BusinessDay 27 May 2019

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New capital requirement for insurers opens door for deep pocket investors I L

May’s replacement to determine future of $4.2bn Nigeria-UK trade OLUFIKAYO OWOEYE & OLUWASEGUN OLAKOYENIKAN

Modestus Anaesoronye

ocal and foreign investors looking to come into the Nigerian insurance industry now have a window of opportunity with the announcement of a new minimum paidup share capital requirement for insurance and reinsurance companies.

National Insurance Commission (NAICOM), the insurance industry regulator, last Monday increased the paid-up share capital of life companies from N2 billion to N8 billion, general business from N3 billion to N10 billion, composite business from N5 billion to N18 billion, and reinsurance companies from N10 billion to N20 billion, according to a circular signed

by Pius Agbola, director, policy and regulation directorate, on Continues on page 46

Experts foresee mergers for survival Retail investors wary of increasing stake

L-R: Faraday Orumwense, vice chancellor, University of Benin; his wife, Osasere Orumwense; Godwin Emefiele, governor, Central Bank of Nigeria (CBN), and Godwin Obaseki, governor, Edo State, at the 3rd Eminent Persons’ Lecture Series, held at the University of Benin, Ugbowo, Benin City, Edo State.

n less than two weeks from today, Theresa May will be stepping down as British Prime Minister, paving the way for a new successor from the Conservative Party. This is coming after months of intense pressure within and outside her party.

But this does not come as a surprise to many analysts who say it was expected.

“This is long envisaged. I knew that when May has been Continues on page 46

Inside Dangote still most admired African brand in fresh survey P. 2

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news Emefiele clears air on multiple exchange rates ... to term smugglers economic saboteurs Hope Moses-Ashike

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overnor of the Central Bank of Nigeria (CBN), Godwin Emefiele, on Friday responded to the lingering question about multiple exchange rates, saying, “Nigeria does not operate multiple exchange rates but multiple foreign exchange windows.”

The Nigeria’s foreign exchange windows include the investors and exporters forex window, the inter-bank window, the official, the window for Small and Medium Enterprises (SMEs), Business Travel Allowance (BTA) and Personal Travel Allowance (PTA).

Emefiele said the foreign exchange rate had substantially converged at N360 per dollar at the Nigerian Autonomous Foreign Exchange (NAFEX) window and Bureau De Change (BDC) segment of the market.

He gave the explanation while delivering a lecture on “Up against the Tide: Nigeria’s Heterodox Monetary Policy and the Breton Woods Consensus,” at the University of Ibadan.

The apex bank governor said the CBN’s unconventional methods (especially in the management of the FX market and its development financing) supported by the orthodox approaches (in the form of its timely adjustments of monetary policy rate) have been able to optimally balance the delicate objectives of price stability and real output growth.

However, he raised concerns over smuggling and dumping of goods, which he said were hindering economic policies.

“If we find a company involved in smuggling then we will use our own tools available to us to complement the efforts of Nigeria Customs. Our instrument is to investigate that company and if found involved in smuggling and dumping, we will stop them,” he said, adding, “We will stamp economic sabotage on them and use them as examples to deal with them for people to learn to respect the economic policies of Nigeria.”

•Continues online at www.businessday.ng

Investors’ interest in Nigerian refineries drag on FG’s stringent conditions HARRISON EDEH, Abuja

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everal global investors who have shown interest in investing in the rehabilitation and even building of refineries in Nigeria have been shut out on the back of the Federal Government’s firm stance on securitisation of the funding options for the would-be investors.

The Federal Government is seeking a guarantee and securitisation of funding options of would-be investors to ensure its prized assets are properly secured, a condition which some of the intending investors consider as stringent.

“Nigeria has stringent conditions, such as sovereign investment guarantee which ensures investors commit to terms of payments from the bank that is facilitating their investment to provide payment guarantee and assurance to the government, to ensure complexities that come with such investments are properly streamlined,” Rabiu Suleiman, an engineer and senior technical adviser to the minister of state for petroleum resources on refineries and downstream infrastructure, told BusinessDay. Suleiman noted, however, that the Federal Government is discussing as well as exploring other funding options that could provide some measure of comfort to the investors to invest in the refineries’ upgrade.

“The government is discussing other funding options with relevant government agencies concerned, such as the Federal Ministry of Finance, the Central Bank of Nigeria (CBN), the Debt Management Office, in a bid to explore options that could attract investors and lessen the burden of internal turnaround maintenance option being currently borne by the NNPC,” Suleiman said.

“The president feels ashamed that during his time as federal minister of petroleum, Kaduna and Warri refineries were built. However, now he is the president, he is putting everybody to task to ensure that the refinery plants are brought back on stream for optimal performance,” he said.

Nigeria main refineries consisting of Warri, Port Harcourt and Kaduna are performing sub-optimally, which had seen the NNPC become the sole importer of a product which nature and providence have given the nation without charge.

To worsen the concern, Nigeria’s refineries made cumulative loss of N114.3 billion in the first 11 months of 2018.

Figures obtained from NNPC showed that within the first 11 months of 2018, the Kaduna Refining and Petrochemical Company made a loss of N31.62 billion, Port Harcourt recorded a N44.2

Continues on page 46 www.businessday.ng

L-R: Mary Gbegbaje, acting executive secretary, Financial Markets Dealers Association (FMDA); Patience Oniha, director-general, Debt Management Office; Bola Onadele. Koko, managing director/CEO, FMDQ OTC Securities Exchange, and Adetoun Dosunmu, chairperson, bonds workgroup, FMDA, during a financial markets seminar organised by FMDA Bonds Workgroup in Lagos.

Petrochemicals to drive oil demand as Nigeria struggles to fix refineries STEPHEN ONYEKWELU

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il and gas lands cape in the coming years is projected to be radically different because diesel demand is expected to decrease in 2035 by 15 percent lower than 2018. As technology improvements in vehicle efficiency, renewable substitution, and autonomous vehicles continue to change demographic behaviour, petrol and diesel demand will decline.

The United States fuels market is expected to start declining soon, but global petrochemicals demand is expected to grow three to six times the global fuels demand between 2018 and 2026. The global compound annual growth rate from 2018 to 2026 for petrol, propylene and paraxylene is greater than 1 percent, 4 percent and 5 percent, respectively. This

Analysis demand growth is being driven by the rise of the middle class in emerging nations.

In this light, petrochemicals are set to drive growth in world oil demand and Nigeria can benefit in the long run if it puts its acts together and encourages strategic private sector investment into its petrochemicals industry.

Petrochemicals are components derived from oil and gas that are used in daily products such as plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents and tyres. They are becoming the largest drivers of global oil demand, in front of cars, planes and trucks, according to a major study by the Paris-based International Energy Agency (IEA), ‘The Future of Petrochemicals released in 2018’.

‘The Future of Petrochemicals’ is part of a new IEA series shining a light on “blind spots” of the global energy system; issues that are critical to the evolution of the energy sector but that receive less attention than they deserve.

Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then. They are also poised to consume an additional 56 billion cubic metres (bcm) of natural gas by 2030, and 83 bcm by 2050.

“Our economies are heavily dependent on petrochemicals, but the sector receives far less attention than it deserves,” Fatih Birol, the IEA’s executive director, said.

“Petrochemicals are one of the key blind spots in the global energy debate, espe-

cially given the influence they will exert on future energy trends. In fact, our analysis shows they will have a greater influence on the future of oil demand than cars, trucks and aviation,” Birol said.

Nigeria built three petrochemical plants in Eleme, Warri and Kaduna. These plants have combined capacity to produce 240,000 metric tonnes of polyethylene, 130,000 metric tonnes of polypropylene, and 18,000 metric tonnes of carbon black per annum.

