and guidelines of the Lagos State government that prohibits gatherings of more than 20 persons, and FMDQ’s commitment to keeping its staff and stakeholders safe, the AGMs held virtually, with the shareholders and other attendees participating in the proceedings via Zoom. Presiding over the FMDQ Group AGM, the newly appointed Group chairman of the Board of Directors, Kingsley Obiora, presented the financial statements for the year ended December 31, 2019, to shareholders, together with the reports of the directors and auditors.
Sahara Energy institutes legal action against Pointblanknews.com GBEMI FAMINU
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he attention of Sahara Energy Resource Limited (SERL) and Sahara Group has been drawn to an orchestrated smear campaign against Sahara by Pointblanknews. com, which continues to manifest in malicious, false and misleading reports published on their online news portal. Pointblanknews.com published the most recent revelations in the series on the July 23, 2020, on its website under the URL: http://pointblanknews.com/pbn/exclusive/ sahara-energy-aa-rano-oilsell-stolen-2-5billion-crudeoil-in-china-share-proceedswith-buharis-cabal/ with the caption: “How Sahara Energy, AA Rano Oil sold stolen $2.5 billion Crude Oil in China, shared proceeds with Buhari’s Cabal”. In the said publication, Pointblanknews.com made spurious and defamatory allegations against Sahara Energy Resources Limited, previous and current government officials and government agencies, citing unnamed and unverifiable sources (in common with its other publications), in what is ostensibly an orchestrated smear campaign against Sahara. For the avoidance of doubt, we would like to state for the record that the allegations in the report are com-
pletely baseless, unfounded and a deliberate attempt to mislead the public and defame Sahara. It is important to note that this most recent publication by Pointblanknews.com contains false statements which were extracted from previous equally unfounded publications of Pointbalnknews.com in its apparent bid to sustain the smear campaign intended to tarnish the reputation of SERL, its affiliates and principals. In the light of previous and pending subsequent
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false stories in the series, we hereby urge members of the public as well as our stakeholders and partners across the globe to disregard previous and future pointblanknews.com reports regarding Sahara Group and its affiliates in their entirety. SERL has retained the service of its legal counsel to immediately institute civil and criminal actions against Pointblanknews.com and its publishers for the false and defamatory statements reported on its online platform as we have done in the past.
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achieved a resilient performance amidst the challenging operating environment, due to strategic initiatives implemented in its first strategic lustrum (2015 - 2019), which mitigated the impact of volatile market conditions.” According to Obiora, “2019 was a year of growth, expansion, and reorganisation for FMDQ, with the consolidation of its flagship wholly owned subsidiary, FMDQ Exchange, the second year of the operationalisation of its wholly owned subsidiary, FMDQ Clear, and the activation of another wholly owned subsidiary, FMDQ Depository, making significant progress in its bid to help de-risk the financial markets by constructing market infrastructures in all components of the capital market value chain, from pre-trade, trade to post-trade.” He further stated that through FMDQ Securities Exchange, the Group admitted a total of 84 securities split across bonds, commercial papers (CPs), and funds from various sectors for listing and quotation on the platform of its platform, in addition to the registration of several CP Programmes.
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COVID-19: As Nigeria battles huge drop in revenue, experts point to Ghana’s pool testing as option MICHAEL ANI
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s Nigeria grapples with shortfall in revenue and a spike in Covid-19 cases, researchers and health experts are recommending Ghana’s pool testing- a kind of testing mix made from several individual samples pulled together into a tube to form one whole sample—as a veritable option in the fight against the ravaging virus. Africa’s biggest economy is one of the hardest hit in the continent from both the health and the economic impact of the novel coronavirus, as daily reported cases of the virus continue to rise, overwhelming the country’s frail health infrastructure. Some 37,801 persons have been infected with the virus as of July 21, 2020, including 15,677 of which have recovered and 805 deaths, according to data from the Nigerian Centre for Disease Control (NCDC). That’s a surge of 420 percent from the 7261 cases reported two months before, showing how fast the virus is spreading. Nigeria’s increasing spread was majorly due to
its inability to quickly ramp up testing at the time it commenced five-week economic lockdown to keep the virus at bay, analysts have said. Although testing capacity has improved after the country added seven private laboratories to assist in ramping up testing, however, it is still low for a country of its size. With a population of over 200 million people, the country has managed to get 247,825 people tested of the virus, one of the lowest among its peers. But to bridge the country’s testing gap would require the country dipping its hands into its resources which has been strained after a big drop in crude oil prices has wiped off more than 60 percent of its revenue. There is also no respite in sight for the nation’s economy in both the short and medium terms after projections from the International Monetary Fund (IMF) and the World Bank, show the economy will contract 5.4 percent and 3.2 percent respectively in 2020. The above fiscal doldrums have made health experts and researchers task the government to rethink
its strategy by adopting the pool testing which requires less resources while still delivering quality outcomes. The argument of comparing Nigeria’s low testing capacity to that of its peers, particularly Ghana has been an issue that sprung up in the past, and Africa’s biggest economy has always defended its testing strategy, saying it might be slow and costly, but it’s the best. Ideally, Nigeria’s method of running individual testing is not a bad approach, however, the approach is not feasible for a country like Nigeria with a population of over 200 million people, said Peter Imoesi, molecular neuroscientist and a research fellow at the University of Aberdeen, Scotland, United Kingdom. In a series of tweets, Imoesi explained that the individual testing approach adopted by Nigeria, requires the use of more consumables which might be a bit capital intensive. This is not just limited to supplies, but also the required human capacity in terms of competence and skilled experts. For him, in the case of a small outbreak like endemic disease, RT-qPCR individual testing is feasible.
N75bn Youth Fund: Experts call for proper legal framework for sustainability TONY AILEMEN, Abuja
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nvestment experts have advised the Federal Government to establish a legal framework for the recently approved N75b Nigerian Youth Investment Fund, for sustainability. They also warned against setting impossible huddles for accessing the funds Tagged “The Nigerian Youth Investment Fund (NYIF)”, the minister of youth and sports development, Sunday Dare had announced the establishment of the fund, after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, last week. But investment experts called for framework that would ensure accountability and transparency, including the setting up of a broad- based team of stakeholders to monitor its implementation This is also as the source within the ministry of youth and sports development told BusinessDay at the weekend that the guidelines for accessing the fund would be released in two weeks’ time. The fund, which is a three-
....as ministry to release guidelines in 2 weeks
year initiative, according to the experts, may have sustainability challenges unless a proper legal framework and monitoring was put in place. The investments experts are also concerned that the disbursement of the funds may suffer same fate as the N50 billion Targeted Credit Facility (TCF) set up in the wake of the disruptive effect of the coronavirus global pandemic. The TCF fund had targeted households with verifiable evidence of livelihood adversely impacted by the coronavirus outbreak, existing enterprises with verifiable evidence of business activities also affected by the pandemic. The Central Bank of Nigeria (CBN) in the guidelines for accessing funds under the TCF listed a step by step procedure to include submission of an application to “NIRSAL MFB, which must, among others, contain BVN number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact as a result of Covid-19 pandemic” www.businessday.ng
John Airohi, head of Jebenro Engineering Consortium, described the government’s effort as positive development for strengthening youth empowerment, but expressed fears that “the funds may not get to the targeted youths” “You know that the TCF was set up as a stimulus package to support households and micro, small and medium enterprises (MSMEs) that are affected by the coronavirus pandemic, but records show that not much has been achieved with the funds” “For this to succeed, government must put in a strong monitoring mechanism to check corruption and other primordial considerations that scuttled similar initiatives.” Samson Itodo, head, research, policy and advocacy, Youth Initiative for Advocacy Growth and Advancement, (YIAGA), noted that as commendable as the initiative may seem, government must establish modalities for “monitoring and accountability” https://www.facebook.com/businessdayng
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Telcos may not get PSB licence in 2020 FRANK ELEANYA
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aring any last minute intervention, telcos would most likely not be issued a Payment Service Bank (PSB) licence by the end of 2020 as indications have emerged that the Central Bank of Nigeria (CBN) has unofficially extended the six months deadline given to the recipients of the approval in principle for a PSB. The CBN had said in 2019 it would not licence more PSB operators until it certifies that the three that got the AIP were able to meet up with the requirements at the end of the six-month window given to them. The three recipients of the AIP include Hope PSB, a subsidiary of Unified Payment, Globacom’s Money Master and 9Mobile’s 9PSB. At the BusinessDay dialogue series on last Thursday, which focused on ‘Future of Payment and Financial Inclusion’, Musa Jimoh, director, Payments System Management, CBN, said the AIP process was still ongoing. He also suggested that the apex bank already see telcos involved in financial services, hence not in a hurry to issue the licence at least until the conditions are met. “Three companies have actually been granted the AIP and they are going through the AIP period. Once they are done and we have certified that they have fulfilled the requirements of the AIP, then the commercial licence would be given to them. So the stage they
are now is AIP for them to bring together all the things that they need to go commercial,” Jimoh said. The 6 months deadline the AIP licensees were given by the CBN supposedly began the day the licence was issued in 2019. But there is little indication on ground that the conditions were met. While Jimoh said during the conference that the AIP process is continuing he did not elaborate whether the CBN has officially extended the deadline. The PSB licence is supposed to allow telecommunication companies to offer payments and remittance services, issue debit and prepaid cards, deploy ATMs, and other technology-enabled banking services. It is like a stripped-down version of traditional deposit money banks, with limited functionality and a focus on onboarding more of the excluded and marginalised population. In 2019, the CBN issued three Approval in Principle (AIP) to two telcos (Glomobile and 9Mobile) and Unified Payments, a financial technology company set up by Nigerian banks. There have been expectations that the licenses will be issued before the end of the first quarter of 2019. At the BusinessDay Inclusion for All summit which was held earlier in 2019, Nurudeen Zauro, the technical adviser, financial inclusion secretariat at CBN, had said to expect the PSB licences, “Most probably by the end of this first quarter.”