However, a few years of operationandalltheplantsbecame moribund. A research conducted by the University of Benin, Nigeria, identified the reasons for collapse of the petrochemical plants to include irregular importation of feedstock, poor maintenance and lack of technical and managerial capacity.

•Continues online at www.businessday.ng

Dangote still most admired African brand in fresh survey …for the second year running SEGUN ADAMS

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angote Group has emerged as the most admired African brand of African origin for the second year running. This is according to a survey of 100 Africa best brands announced in Johannesburg at the weekend.

Of 15,000 brands mentioned in the survey carried out by South Africa-based Brand Africa in collaboration with the Johannesburg Stock Exchange (JSE), the seventh edition which was released at the weekend, Dangote ranked first brand when consumers are prompted to recall the most admired African brand.

In the top 100 list, the United

States sports and fitness mega brandNike,anon-Africanbrand, retains the overall number one brand in Africa spontaneously recalled by consumers. South African telecoms brand MTN is the number one African brand spontaneously recalled by consumers, while Ethiopian brand Anbessa Shoes, at number two, swappedpositionswithNigerian conglomerate,Dangote,whichis the number three most admired brand of African of origin.

However, when consumers are prompted to recall the most admired African brand, Dangote retains the number one position. Just last year, Dangote brand was named the most valuable brand among the top 50 brands in Nigeria for 2018 by Brand Nigeria.

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Anthony Chiejina, group chief corporate communication officer, Dangote Group, said the management was not surprised at the ranking because the company has a long-standing reputation for quality, relevance compliance and social stewardship.

“We fervently believe that only Africans can develop Africa, and this gives us stronger sense of relevance in all the countries where we have our operations,” Chiejina said.

“We are touching lives by providing their basic needs and empowering Africans more than everbeforecreatingjobsreducing capitalflight,helpinggovernment conserve foreign exchange drain by supporting different industrial infrastructural projects of African @Businessdayng

government,” he said.

Chiejina stated further that Dangote Cement has been producing high quality and affordable cement, reducing poverty, engaging in unprecedented philanthropy and, above all, respecting the laws of the land where the company operates.

“All these are our credo and we do not compromise it, it is our way. And the ranking is just an acknowledgement of all these by our stakeholders.

We keep our brand promise and stay authentic,” he said.

Further analysis of the ranking indicates that overall, the 2018/19 Brand Africa 100 list, which is calculated from 15,000 brand mentions, illustrates a very diversified range of brands

Continues on page 46

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EDITORIAL Publisher/CEO

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

When markets and politics collide

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hat is p erhaps being lost amidst the frustrations about liquidity and the arguments about the technicalities of MTN’s listing is that they are the fallout that results when markets and politics collide.

When the relationship between public sector and markets is strained, we get anomalies and distortions.

This is bad for the government, bad for MTN, bad for

interested investors seeking access and most importantly, it is bad for Nigeria.

MTN’s listing should be the stimulus for a new potential wave of listings. All eyes are on it. If it works, we can, and should see Airtel and Glo follow suit. Perhaps others in similar situations. If it fails, we set the market back significantly.

MTN has taken the position that if it cannot see a clear resolution to its dispute with the Attorney General of the Federation, then it is challenging

to understand fair value for its shares and so unfair to shareholders, both prospective, and existing, to do a public offer.

Our court systems and processes mean that this dispute could continue for years. What does this mean for markets?

What level of uncertainty does it create and what impact does that have on other prospective listings?

Markets work most efficiently and effectively when they have clarity and certainty around the environment with-

in which their participants operate. If that clarity is lost, then it creates volatility and distortion.

That is what we are seeing play out today. A graphic representation of the issues that exist between Nigeria’s public and private sectors.

The communication between government and private sector needs to get better. The status quo is more destructive than it is constructive. MTN and the AGF need to resolve their issues and quickly too.

CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua ASSIST. SUBSCRIPTIONS MANAGER Florence Kadiri GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

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

EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo

Enquiries NEWS ROOM 08169609331 08116759816 Lagos 08033160837 Abuja

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COMMENT

Buhari’s government by vetoes and executive orders global Perspectives

OLU FASAN

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resident Muhammadu Buhari will be sworn in for his second and final term in office this week, on Wednesday, 29 May. Four years ago, he assumed office amid great hope. Over these four years, I have discussed extensively his administration’s performance in many areas – the economy, national security, corruption, political and institutional reforms etc. However, one area I haven’t given much attention to is the art or process of government.

But this is important because government effectiveness, which refers to the ability to get things done, is not just about outcomes, but also process. In fact, process matters a lot because unless you get the process right, the outcome won’t be right or effective. And when it comes to process, the two critical tools of government are policies and laws. Indeed, the whole essence of government is to make policies and enact laws that improve everyday lives.

Laws are particularly important because critical reforms can only succeed and endure if they are underpinned by proper legislation, that is, if they are enacted into law! Which is why a serious government must have a proper legislative agenda and engage constructively with the legislature to ensure its priority policies are given relevant legislative or statutory backing. Surely, a president that can’t secure critical legislation for his government’s agenda will fail, whatever else he says or does. Indeed, as the Times of London once wrote:“The first six months of a presidency are a precious opportunity to enact critical laws”.

But President Buhari came to power without a serious legislative agenda. His attitude to legislation was lackadaisical,

cynical and dismissive. As we know, he frittered away the first six months of his presidency during which he made no single legislative proposal. Indeed, over the past four years, given the irreparable breakdown in relations between the presidency and the National Assembly, Nigeria has had a very dysfunctional government.

The legislators failed to pass several critical bills, and the president vetoed many of the ones they passed, while using Executive Orders instead of proper legislation to make laws.

Let’s start with the legislature. Truth is, the so-called 8th National Assembly is a failure in value for money (VfM) terms.

The annual budget of the National Assembly was N140 billion in 2018, and a senator receives, according to a recent report, N14.25 million total package a month, while a member of the House of Representatives receives just a little less.

With such huge resources, hardly anyone can say that the National Assembly has been productive!

In a recent front-page story, this newspaper wrote that “500 bills are pending at 8th National Assembly” (BusinessDay, 13 May 2019). Some of the pending bills relate to critical economic and business reforms, such as tax relief for industrial development, stamp duties, which several foreign investors have highlighted as a major obstacle to doing business in Nigeria, and transparency in the petroleum industry, another area where reform is widely believed to be badly needed.

Last week, I wrote that the US Central Intelligence Agency (CIA) said in its 2019 World Factbook that piracy is too rife in Nigeria and that “Nearly half of all reports of vessels being fired upon occur in Nigerian waters”.Yet, despite the impact of piracy on foreign direct investment and Nigeria’s image, passing the “Suppression of Piracy and other Maritime Offences Bill” is not a priority for the legislators. Another example. Nigeria signed the Paris Climate Change Agreement in 2015, with President Buhari and Senate President Bukola Saraki attending the conference. Yet, four years on, the Climate Change Bill to implement Nigeria’s commitments is still languishing in the National Assembly.

All of this points to a dysfunctional legislative process. If a legislature can-

not prioritise the passage of critical bills, without sacrificing proper scrutiny and quality, it’s certainly not fit for purpose.

Yet, in fairness, that’s not to say that the National Assembly has not passed bills since its inauguration in 2015. Of course, it has! And some important bills too!

Which brings us to the territory of presidential vetoes. According to several newspaper reports, President Buhari rejected at least 41 bills passed by the National Assembly since 2015. Recently, this newspaper pleaded in an editorial: “Mr President, please sign the waiting bills into law”(BusinessDay, 16 May 2019). Of course, that plea is understandable when you consider that the bills that President Buhari vetoed related to the much-needed electoral reforms, the much-needed transparency of the petroleum sector and the much-needed transformation of Nigeria’s unattractive business environment.

Take the electoral bill. Virtually all major observers in this year’s general election attributed the huge irregularities that marred the elections and undermined their credibility to flaws in the electoral laws. Yet, President Buhari rejected four versions of the Electoral Act (Amendment) Bill. What about the business environment? How could a president whose administration talks a lot about the ease of doing business refuse to sign into law the Companies and Allied Matters Bill that received significant inputs from the private sector as well as international organisations, such as the UK Department for International Development? The same can be said of President Buhari’s refusal to assent to the Petroleum Industry Governance Bill. Everyone talks about the opacity of the petroleum sector. Yet, President Buhari won’t touch any reform of the sector with a barge pole!

Of course, a president can veto a bill if it’s not in the national interest. But which of the vetoed bills was not in the national interest? And if there were constitutional or drafting concerns, shouldn’t a sensible executive work with the legislature to rectify them? But it seems that President Buhari’s refusal to assent to the bills was idiosyncratic and self-serving, for instance, rejecting the Petroleum Industry Governance Billapparently because it reduces his powers as the minister of

‘

President Buhari has run a personalised first term, characterised by vetoes, executive orders, disregard for the rule of law and a breach of the principle of separation of powers. He must not repeat any of these in his second term

petroleum!

But while President Buhari was rejecting bills passed by the National Assembly, he was creating his own laws, using Executive Orders. At the last count, there were 7 of them. Yet the truth is that Executive Orders have limited use, namely, “to direct or instruct actions of executive agencies or government officials or to set policies for the Executive Branch to follow”, according to Black’s Law Dictionary.

Far-reaching and long-lasting reforms can’t be done through executive orders, which can be terminated with a stroke of the pen. For instance, all of President Obama’s executive orders were cancelled in one day, with a stroke of the pen, by President Trump. But when Trump wanted to abrogate the Affordable Care Act (“Obamacare”), he had to go to Congress, which refused to repeal it. So, the Buhari administration is misguided by trying to use executive orders, rather than statutes, to achieve major reforms.

What’s more, executive orders lack legislative scrutiny and, thus, shouldn’t be used to create criminal offences or change fiscal rules. For instance, Executive Order 6 which effectively freezes the assets of individuals facing corruption allegations or charges seeks to pre-empt or override the powers of the courts. A far-reaching instrument like that which, creates criminal offences, should have undergone legislative scrutiny. Clearly, Executive Order 6 amounted to, as the Nigerian Bar Association said, “attempts at decree-making”. The intention of Executive Order 7, which allows private companies to construct roads was good, but because the companies would recover their costs through tax reductions, the executive order has fiscal implications and raises transparency issues that require legislative scrutiny and oversight.

President Buhari has run a personalised first term, characterised by vetoes, executive orders, disregard for the rule of law and a breach of the principle of separation of powers. He must not repeat any of these in his second term!

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

Four men walk into a bar with only two beers: What happens next?

ECONOMIST

NONSO OBIKILI

F

our men who live in a town called Geria walk into a bar.They are all friends and are part of club called “The Real Sector”. They want to drink the only beer in town. An awesome beer called loans. This beer is not just awesome because it tastes good, but it also has some medicinal effects. It makes people stronger, boosts their immune systems, and makes them more likely to survive. Everybody loves this beer.

The four men walk into the bar and meet the bartender. A guy people know only by his nickname, Mr. Bank. No one knows his real name but there are rumours. Bank is an attractive man with a beard that looks like it was transplanted directly from Pete Edochie’s face. Bank also looks very rich and wears fancy suits.

Although sometimes the suits are a bit too tight but that’s neither here nor there. Still, everyone kind of agrees that Mr. Bank is

rich although they are not quite sure how given that he’s only a bartender.

The four men walk up to the bartender and say, “Mr. Bank, give us four beers please”. Mr. Bank looks at them causally and says, “Ah, you guys are back again? Well I hate to be the harbinger of bad news but there are only two beers left.”“Harbinger? Why can’t you just speak English? Please give us four beers. NOW!” “Ha. I’m sorry but honestly, there are only two beers left. There’s nothing I can do”.

The men are furious. There are four of them and they can’t share only two beers. To get the full medicinal effect of the beer you must drink a whole bottle.

They haven’t had any beer in a while and are all beginning to feel a bit weird. They strategize and come with a plan to take to the bartender.

“Mr. Bank. Ok look, we are sorry for talking to you anyhow. We were just playing. Please no vex. Give us four beers. In fact, we will even pay you more than what we normally pay”.They beg Mr. Bank continuously, but his response is the same each time, “There are only two beers left”.

One of the men bursts out in a fit of anger. “Who do you think you are? Is it because I am trying to buy beer? Beer that I will pay for with my own money! In fact, I’m calling the police.” The man picks up his phone and calls someone. “You will soon see something. Continue hoarding beer. You will see.” Mr. Bank is unmoved. www.businessday.ng

‘

A bystander who had been watching the stand-off shouts “You know, you can always try to make more beer or maybe even import some beer!” The police chief shoots the bystander dead on the spot

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A couple of minutes later the police boss walks in. Most of the town’s people know him as a nice guy and they love him, mostly because he gives you free beer if you visit him and ask nicely. The bartenders don’t like him that much though and they secretly call him the emperor, but no one is sure why.

“Mr. Bank. How are you? Do you know why I am here? Good. Now give these men the four beers and let me be on my way”. Mr. Bank replies, “I’m sorry sir but I really have only two beers left”. “What do you mean? Can’t you see how sick these men look? If they don’t drink the beer they may die. I don’t want people dying on my watch. Give them the four beers.”

“I understand sir, but there are really only two beers left. There’s nothing I can do”.

Now the police boss is furious. He used to be a bartender, so he knows the tricks these bartenders play. “Look, Mr. Bank, I know you have four beers. You always have fours beers. What happened to the first two if you only have two left?”

Mr. Bank responds, “The chief came and bought two beers earlier on. That’s why I only have two beers left.”Everyone knows the chief of Geria drinks a lot of beer. A lot.

“Wow. My God!” goes the police chief.

“We are going to have to find a way to give these men the four beers they deserve. I know you can do it. These men can’t die on my watch”. The police boss goes and @Businessdayng

consults with his people and comes back to Mr. Bank and says, “For every beer you sell I will personally give you 10 percent extra money”. “Nice, but there are still only two beers”. “OK, if you don’t sell four beers to these men, I will seize all your tips.” “Ah emperor, but it’s not my fault. I don’t make beer and there are only two beers left. The chief drank two. There is nothing I can do even if you seize my tips”.

The police chief is still not convinced.

“Oh, are you still playing games? OK if you don’t sell these men four beers, I will stop you from selling to the chief.”Mr. Bank knows the chief is his most reliable customer and always pays on time, and he will lose money if he can’t sell to the chief. “It doesn’t matter. I don’t make beer. If the chief buys two beers from the factory there will still be only two beers left.Better tell the chief to stop drinking beer if you want these men to have four beers next time. And since you want to go there, do you want me to tell how you sent your friend STAB to collect beer from me by force?”

An awkward silence ensues.

A bystander who had been watching the stand-off shouts “You know, you can always try to make more beer or maybe even import some beer!” The police chief shoots the bystander dead on the spot.

Dr. Nonso Obikili is Chief Economist at Business Day.

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The middle classes: How to measure them and how to sell to them

Gregory Kronsten

P

oliticians, journalists and academics like to talk about the middle class so as to acknowledge aspirations or pigeonhole people. Businesses chasing consumers for their products are more likely to term a household middle income rather than middle class. However, they are all looking at broadly the same group of people.