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FG raises Abuja-Kaduna train fares by 100% as operations resume MIKE OCHONMA
...economy N3000, business N5000, VIP N6000
resident Muhammadu Buhari has approved a 100 percent increase in fares on the Abuja-Kaduna train services from N1500 to N3000 for the economy class, N2500 to N5,000 for the business class and N6000 for the VIP class coaches. Four months after commercial services on the train route were suspended as a result of the Covid-19 pandemic, operations on the everbusy corridor is set to resume on Wednesday, July 29, 2020. Rotimi Amaechi, minister of transportation told journalists during a test-run of the newly delivered Diesel
Multiple Units (DMUs) consisting of two locomotives and eight coaches, that the hike in fares was to ensure that physical distancing was maintained as well as cover the running cost of the operations. According to the minister “in a month, we get about N120 million and if we run like this, we will realise about N60 million. It then means that we need another N60 million to complement the running cost. What the president did to approve the new fare was to say, once you can get your running cost, it is okay.” Reacting to questions on the affordability of the new fares especially by the low
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and middle-income earners, the minister insisted that people using the services were not poor and, therefore, could afford the fares. The minister, who admitted there has been pressure on them to resume operations before the Sallah celebrations, disclosed that the Nigerian Railway Corporation, (NRC) was increasing operations from the initial 8 operational service on both routes before the outbreak of Covid-19 to 14 commercial operations daily. Providing an update on the Lagos-Ibadan rail project, Amaechi stated that the project was moving at a slow pace. He said that due to the
Covid-19 pandemic the Chinese contractors reduced the number of workers from 1000 to 10, and because of this, the big stations have not been completed. ‘’The two things we can do is to either run skeletal services and be running 2 services; one going and one coming. That means, they will be using the double tracks, but they won’t be using the stations’’. ‘’If they have to use the stations, nobody should complain that they are uncompleted stations. We will only do that if there is heavy pressure on traffic, if not they may have to wait till the stations are ready,” he said.
Nigeria needs competent, qualified leaders post COVID-19 - Peter Obi KELECHI EWUZIE
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ormer governor of Anambra State Peter Obi says Nigeria in post Covid-19 era will present even greater challenges that require Africa’s biggest economy to choose its leaders painstakingly. Obi, therefore, called for an urgent shift in the process of selection of leaders in the political space, adding that more than ever before, Nigerians need to have elected political officers who are competent and qualified to lead the country these critical times. Speaking on how to build with courage and resilience in the Covid-19 period, Obi, who was the People’s Dem-
ocratic Party (PDP) vice presidential candidate in the 2019 general elections noted that Covid-19 offered Nigerians an opportunity to see the cumulative effects of leadership failure over the years in our health, infrastructure, education, and economy. According to him, “a situation where we have people in leadership who are incapable of learning new things has to change. Nigeria doesn’t need leadership who is trapped in the processes of yesterday; we want those who have something to offer for tomorrow”. The former governor further said that from the political point of view, if Nigeria entrepreneurs and businesses were to get their
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plans and processes right and fail to correct the political equation, then everything was wrong. “In all our doing as a country, it is important we get our politics right. It is critical that the right sets of people are in governance. “In a society where people have excelled, they have achieved such because they have been given an opportunity. When we are talking about the new normal, we also have to look at our environment. We need to start thinking differently about those that govern us also,” he said. Ndidi Nwuneli, cofounder of Sahel Consulting in her keynote address at the Bridge Leadership foundation career event
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said there was an urgent need for decisive action and broad-based collaborations between government and private organisations to revamp early childhood education. Nwuneli in her lead presentation titled: “The global economy: adapting to the new normal”, identified collaboration across key ministries and sectors, accountability, transparency and equity as the right approach to in tackling the challenges the coronavirus pandemic has presented. According to her, the key drivers in the ecosystem are transparent government, dynamic entrepreneurs, and skilled workforce with the requisite life and leadership skills.
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Monday 27 July 2020
BUSINESS DAY
FT
FINANCIAL TIMES
World Business Newspaper
Banks across Europe braced for more heavy loan-loss charges
Largest UK, Swiss and eurozone lenders expected to set aside at least €23bn as they tackle Covid pain Stephen Morris and Owen Walker
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urope’s biggest banks are set to unveil another huge round of provisions for loan losses, as they take stock of the damage wrought by Covid-19 around the globe. The largest UK, Swiss and eurozone lenders are expected to provision at least €23bn for the second quarter as they report earnings in coming days, according to analysts at Citigroup. That is on top of the €25bn of charges the same group took against potential defaults in the first three months of the year. When added to the $61bn already reserved by the five largest US banks over the first six months, the combined figure from the biggest western lenders could reach $117bn. That would be the highest net addition to reserves since the first half of 2009, in the aftermath of the collapse of Lehman Brothers, according to Citi. Few economists are projecting rapid “V-shaped” recoveries and more pain is expected when government support schemes wind down in the autumn. Oliver Wyman, the consulting firm, forecasts as much as €800bn of loan losses for European banks over the next three years if there is a second wave of infections. “It’s going to be another difficult one — several banks have flagged
Barclays, Deutsche Bank and Italy’s UniCredit have a combined market cap less than videoconferencing company Zoom © FT Montage/Bloomberg
this could be the worst quarter of the year,” said Jon Peace, an analyst at Credit Suisse. He noted that under new accounting rules, banks are required to “front-load” their provisions for likely losses, but added that at the end of the first quarter they were working off assumptions for GDP growth and employment “that were not as bleak as today”. UBS, the first of the major European financial institutions to report last week, posted a 43 per cent surge in earnings at its investment banking arm, but also took another $272m of loan-loss charges. That
brought its total for the first half to $540m — 16 times the same period in 2019. “The first quarter was about whether you are resilient and, for some, able to survive,” Sergio Ermotti, chief executive of UBS, told the FT. “The second quarter will be about whether you can demonstrate adaptation. We have already entered the ‘lessons learned’ phase of coronavirus.” The already beleaguered European banking sector, still dogged by problems carried over from the financial crisis of 2008-09, has been
punished in the stock market. Shares in European banks have dropped 31 per cent so far this year, on average, compared with a 10 per cent fall in the benchmark Stoxx 600 index. On average, the banks are trading at less than 40 per cent of the book value of their net assets. Barclays (€22bn), Deutsche Bank (€17bn) and Italy’s UniCredit (€20bn) have a combined market capitalisation less than Zoom, the $74bn (€64bn) videoconferencing company that has prospered during the pandemic. “It is a universal consensus that given the headwinds, investing in
banks is as stupid an activity as investing in oil majors,” said Richard Buxton, head of UK Alpha strategy at Jupiter Asset Management. “It is unlikely that anything revelatory emerges from this reporting season to change that.” “The economic downturn clearly means a big pick-up in bad debts,” he added. However, “I am extremely confident that whatever the damage to [profit and loss accounts] from the crisis, it does not mean they need to raise additional equity capital.” In the first quarter there was a wide disparity between banks’ accounting approaches to potential loan losses — a discrepancy described as “extraordinary” by Magdalena Stoklosa, head of European financials research at Morgan Stanley. An outlier so far is Deutsche, which provisioned just €500m in the first quarter, compared with £2.1bn at Barclays and $3bn at HSBC. The German bank has already said that loan-loss provisions would rise to €800m in the second quarter, the highest level in a decade. For European lenders that have significant investment banking arms, a surge in trading revenues should cushion the blow. US banks reported an average 69 per cent increase in revenues from trading stocks, bonds and other assets, benefiting from market volatility and a slew of emergency fundraisings from big companies.