Definitions vary but we would identify core characteristics as regular non-manual employment, a certain level of educational attainment and a measure of financial security. By way of aspirations, we highlight the education of children.

There can be non-economic considerations that are related to status.

At the height of the Zimbabwean crisis, unpaid government teachers and doctors could be found picking citrus fruit for export to the UK on farms on the South African border. An anthropologist in the field found that they considered themselves middle class despite their straitened circumstances and that they had minimal contact with their fellow farmworkers.

A few years ago, the African Development Bank (AfDB) came up with a range of daily incomes from US$2 to US$20 to define the middle class. This points to a group of about 350 million Africans. IPSOS employs narrower criteria, and produced an estimate of 100 million with combined daily spending power of around US$400m in its research last year. We favour the lower figure. A recent survey showed that 40 per cent of US citizens could not manage a US$400 external shock (such as a large unexpected bill) and therefore do not enjoy the financial security that we identified as a core middle class characteristic.

We think that this exercise generally brings surprises to the downside.

Who would have guessed, for example, that Volkswagen sold just 350 new cars in Africa in 2018 outside South Africa and the countries north of the Sahara? This could be a reflection on the marketing strategy of the auto manufacturer but is nonetheless a small number. (We are confident that we heard correctly.)

In the absence of an effective social safety net, the African middle class is a fluid group of people. A household’s security can evaporate due to substantial medical costs. It does not pay to fall ill. The household budget takes a massive hit and one consequence could be that it reverts to cooking with salt rather than buying stock cubes for flavouring.

Additionally there are changes in progress in society that further complicate the picture including the

growth of supermarkets, the expansion of mobile money (notably in East Africa) and the emergence of entrepreneurs developing products to challenge established manufacturers in their field. An example of the latter is food snacks produced with local raw materials.

Marketing of consumer goods has to be flexible therefore but still needs some foundations upon which to base strategy. A well-known company in this field commissioned some research to establish a profile of its African consumers. The research produced some surprises: 20 per cent have hot running water, 40 per cent running water and 96 per cent electricity, while 40 per cent cook on open fires. Since the company does not produce for the low end of the market, we can say that its consumers are middle income.

The consumer profile is not uniform across borders. There are local preferences, for example on the packaging of goods and the style of corporate advertising. There are also initiatives that have shaped the development of the middle class. One such was the Urban Foundation, a business network in apartheid South Africa that promoted home ownership from the late 1970s in the large townships. While issues around the transfer of title on the death of the first owner have since emerged, there is no denying the initial impact of the initiative in boosting middle class numbers.

The rapid expansion of Dar es

‘

In the absence of an effective social safety net, the African middle class is a fluid group of people. A household’s security can evaporate due to substantial medical costs.

It does not pay to fall ill

Salaam to the north of the city is another example. The expansion is the work of private individuals and firms, cash based without state funding and with a negligible mortgage market in Tanzania. This has been a more fragile development than the Urban Foundation initiative. Few of the builders have registered titles and can borrow against their property as collateral.

This reinforces our earlier point about the fluidity of income groups.

While the narrative of Africa rising is now seldom heard, large businesses cannot ignore the middle income market for its healthier margins and because they know that the story will change again for the better. In a Nigerian context, consumer goods companies are struggling because of subdued demand. Household budgets are slowly being rebuilt due, inter alia, to the pass through from the firmer oil price, the FGN’s expansionary fiscal stance and, at some point, the rise in the national minimum wage. The companies and their shareholders have to be patient.

• We wrote this piece after attending a debate in London last week on “The African Middle Class Re-examined”, organized by the Royal African Society. A senior representative of a consumer goods company, an impact investor and three academics with expertise in their field in Africa made up the panel.

Gregory Kronsten is the Head, Macroeconomic & Fixed Income Research FBNQuest

Power interrupted: Panic at the DisCos Monopoly for the sake of the monopolist Muyiwa Ahmed

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U

p NEPA!” The joyful yell that formed part of the earliest memories of many a Ni g e r i a n c h i l d o f my generation. But then, NEPA would only provide temporary reprieve and we were soon back to watching candlelight flames flicker until NEPA came through for us again. That was our story in the 80s. And the 90s. And although we were told that reform will birth positive changes, throughout the 2000s. It is now 2019 but not much has changed, except that our affirmations of NEPA now replaced by blaring sirens signifying that it is time to switch off the generator.

Progress of some sort I suppose. But then, after all the spend by government, after all the reform and privatisation and after all the policy and regulation and even though NEPA ceases to exist, the never-ending problem of a huge deficit in power supply persists.

Nigeria’s electricity sector has performed below expectation, as evident in the more than 80 million Nigerians who do not have electricity in their homes.

Systemic issues currently affect all as-

pects of the power value chain, forcing Nigerians to rely on self-generation of power. The long-standing problems have persisted, not for want of attempted solutions, but in spite of these. We have had many rounds of exciting initiatives and intervention: regulatory reforms; an omnibus power sector reform Map in 2005 to introduce competition and scale up the efficiency and effectiveness of the power sector and opening up the sector to privatisation. Yet, electricity consumers continue to face unreliable supply, distribution utilities are in poor financial health, and, most problematic, some areas are faced with no access to power at all – 13 states in the country reportedly have below 40% access to electricity and, according to the World Bank, Nigeria still ranks second worst in the global electricity access deficit charts.

The utility failures point to an unwillingness or perhaps an inability by the distribution side of the business – the DISCOs – to meet the expectations of stakeholders in the provision of access to reliable power services to all customers and yet they operate as business as usual.

There are several issues on the distribution side of the business – from – old, obsolete networks; lack of maintenance of network equipment; poorly trained manpower; poor customer data; low meter penetration – According to NERC www.businessday.ng

in June 2018, only 42% of registered electricity customers had been metered in the entire country. There are also health, safety and environmental issues and a near absence of investments despite the commitment of the DISCOS and their investors in the Performance Agreements signed as part of the privatisation. To top it off, oftentimes, billing systems are faulty and there is a complete disregard for customer care. Some urban, periurban and rural communities have no access to electricity at all. This is comes at a huge loss to the average Nigerian and businesses; SMEs collapse under heavy utility cost when available and perish with 24-hour diesel bills.

The DISCOS collect revenue for the entire power ecosystem - however, due to the technical, collection and other losses incurred by the DISCOs, liquidity constraints have manifested across the entire power value chain creating bottlenecks in reigniting economic growth. There is huge concern about what appears to be systemic partisan practices within the sector, which are harming access to electricity, confidence in the market and basic quality of life. Regulation is the only way that this can be overcome – however this is the missing piece of the puzzle. The Nigerian Electricity Regulatory Commission (NERC) does not appear to have been

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effective in setting proper parameters for operations and intervening in ways that clearly promote the interest of the helpless consumer.

The goal should not be to protect the monopoly DISCO or generation or transmission company. It should be to protect the consumer from the failures of sector operatives.

To support the expanding access to modern energy services in a timely and sustainable manner, regulators should ensure a level playing field when it comes to willing buyer, willing seller - the core of how we approach energy supply from infrastructure to the end user has to change – if the DISCOs are unable to provide power, then new entrants and power providers should be encouraged to enter the sector and provide the necessary infrastructure and services where they are able to meet the consumers’ needs, especially in areas that are not adequately served. The long-term interest of Nigerians should be the priority – let’s move on from business as usual and work towards the day when we do not have to jump in joy when power from public supply resumes, whether the resumption is signaled by chants of ‘UP NEPA’ or by a blaring siren. These need to become very distant, unpleasant memories.