US universities under pressure to cut fees because of remote learning Georgetown joins Princeton among just a handful of elite institutions to make concessions to students
Andrew Jack
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ackson Butler received an unexpected boost this week after growing frustration that his final year at Georgetown University would be largely taught online with limited access to its Washington DC base. “It’s very clear we’ll have a diminished experience,” he said. “There will be no extracurricular activities and we won’t be able to access resources on campus.” But after organising a petition of 2,000 students accusing Georgetown of “highway robbery” for maintaining its tuition fees at nearly $58,000 a year, the university backed down and offered a 10 per cent discount. Georgetown has become one of just a handful of elite US institutions to make such a gesture, with most resisting calls for discounts as they brace themselves for the hefty impact of coronavirus on their own budgets. Georgetown’s move adds to pressure on institutions around the world to make concessions to students who feel short-changed by what they say will be an inferior online university experience. Some hope it would strengthen efforts to seek reimbursements on fees
Georgetown University is offering a 10% tuition discount to its students © Saul Loeb/AFP/Getty
for the year just ended, but which was curtailed when the pandemic struck. Princeton University last month reduced annual fees by 10 per cent to $48,500 to compensate for offering undergraduates half their normal time on campus in the coming year and half remotely. “We recognise there’s a difference in what we can deliver remote and on campus. It wasn’t possible for us to offer all students a place on campus for both semesters,” said Christopher Eisgruber, Princeton’s president. Williams College in Massachusetts has put in place a 15 per cent cut in total charges, or just over www.businessday.ng
10 per cent for tuition to $50,450. Dukes Love, the university’s provost, said that while teaching quality would be unchanged, the reduction reflected the fact that student would not have the “full residential college experience”, such as athletics and music. “These are not just a side component for our students, they’re really fundamental,” he said. But other US universities have resisted cuts and even maintained increases in fees, while some are finding ways to offer concessions without losing revenues. Yale University raised tuition from $55,500 to $57,700 in the coming academic year but waived some lodging costs
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and offered credits for two summer session courses in compensation. Others such as Harvard University have ruled out reductions. It increased tuition fees by 3.5 per cent for the coming year to $57,384 despite student protests. “Harvard sees me as a dollar sign, and not a person,” wrote one student on a petition currently circulating. The university did not respond to requests to comment. The problem for many universities is that they face a substantial drop in revenues from student enrolments and grant funding. This is leading to deferred spending, budget cuts and, in some cases, potential closure. President Donald Trump’s efforts to restrict visas for foreign students learning online have added pressure. Similar situations are taking place beyond the US, notably in English language countries with higher fees including Australia and Canada. In the UK, the National Union of Students has called for a “safety net” that would allow students to re-do a portion of their studies at no extra cost, write-off some of their debt or receive partial fee reimbursement. An NUS spokesperson said: “It’s shocking that some universities are telling students outright that they will not be able to defer their stud@Businessdayng
ies for coronavirus-related reasons. These universities are putting their own financial stability over the welfare and experience of students, and must change these policies immediately.” Simon Marginson, professor of higher education at Oxford university, expressed sympathy with resistance to cutting fees. “When we’re unsure of what we can provide safely, and might have to go suddenly into online mode, we’re carrying costs in both modes,” he said. But it is in the US where the debate for discounts rages loudest, given the relatively high level and wide variation in fees and in some cases significant financial endowments — as high as $50bn at Harvard — that critics argue should be used to cushion short-term costs. Steve Berman, a lawyer overseeing more than 20 class action lawsuits seeking refunds at various universities, pointed out that before the pandemic, many schools offered online courses at about a tenth of the price of in-person teaching. “The schools themselves realise [online] isn’t as valuable but they’re charging the full price when not delivering the full menu. We think that’s a breach of the promise they owe families,” he said.
Monday 27 July 2020
BUSINESS DAY
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FINANCIAL TIMES
COMPANIES & MARKETS
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US oil production wells up after Covid price crash
Output expected to stabilise at about 11m barrels a day after recovery from June low Derek Brower and Myles McCormick
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S oil companies have increased production by 1.2m barrels a day over the past six weeks, as they restore wells shut earlier this year and start producing from others they left unfinished as prices sank. Output bottomed out at 9.7m b/d in the second week of June but has since risen to 10.9m b/d as activity starts to pick up in the big shale fields of Texas, according to Genscape, a division of consultancy Wood Mackenzie that monitors energy flows. That figure is more than the UK’s entire crude production of 1.1m b/d. US production should now stabilise at about 11m b/d through to the end of 2020, analysts said. That is well below the 13m b/d in March before the Saudi-Russian price war and coronavirus pandemic devastated US oil prices. “It’s a slow, slow recovery, but it’s happening,” said Alexandre Ramos-Peon, a senior analyst at Rystad Energy, a consultancy. Despite the restarting of wells shut around the time the US oil price plunged below zero in April, drilling activity remains weak. The number of operating rigs was
The number of operating rigs in the US was 251 last week, compared with about 800 in January © AFP via Getty Images
just 251 last week, compared with about 800 in January. But oilfield services companies say activity is beginning to pick up as operators redeploy crews to bring drilled-but-uncompleted wells into production. Hydraulic fracturing, or fracking, uses water, sand and chemicals pumped into a well to open small cracks that will release the oil or gas. The rise in fracking will ease fears
that production could slip into an even more severe downward spiral. Shale is unusual in the oil business because a typical well produces prolifically for a year before output drops steeply and then settles into a modest and diminishing flow rate thereafter. That means thousands of wells must be drilled each year just to hold overall output steady. The number of so-called frac
crews carrying out well-completion work crashed to a low of 45 in May, just 10 per cent of the levels a year earlier, according to Primary Vision, an oilfield data provider. But the research firm said 62 frac crews were now operating across the country. Rystad estimated more than 400 wells would be fracked this month, up from a low of 325 in June. US shale basins hold more than
7,000 wells that have been drilled but await completion, according to the federal Energy Information Administration. That leaves a large inventory of wells for operators to bring into production. Even so, a sustained recovery in output would need more drilling, say analysts. “The stock of uncompleted wells is like a savings account for the industry,” said Ian Nieboer, a managing director at RS Energy Group, a consultancy. “It buys time — but even treading water to keep production flat will become difficult if drilling activity doesn’t increase.” Last year more than 14,000 wells were drilled in the US, but fewer than half that number would be drilled in 2020, said Mr Nieboer. Rystad predicts US production will grow by about 500,000 b/d in 2021, after hovering around 11m b/d for the remainder of this year. That is well below the growth rates of recent years. “We would need to see fracking activity return to the thousands (of wells) in order to see such a production growth,” said Mr Ramos-Peon. “Right now it’s like a reset to the industry. Lots of bankruptcies, lots of disenchantment, less capex. But it’s still profitable to continue growing at these prices.”
What tools can the Fed use to support the recovery?
Market Questions is the FT’s guide to the week ahead FT reporters
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hat tools can the Fed use to support the recovery? Investors will this week be looking to the US Federal Reserve for clues at its monetary policy meeting about what path the central bank will take to shore up an economic recovery that appears to be weakening. Outbreaks of Covid-19 across the US seem to have impeded a rebound in the labour market, while a swift rally in the S&P 500 is showing signs of losing momentum. The largest weekly rise for the large-cap index is 1.8 per cent over the past month. The Fed has already slashed interest rates to zero, pledged to buy an unlimited quantity of government debt and unveiled a series of emergency measures that include facilities to support the markets for corporate debt and municipal bonds. Stocks on Wall Street have climbed more than 45 per since March as a result, but concerns remain about the sustainability of the recovery, prompting speculation as to what other tools are at the Fed’s disposal. Negative interest rates have been ruled out for now but other
© FT montage; Bloomberg; Getty Images
unconventional measures are on the table. The first is explicit forward guidance about the path of interest rates, under which moves are tethered to inflation outcomes or unemployment levels. Fed officials discussed this option at length at their previous meeting, leading some to believe this will be the next policy to be rolled out. Yield curve control, in which the Fed sets targets for Treasury yields and then buys and sells as many securities as necessary to maintain those levels, has been debated too. But officials have been less keen to embrace this policy, indicating that additional research needs to www.businessday.ng