Ahmed writes from Lagos.

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Forging an elite Consensus

Patrick Atuanya

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igerian President Muhammadu Buhari at 76 years old is probably thinking of a legacy to leave behind after his 2 terms of 8 years at the helms, leading one of the youngest population of people on average globally.

Asiwaju Bola Ahmed Tinubu, a stalwart of the ruling APC is 67 years old, while the Presidential candidate of the opposition PDP is 72 years old.

Beyond politicking for the sake of politics, in Nigeria today there seems to be a lack of an elite consensus on the broad reforms that the country should be undertaking to leave a better future for the next generation.

In political science, the elite consensus theory posits that a small minority, consisting of members of the economic elite and policy-planning networks, holds the most power—and that this power is independent of democratic elections.

Through positions in corporations or on corporate boards, and influence over policy-planning networks through financial support of foundations or positions with think tanks or policy-dis-

cussion groups, members of the “elite” exert significant power over corporate and government decisions.

The basic characteristics of this theory are that power is concentrated, the elites are unified, the non-elites are diverse and powerless, elites’ interests are unified due to common backgrounds and positions and the defining characteristic of power is institutional position.

Clearly today in Nigeria that is not the case.

The big issues that confront the nation today are largely unresolved, and there is a lack of clarity on what the way forward is.

From the huge fuel subsidy expenses, floating of the naira, an education policy, what to do with the power sector, privatisation of government assets, restructuring and decentralisation of power from the centre, comprehensive health care reforms, private sector led growth, free trade and non-protectionist policies, and so on, Nigerian elites are hopelessly divided on the way forward.

This was not always the case, at least from 1999 to 2007, during the President Obasanjo years.

At the time, with strong leadership from Abuja, the country pursued a right of centre economic policies, with acknowledgement from most elites that free markets, small government, privatisation and allowing market forces work were the best paths to prosperity for most Nigerians.

The consensus was also broad based at the time with buy in from the NorthSouth divide in Nigeria.

A certain Nasir El Rufai (current Governor of Kaduna State) at the time

was the head of the Bureau of Public Enterprises (BPE), while Atiku Abubakar (then Vice President of Nigeria), chaired the National Council on Privatisation (NCP).

Together they oversaw one of the most comprehensive privatisation exercise in Nigeria whereby government ownership in over 800 enterprises were sold entirely or reduced to minority stake.

This included stakes in major banks like UBA, First Bank, chemical plants like Eleme Petrochemical, oil firms like unipetrol, cement plants, and so on.

More importantly the private sector was unleashed and major reforms like bank consolidation, the new pension act, telecomm deregulation, and others helped to build a more confident Nigerian corporate class, some of which began to extend their reach outside the shores of the country to other African countries.

It is impossible to underplay the importance of such an achievement, especially when one looks at the political landscape today, where regional interests are often considered ahead of national interests and where a zero sum game interpretation is given to most reform efforts.

So privatisation of government assets is seen as undesirable because rich people from a certain region may buy up such assets instead of being seen as a way to reduce corruption and pressure on the sovereign balance sheet.

Removing fuel subsidies, setting a cost reflective tariff for electricity, and letting the markets determine the value of the naira is also not to be contem-

‘

If the elites in Nigeria do eventually engage in honest soul searching, they would agree that the time to come together to rescue the country is now

plated, not because these are not sound economic policies, but because politicians think certain of their constituents and power base (the poor) will allegedly be harmed by these, even though the opposite is actually the case.

At the beginning of this piece the ages of certain power brokers and political leaders was mentioned to show that they have a limited time frame to set the country on a sustainable growth path and enshrine stability in the political space.

The major issues confronting the nation today are certainly daunting, the biggest of which perhaps is the lack of hope for millions of young Nigerians in the country or a sense of a ‘Nigerian dream’.

Any sensible or credible forecast/ modelling of the future of the country (say 20 years from now), with the current trajectory will only come up with disaster as the conclusion.

A young population forecast to double to near 400 million people by 2050, an economy that is not creating enough jobs for the mass of people, dwindling oil production per capita, a huge uneducated underclass largely unprepared for the jobs of the future whether in robotics, artificial intelligence, science and technology, means a country tottering near disaster with a bleak future.

If the elites in Nigeria do eventually engage in honest soul searching, they would agree that the time to come together to rescue the country is now!

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

The Nigerian code of corporate governance 2018 Principle 4: The MD/CEO

Bisi Adeyemi “Leaderless teams are not unknown. The Orpheus Chamber Orchestra performs Beethoven symphonies without a conductor. Special forces conduct missions without a commissioned officer. Yet these are the rare exceptions. Virtually every team – whether a rowing crew seeking a championship or a company executing a strategy – requires a capable leader”. Boards That Lead – Charan, Carey & Useem. he fourth Principle of the Nigerian Code of Corporate Governance 2018 deals with the role of the Managing Director/Chief Executive Officer (MD/ CEO). “The Managing Director/Chief Executive Officer is the head of management delegated by the Board to run the affairs of the Company to achieve its strategic objectives for sustainable corporate performance.”

The titles MD (Managing Director) and CEO (Chief Executive Officer) typically mean the same thing. Both refer to the operational leader of the business and would normally be appointed by and report to the Board of Directors. Both are employees of the business, engaged to do a clearly defined set of tasks with clearly identified performance targets. The title of Managing Director is sometimes used where the individual is not a member of the Board. The distinction is however

T

being eroded by an emerging trend of appointing the person with day-to-day responsibility to the Board. This has the advantage of making that person more aware of the Director’s liabilities for corporate actions, of the Board’s need for information and of the importance of alignment between the objectives of the shareholder, the Board and Management.

Although the primary authority for the governance, direction, and control of the company is vested on the Board, the Board would typically and for practical purposes delegate some of its authority to the CEO. To ensure that there is clarity in this regard, a Delegation of Authority Document (DoA) is imperative. The DoA will set out the limits of the CEO’s delegated authority, matters that are exclusively reserved for Board approval, those that the CEO can deal with without recourse to the Board and in respect of which he/she must report and those matters that don’t need to come to the Board at all.

The CEO is then required to take responsibility for the day-to-day operations and management of the organisation. Consequently, the success or otherwise of a company hinges to a large extent on choosing the right CEO. This responsibility is squarely that of the Board, as is picking the right replacement for a departing CEO. The CEO is responsible for ensuring that the Board is provided with adequate and accurate information in a timely fashion with respect to corporate performance, risk and other exposures and all such information as shall enable the Board effectively fulfil its governance responsibilities. Whilst the Board would expect to receive periodic reports at Board and Committee meetings, the CEO should bring to the Board’s attention such matters as may affect corporate performance, well-being and reputation in www.businessday.ng

between meetings. The CEO is expected to take the initiative with respect to the reporting format and content, however the Board is at liberty to provide guidance in this regard. Sharing accurate information freely with the Board (even where it is not good news) is a sure way of wining and sustaining the trust and confidence of the Board.

The CEO is responsible for ensuring proper implementation and achievement of the company’s strategic imperatives to ensure the sustainable development and growth. According to the Code, the CEO “should demonstrate entrepreneurial skills, credibility and integrity and have the confidence of the Board and management”.

Without a doubt, the CEO has to take the lead role and is fully responsible for advancing the success of the enterprise. Whilst the Board will provide the leadership required to actualize the Company’s strategic objectives, execution and the initiatives that will see the actualization of those objectives form the crux of the CEO’s KPIs. In this regard, the CEO is expected to remain up-to-date with economic, socio-political and industry developments and trends, locally and internationally.