be done. Colby Smith How much higher can the oil price go? Brent crude is back to near $45 a barrel, after collapsing below $20 in April as lockdowns began to bite. But despite this impressive recovery, at least in percentage terms, oil companies are still getting roughly $20 less per barrel for their crude than they were this time last year, in what has been one of the most painful periods for the industry of the past 20 years. The question every oil executive is asking, therefore, is whether the recovery can keep going. No one seems particularly confident. Opec and Russia, which cut production
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sharply to trigger a rebound in price, will start to add back some of their output from August 1. Against this backdrop, there has been a renewed threat to crude demand. China, the secondlargest oil consumer after the US, is expected to moderate its buying spree after snapping up millions of cheap barrels over the past few months, while US states are having to reimpose lockdown measures as the country struggles to get the pandemic under control. The fundamentals do not look promising. The market may now be in a small deficit, but the huge oil surplus built up during March and April, when global demand was down about 20 per cent or 20m barrels a day, will take a long time to burn off. Traders remain cautious, with Brent trading within a narrow $5 range for most of the past month on low volumes. After the turmoil of the spring, it may take until after the summer for a stronger direction to emerge. David Sheppard How much life is left in the euro rally? The euro surged to trade at a 22-month high against the dollar last week, hitting $1.16 on Friday, and analysts expect more gains to come. “How far can it go? We think @Businessdayng
$1.20,” said George Saravelos, global head of currency research at Deutsche Bank. Two catalysts have boosted the single currency: an agreement among Europe’s leaders on a historic €750bn recovery fund, and signs that the region’s economies are more resilient to the pandemic than the US. “Our economists expect a steeper and smoother rebound from the corona-crisis in Europe than the US due to better virus control and a much smaller increase in unemployment rates,” said analysts at Goldman Sachs. Data released this week will reveal whether this new-found optimism is justified. Investors will be keeping a particularly close eye on secondquarter eurozone growth data on Thursday, which will provide a reading on whether the cautious reopening of countries has led to a rebound. Inflation and retail sales data will provide further clues about the likely direction of the currency. Gaétan Peroux, a strategist at UBS chief investment office, said global demand for EU exports would also have to rebound for the euro to hit $1.20, which he expects to happen in the first half of next year. Eva Szalay
Monday 27 July 2020
BUSINESS DAY
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Company IN FOCUS
BUSINESS DAY Monday 27 July 2020 www.businessday.ng
The hot air about Azura and the penchant of our leaders to amuse ISAAC ANYAOGU
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v i e O m o -A g e g e has said Nigeria’s agreement with Azura Power could be another P&ID case and sought an outright cancellation of the agreements Nigeria has with Azura Power and Accugas. But this comparison flies in the face of reason. While the P&ID deal is nothing but an inglorious contraption, Azura is Nigeria’s most acclaimed power generating company which has never failed to deliver power for even one day since its celebrated commissioning. Omo-Agege and others like him should know better. As a ranking member of the country’s legislature, he enjoys the privilege of having tax-payers bear the cost of his legislative aides. Given that energy features prominently at every important policy intersection in Nigeria, one of his aides should and must be a person well skilled in energy economics. “We cannot review that agreement, we will need to cancel that agreement outright. We have another P&ID in our hands clearly,” Omo-Agege said on Wednesday following a presentation by the senate’s power committee. The matter of Azura is neither complicated nor is the arrangements that the company has with the government of Nigeria opaque in any important aspect. So, BusinessDay went out to interrogate this matter instead of just blowing hot air like Omo-Agege. Here is what the facts tell us. What deal did Nigeria do with Azura Nigeria entered into an agreement to procure from Azura, a 450-MW of power plus a transmission substation and a gas pipeline/metering station to booth. This contract was directly between Azura and the Nigerian Bulk Electricity Trading company (NBET), Nigeria’s bulk buyer of energy and whose job it is to provide guarantees. However, because NBET’s cash flows were and are known to be suboptimal, Azura could not raise capital (equity/debt) for the project unless NBET itself also secured guarantees to back its desire to deal. These guarantees were provided for Nigeria by the World Bank/MIGA and the Federal Government Put-Call Option Agreement (PCOA). The regulator NERC and NBET worked with Azura from 2011 to 2015 to work through licenses, tariffs, Power Purchase Agreements, loan agreements and credit support arrangements with shareholders, the World Bank, Federal Ministry of Finance and the lending banks. EPC work could not start at Ihovbor-Benin
(located right next to the NDPHC plant) until 2015 when all the licenses and project agreements (over 20 of them) were in place. Project construction (all elements from IPP through TCN substation to gas pipeline and metering) was completed 6 months ahead of schedule, alsoon budget and commissioned in 2018. No other project of its magnitude in Nigeria has scaled this bar. So Omo-Agege, the senator they love to call DSP, Azura is not a P&ID unless you have not checked or asked the right questions. Hal Gregersen, the Innovation guru and admired professor at MIT has a new book out. ‘Questions are the answer’ and it is about how leaders succeed by asking questions . He said the right questions open the door to innovation. Perhaps it can offer useful insight to the senator if he reads it. Interplay between Azura and NBET Subsequently, Azura committed (in its Power Purchase Agreement with NBET) to deliver 450MW of capacity daily
and NBET committed to take this power and pay for that energy. That’s what all sellers and buyers do all over the world. Since then, Azura has not missed a day of that obligation. As we all know, NBET has vesting contracts with all 11 Discos under which capacity/energy received from all the country’s Gencos and IPPs are allocated (vested) amongst the Discos. The Discos are supposed to pay back upstream to GenCosand the Transmission Company of Nigeria (TCN) for this energy sold to it. As has now been shown, the DisCos have since 2018 been paying only an average of 30-35 percent for the capacity and energy received. That creates a massive payment risk for the GenCos, gas suppliers, the very unique Nigerian mess that Azura’s guarantee portfolio was designed to hedge against. Nigeria’s GenCos and TCN are owed over N1.7 trillion for unpaid energy delivered and transmitted and worse still there is no clear path to payment. NBET is unable to pay up be-
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When Omo-Agege finds out the truth, he will see that the reason why Azura’s $30m/month commitment seems to be such a huge burden is also the same reason why there has been only one true IPP in this country - Azura. That reason is the delinquency of Nigeria’s Discos which means that Nigeria has a power sector but not an electricity market
cause it does not have enough cash to pay these debts even though NBET signed up effective agreements to pay these GenCos and TCN. In turn, the GenCos owe their gas suppliers about a third of the N1.7 trillion owed to them by the Discos. The ONLY REASON why Azura is not caught in this mess is that it negotiated and received solid internationalbacked guarantees, just like all properly structured IPPs across the world. If it’s guarantees had been provided by Nigerian banks only NBET’s default would have broken the back of the local banking sector. Indeed, Azura is often paid in arrears but has never called on its World Bank guarantee which would have completely destroyed Nigeria’s international financial credibility. And how does Azura charge the NBET Typically Azura’s monthly invoice is between $25m - $30m for its 450MW delivered to Nigeria’s grid daily. Of this sum, a third goes directly to Seplat which has a binding agreement to provide Azura gas to fire the station. For this reason, Azura’s 450MW plant is probably Seplat’s best customer. The other GenCos are dire financial situation because NBET is failing in its payment obligations, and because, in turn, the Discos are forever delinquent. Azura’s charge was around N19 per kilowatt hour at the end of last year and bear in mindchanges in macroeconomic indices (mostly FX) mean that this charge can move. So, we have a figure of $25-30m monthly which works out like this N19x1000 = 19,000 per megawatt of power. N19,000 per megawatt x 450 MW x 24 hours N205,200,000 per day. Other Nigerian thermal Gencos are at about the same pricing level. Only problem is these other thermal GenCos don’t
have guarantees. That’s why they all are not happy with the Azura deal. It is like the woman in the Bible who asked that the child be killed just because the baby was not hers. What options are open to Nigeria Nigeria has options. First, it can deliberately default and World Bank’s MIGA will pay Azura. Once that happens, Nigeria’s international credit rating goes to rock bottom. Second, it can exercise its PCOA rights and pay Azura the over $2bn due for capital expenditure and lost profits. Nigeria does not have that money. So, instead Nigeria’s policymakers, legislators and regulators should be roused from their slumber, get the industry’s cash flows to actually begin to flow, then start paying up on due bills instead of looking for how to avoid paying up on legitimate contracts which will extend the contagion of default to international obligations. This is not wise at all. Azura is Not another P&ID Where is the P&ID connection in all this? A former chief of staff to the president took time to be persuaded about the deal with Azura. He later found out the truth and calmed down. Seems the DSP and others have taken over. He needs to think and ask himself questions as BusinessDay has done or simply call NBET for a briefing. Then he too will calm down after asking the right questions. When Omo-Agege finds out the truth, he will see that the reason why Azura’s $30m/month commitment seems to be such a huge burden is also the same reason why there has been only one true IPP in this country - Azura. That reason is the delinquency of Nigeria’s Discos which means that Nigeria has a power sector but not an electricity market. In our villages, our mothers looked forward to market day. There were no excuses. Functional markets are key platforms that drive modern life. They brought their wares and sold them so they could buy what they did not have at home. Nigeria’s DisCos must be turned around quickly as they are the ones who collect the cash for the entire industry. When they start paying their bills close to or at 100 percent, Nigeria will see more IPPs, more power supply. Until then, it will be only Azura available. Finally, the point must be made that the national assembly intervention in the sector is becoming the greatest obstacle to enthroning commercially viable electricity tariff in Nigeria. If the senator wants to contribute to a solution as he should, let him follow the electricity value chain to its anaemic source - the house of the Discos.
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