The Code recommends that the powers and responsibilities of the CEO and the relationship between him and the Board should be clearly set out in a contract of employment. It is expected that the Board will clearly define the Key Performance Indicators (drawn from the Company’s strategic objectives) against which the CEO’s performance will be measured as well as well as a formal process for undertaking the appraisal.

To develop a collaborative relationship with the Board, the CEO should meet and consult with the Board Chairman periodically. Due care should however be taken not to side-line the other Directors or give the impression that Board meetings are a mere formality to ratify decisions

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taken outside the Boardroom.

As the head of the management team, the CEO is expected to provide inspiring leadership to his/her team and represent the Company in its dealing with external stakeholders. The CEO is expected to establish a culture of integrity, conformance and performance which should be assimilated by personnel at all levels of the Company. He/she should set the appropriate tone and “walk the talk”. In setting performance targets, the CEO should ensure that due regard is had to the Company’s core values and ethical culture. Hiring, firing and compensation decisions should be guided by the organizational values.

Given the looming and larger than life persona of the CEO and to ensure the autonomy and independence of the respective Board Committees the Code recommends that the CEO shall not be a member of the Committees responsible for remuneration, audit, or nomination and governance.

The CEO is expected to promote and protect corporate interest. Accordingly, the interest of the Company shall always be paramount and where there is a conflict, the CEO shall disclose such conflict. Clearly, mere disclosure and recusal will not always cure a conflict and in such instances, the Board shall take that decision which is in the best interest of the enterprise. The Code requires the CEO to declare any conflict of interest on appointment and annually thereafter.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/pages/page/dkhub

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Monday 27 May 2019

BUSINESS DAY

In Association With

Gold blush

Too many Climate of fearchallengers

How can Uganda export so much more gold than it mines?

Some suspect it is smuggled from war-torn Congo next door

They are linked—and that is worrying

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ID CLIMATE change cause the war in Syria? Or the genocide in Darfur? Obviously, that is not the whole story.

Suppose Syria’s despot, Bashar al-Assad, or Sudan’s former tyrant, Omar al-Bashir, were to find themselves on trial in The Hague and tried to blame their country’s carnage on global warming. Such a risible defence would flop. No conflict occurs without leaders to give orders and soldiers to pull triggers. No atrocities are committed unless human beings choose to commit them.

Nonetheless, future-gazers are right to warn that global warming has made some wars more likely than they would otherwise have been, and will make others more

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EEP IN PITS hewn from the earth dozens of teenage boys slam their hammers into the rock. Other men pan the crushed ore by hand in tubs filled with water and mercury. Uganda does not have many gold mines and most, like this one in Busia, in the east of the country, are neither sophisticated nor especially productive. Yet this small east African nation exports a fantastic trove of the yellow metal.

According to official statistics, gold exports surged to $514m in 2018 from less than $10m a decade ago. Last year gold surpassed coffee as Uganda’s biggest earner of foreign currency.

The open secret of Uganda’s gold boom is that most of this metal is dug up elsewhere. Its central bank reckons that only 10% of the exported gold comes from local mines. It blandly says the rest comes from elsewhere in Africa. Officials insist that the trade is all legal and untarnished. But industry insiders gesture over the border to the Democratic Republic of Congo, whose lawless eastern provinces are rich in

minerals including gold, and which levies a 3% tax on gold exports. They think that more than 90% of Congo’s gold production is illegally whisked

to neighbours such as Uganda and Rwanda and then onto planes flying to Dubai. Some go direct. In 2016 customs officials in Dubai checked the rather overweight baggage of a Congolese frequent-flyer from Lubumbashi. In it was 150kg of gold.

One investigation for the OECD, a club of mostly rich countries, found that airline passengers were regularly stopped by security officials at Entebbe airport trying to sneak off with gold bars crammed into their carry-on bags.

Uganda, too, used to tax gold exports, but in 2014 Uganda’s president, Yoweri Museveni, waived the tax. In 2015 Belgian investors spent $15m building African Gold Refinery after being assured of tax exemptions for both the import of raw gold and the export of refined gold for at least ten years. Since then the refinery has exported more than 31 tonnes of gold to Dubai and Antwerp. Last year a competitor, Bullion Refinery, entered the market, and is now thought to be exporting similar quantities.

Uganda’s export boom ought to be a shining example of how governments can spur investment and minerals beneficiation with sensible tax policies. Yet investigators for the UN have singled out Uganda for shame and named both refineries in a report to the Security Council on how gold

How to think about global warming and war

smuggling funds warlords and militias.

Their report says that middlemen selling gold to the refineries are linked to Congolese smugglers. The Sentry, an American watchdog backed by George Clooney, an actor, last year estimated that $300m-600m of gold is smuggled out of Congo each year. African Gold Refinery says it selects its suppliers carefully and complies with laws prohibiting the trade in minerals from conflict areas. Bullion Refinery, whose website welcomes “small, medium and large scale suppliers” of “raw gold dust and powder”, did not respond to a request for comment.

Most of the gold processed in Uganda comes from areas controlled by armed militias that extort money from artisanal miners. A report for the UN found that one militia forces miners to sell their gold at $25 per gram, far less than the $60 they would get on the open market, and charges miners a monthly fee for access to the pits. Rebel militias are not the only ones getting rich. Another UN report alleges that officers in Congo’s army illegally own mines or extort gold from miners.

Mr Museveni shows little interest in policing the trade. At the opening of a gold refinery he said he would deal harshly with officials who were “frustrating” investors in the industry. Some locals may profit, but gold smuggling fuels violence in the country’s large, unstable, neighbour.

so in the future. It is never possible to pinpoint a specific war and say that it would not have happened in the absence of climate change, just as it is impossible to say that a particular flood or typhoon was caused by it. Rather, climate change is causing environmental upheaval that destabilises regions and raises the risk of bloodshed (see article).

Some worry that the Arctic will be a flashpoint. As the ice cap shrinks, NATO and Russia bolster their military presence there. China is building a nuclear-powered icebreaker. At the Arctic Council on May 6th Mike Pompeo, America’s secretary of state, downplayed climate change but waxed indignant about Russia’s “aggressive behaviour” in reopening military bases in the region. If the NorthWest Passage opens to shipping or enough valuable minerals are found beneath Arctic waters, expect a tussle between great powers for polar pre-eminence.

But none of that is likely to lead to war. Nuclear-armed states are wisely wary of provoking each other too much. The bigger danger of cliContinues on page 19

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In Association With

Work

The rich world is enjoying an unprecedented jobs boom Capitalism’s critics are yet to notice

Continued from page 18

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V E RYO N E S AY S work is miserable.

Today’s workers, if they are lucky enough to escape the gig economy and have a real job, have lost control over their lives. They are underpaid and exploited by unscrupulous bosses. And they face a precarious future, as machines threaten to make them unemployable.

There is just one problem with this bleak picture: it is at odds with reality. As we report this week (see Briefing), most of the rich world is enjoying a jobs boom of unprecedented scope. Not only is work plentiful, but it is also, on average, getting better. Capitalism is improving workers’ lot faster than it has in years, as tight labour markets enhance their bargaining power. The zeitgeist has lost touch with the data.

In America the unemployment rate is only 3.6%, the lowest in half a century. Less appreciated is the abundance of jobs across most of the rich world. Two-thirds of the members of the OECD, a club of mostly rich countries, enjoy record-high employment among 15- to 64-year-olds. In Japan 77% of this group has a job, up six percentage points in six years. This year Britons will work a record 350bn hours a month. Germany is enjoying a bonanza of tax revenue following a surge in the size of its labour force (see article).

Even in France, Spain and Italy, where joblessness is still relatively high, working-age employment is close to or exceeds 2005 levels.

The rich-world jobs boom is partly cyclical—the result of a decade of economic stimulus and recovery since the great recession. But it also reflects structural shifts. Populations are becoming more educated.

Websites are efficient at matching vacancies and qualified applicants. And ever more women work. In fact women account for almost all the growth in the rich-world employment rate since 2007. That has something to do with pro-family policies in Europe, but since 2015 the trend is found in America, too.

Last, reforms to welfare programmes, both to make them less generous and to toughen eligibility tests, seem to have

encouraged people to seek work.

Thanks to the jobs boom, unemployment, once the central issue of political economy, has all but disappeared from the political landscape in many countries. It has been replaced by a series of complaints about the quality and direction of work. These are less tangible and harder to judge than employment statistics. The most important are that automation is destroying opportunities and that work, though plentiful, is low-quality and precarious. “Our jobs market is being turned into a sea of insecurity,” says Jeremy Corbyn, leader of Britain’s Labour Party.

Again, reality begs to differ.

In manufacturing, machines have replaced workers over a period of decades. This seems to have contributed to a pocket of persistent joblessness among American men. But across the OECD as a whole, a jobs apocalypse carried out by machines and algorithms, much feared in Silicon Valley, is nowhere to be seen. A greater share of people with only a secondary education or less is in work now than in 2000.

It is also true that middleskilled jobs are becoming harder to find as the structure of the economy changes, and as the service sector—including the gig economy—expands. By 2026 America will have more at-home carers than secretaries, according to official projections. Yet as labour markets hollow out, more high-skilled jobs are being created than menial ones. Meanwhile, low-end work

How to think about global warming...

is becoming better paid, in part because of higher minimum wages. Across the rich world, wages below two-thirds of the national median are becoming rarer, not more common.

As for precariousness, in America traditional full-time jobs made up the same proportion of employment in 2017 as they did in 2005. The gig economy accounts for only around 1% of jobs there. In France, despite recent reforms to make labour markets more flexible, the share of new hires given permanent contracts recently hit an alltime high. The truly precarious work is found in southern European countries like Italy, and neither exploitative employers nor modern technology is to blame. The culprit is old-fashioned law that stitches up labour markets, locking out young workers in order to keep insiders in cushy jobs.

Elsewhere, the knock-on benefits of abundant work are becoming clear. As firms compete for workers rather than workers for jobs, average wage growth is rising, pushing up workers’ share of the pie—albeit not as fast as the extent of the boom might have suggested.

Tight labour markets lead firms to fish for employees in neglected pools, including among exconvicts, and to boost training amid skills shortages. American wonks fretted for years about how to shrink disability-benefit rolls. Now the hot labour market is doing it for them. Indeed, one attraction of the jobs boom is its potential to help solve social ills without governments having to do or spend very much.

Nonetheless, policymakers do have lessons to learn.

Economists have again been humbled. They have consistently underestimated potential employment, leading to hesitant fiscal and monetary policy. Just as their sanguine outlook on finance in the 2000s contributed to the bust, so their mistaken pessimism about the potential for jobs growth in the 2010s has needlessly slowed the recovery.

The left needs to accept that many of the criticisms it levels at capitalism do not fit the facts.

Life at the bottom of the labour market is not joyous—far from it. However, the lot of workers is improving and entry-level jobs are a much better launch pad to something better than joblessness is. A failure to acknowledge this will lead to government intervention that is at best unnecessary and at worst jeopardises recent progress. The jobs boom seems to be partly down to welfare reforms that the likes of Mr Corbyn have vociferously opposed.

The right should acknowledge that jobs have boomed without the bonfire of regulations that typically forms its labour-market policy. In fact, labour-market rules are proliferating. And although the jury is out on whether rising minimum wages are harming some groups, such as the young, they are not doing damage that is large enough to show up in aggregate.

The jobs boom will not last for ever. Eventually, a recession will kill it off. Meanwhile, it deserves a little appreciation.

mate-induced conflict lies farther south, in hotter, drier zones, and involves mostly civil wars in poor countries, not international ones.

Some things are clear. Accumulating greenhouse gases in the atmosphere are increasing the frequency and intensity of extreme droughts and floods in some regions. Seasonal rains and monsoons are becoming more variable and less predictable. As one area grows parched, its inhabitants encroach on land traditionally farmed or used for grazing by others. Disputes erupt, some of which are already turning violent, especially in the Sahel, a huge strip of Africa below the Sahara. Environmental stress plays a role in deadly conflicts in Burkina Faso, Chad, Cameroon, Mali, Niger, northern Nigeria and South Sudan, not to mention non-Sahelian states such as Yemen. As global temperatures continue to rise and the weather becomes more erratic, such conflicts could grow more common.

Several other factors tend to foment war, including poverty, stagnation and bad government. Ethnic differences, religious zealotry and the availability of minerals to loot are often assumed to increase the risk, but they typically do so only in countries that are too poor, stagnant and ill-governed to keep violence in check. The good news is that, as poverty has receded worldwide, the proportion of humankind who die in wars and civil strife has fallen sharply, from nearly four per 100,000 each year in the 1980s to less than one in the past decade. The bad news is that climate-related disruption is likely to get worse. And if it leads to more conflicts, it can start a vicious cycle, since war makes regions poorer, and poverty fosters future wars.

Climate-induced war is one more reason for governments to take global warming seriously.

However, as Australia showed on May 18th, when it elected a coalcuddling conservative government, voters are not yet willing to pay much to avert planetary peril.

Cheaper ways to reduce emissions are urgently needed, along with incentives to remove carbon from the atmosphere.

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Monday 27 May 2019

BUSINESS DAY

In Association With

Who’s the boss?

Congo’s new president, Félix Tshisekedi, does not call the shots His predecessor has yet to move out of the presidential villa

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ENDORS SELLING mobilephone airtime and moneychangers swinging bags of Congolese francs mill around beneath a billboard in Kinshasa that reads “Kabila forever”. It reminds people that Joseph Kabila, who stepped down in January as president of the Democratic Republic of Congo after 18 years, has not really gone. Though Mr Kabila (pictured, left) handed over the sash of office to Félix Tshisekedi, the leader of the main opposition party, he appears still to be calling the shots.

The ascent of Mr Tshisekedi (pictured, receiving the sash) was remarkable. It was the country’s first transfer of power via the ballot box; all previous leaders were either killed or fled. It also involved a novel kind of election-rigging. Mr Kabila’s chosen successor was so unpopular that the regime could not plausibly claim he had won.

Instead, and presumably after some interesting backroom discussions, it announced that Mr Tshisekedi had won, though impartial estimates suggest he came a distant second with less than 20% of the vote. The real winner with 60%, Martin Fayulu, had promised justice for Congo’s

many corrupt bigwigs. He now tours Western capitals trying to drum up support for another election, which is unlikely to happen.

Just as important as the jiggerypokery around the presidential election was the theft of the parliamentary one, which implausibly handed almost 70% of the seats in the national assembly to members of Mr Kabila’s party. That party also controls the senate, which is elected by members of the provincial assemblies, some of whom were reportedly paid as much as $50,000 for their votes, according to candidates who withdrew from the race. Mr Tshisekedi tried to take a

stand against flagrant vote-buying by blocking the new senators from taking their seats. But after little more than a week he backed down.

With both houses of parliament in Mr Kabila’s pocket, Mr Tshisekedi is just “renting the seat of power”, says Manya Riche, of the Congo Peace Centre at Texas A&M University. He has little power save for a presidential veto that he can use to block new laws. But this can be overruled by the constitutional court, which is also stacked with Mr Kabila’s loyalists. Moreover, Mr Tshisekedi can be kicked out of office by a two-thirds majority in parliament.

Mr Kabila, who says he is enjoy-

ing his retirement catching up with his mother, seems confused about what retirement entails. He has refused to move out of the presidential villa or, apparently, hand over the presidential plane to his successor, who is in temporary accommodation and slumming it on commercial flights. Mr Kabila is also holding court, hosting politicians on his farm near Kinshasa. Selfies of the former president and newly elected governors, grinning among verdant bushes, recently circulated on social media. Tellingly, Mr Kabila had glad-handed the governors before Mr Tshisekedi met them.

More ominously, Mr Tshisekedi spent four months bickering with Mr Kabila over who should be prime minister. Parliament only appointed someone this week: Sylvestre Ilunga Ilukamba, a 74-year-old former director of a state railway company and a little-known member of Mr Kabila’s party. That it took so long bodes ill.

Tensions over who pulls the levers of power and public frustration at the slow pace of change could lead to a “violent stalemate” with bloody protests, frets Kris Berwouts, the author of “Congo’s violent peace”.

Still, there are reasons for hope.

The new president has already gained some popularity by making politics a little less oppressive. He has released some 700 political prisoners and allowed Moïse Katumbi, a former governor and presidential hopeful, back into the country after three years in exile.

Mr Tshisekedi is supported by the EU and America, which had fraught relations with his predecessor. Diplomats say that, although the election was clearly stolen, America and the EU accepted the outcome in the hope that it will weaken Mr Kabila’s grip on power and allow for a cleaner vote at the next presidential election due in 2023. To signal its distaste for an election it had endorsed, America slapped sanctions on three election officials.

The suspicion that Mr Tshisekedi was complicit in the theft of the election infuriates some members of his party. They say that he rose to prominence on the reputation of his late father, Étienne, a stalwart of the opposition. “How can a biological son of Étienne do this?” asks Valentin Mubake, his father’s former aide, who scoffs that the new president has no power of his own.

“He wouldn’t even dare remove that Kabila billboard.”

A Gulf case study

The lessons of Bahrain, a state that tried to wean itself off oil Many reforms other Gulf states are mulling were tried first in Bahrain

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HE ORANGE helmets are a burst of colour in the desert, where drab aluminium potlines stretch for almost a mile across the sands. Workers at Alba, Bahrain’s aluminium smelter, are finishing a $3bn expansion. A country of just 1.5m people will soon produce 1.5m tonnes of aluminium a year, more than 2% of global output. Alba will add another 500 to its staff of 3,200. Almost 90% are citizens, meaning the firm will employ 2% of the national workforce. The aluminium industry will account for 15% of GDP, says Tim Murray, the CEO. “People don’t realise it’s that big.”

All six members of the Gulf Cooperation Council (GCC) have lofty plans to wean their economies off oil. Bahrain is in many ways a forerunner of this effort. It built a financial sector back in the 1980s. More recently it passed a bankruptcy law, allowed 100% foreign ownership of firms and introduced flexible visas that allow some migrants to freelance. “Everything those guys are doing now, we tried already,” says Ausamah al-Absi, who heads the labour regulator. The results have been mixed—with lessons for Bahrain’s neighbours.

Compared with other Gulf states, the job market in Bahrain looks vibrant. Two-thirds of citizens work in the private sector, compared with 55% in Saudi Arabia and 10% in Kuwait. Unemployment is 4%. In Saudi Arabia, where joblessness is three times higher, the government is raising work-permit fees to drive out migrants. In Bahrain such fees are low. Most migrants toil in low-wage jobs that locals spurn. Bahrainis do not want to lay bricks.

Bahrain ploughs 80% of the take from work-permit fees back into the domestic economy through Tamkeen, which offers subsidised loans and grants to help businesses buy

equipment and training. Though it has a few national champions, Bahrain has tried harder than other GCC states to cultivate small firms.

Businessmen praise its simpler bureaucracy. A restaurateur says he needs nine licences to operate a fast-food joint in his native Kuwait.

Bahrain consolidated its permits into one.

Yet the fiscal picture is bleak.

Oil provides about 70% of government revenue—and there is not enough of it. Last year’s deficit was a yawning 12% of GDP. Wealthier Gulf countries had to offer a $10bn bail-out. Bahrain trimmed subsidies for power and water consumption

in 2016. But more reforms planned for this year were postponed for fear they would trigger unrest.

Cutting subsidies will only get Bahrain so far. But even though Bahrain introduced a 5% valueadded tax in January, a corporate or income tax seems politically impossible. Without new taxes the Gulf states will struggle to balance their budgets.

State jobs still pay 70% more than those in the private sector, a figure that has grown over the past decade as the monarchy doled out increases and stipends to buy political calm. The gap fuels unrest in a country where the Shia majority is often frozen out of state jobs.

Flexible work permits might slowly drive up wages in migrant-heavy sectors—but unhappy employers are trying to kill the programme.

Oil still accounts for more than half of exports. Sameer Abdulla Nass, the head of the chamber of commerce, complains that 100% foreign ownership has brought only “retail and restaurants”, not industry.

Bankers talk giddily about fintech as a growth industry. In a venturecapital firm overlooking the Gulf, though, investors complain that universities do not produce enough

entrepreneurs. Nor do they provide the sort of training that might help graduates land well-paid technical jobs.

Bahrain has done well at convincing its citizens to try the private sector instead of counting on cushy state gigs. But it has not upended the social contract, whereby oil pays the bills and foreigners do the manual labour. Some day, it will have to, says Mr Nass. “We have no choice.”

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LCCI partners Russia to push trade beyond $1bn

COMPANY NEWS ANALYSIS INSIGHT

Pg. 22

INDUSTRIAL GOODS

Industrial manufacturers’ asset efficiency slump in Q1 2019 ISRAEL ODUBOLA & SEGUN ADAMS

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layers in the industrial goods space were unable to maximise returns on their expanding asset base on account of their top-line failing to keep pace with growth in fixed capital in the first quarter of 2019.

Analysis of the key asset efficiency metrics; Fixed Asset Turnover (FAT) and Return on Asset (ROA) of industrial goods manufacturers that have released their earnings scorecards for 2019’s first quarter showed a tangible decline in their ability to utilize assets to grow earnings.

Fixed Asset Turnover for eight firms including Cement Company of Northern Nigeria (CCNN), Berger Paints, Chemical & Allied Products, Meyer, Grief, Premier Paints, Portland Paints and Beta Glass, shrank to 0.71 in the quarter review, indicating some 430 basis points decline over 1.14 reported a year earlier.

On the other hand, Return on Asset of these firms dipped some 3 percent points to 0.95 percent in the recently concluded quarter, compared with 3.86 percent in the previous comparable quarter.

The Fixed Asset Turnover ratio shows how manufacturers’ acquisition of property, plant and equipment are effectively utilized to raise output.

When a firm makes such significant purchases, investors track FAT to see if the company’s new

fixed assets are rewarded with higher sales.

ROA shows the capacity at which manufacturers use their assets to generate profit. A higher ROA figure indicates better managerial efficiency towards assets utilization; conversely, a lower figure shows less efficiency.

This implies the firm realized N710 as revenue from every thousand naira invested in fixed assets and earned N95 from every

thousand naira expended on total assets.

The cumulative monetary worth of assets of the eight players accelerated from N48.2 billion in 2018’s first quarter to N420.9 billion a year after, on the back of CCNN’s merger with BUA-owned Kalambaina Cement, which expanded asset base from N27 billion to N358 billion.

Similarly, revenue and net earnings of the eight players

surged 80 percent and N103 percent respectively to N28 billion and N5 billion, although both underperformed assets growth which skyrocketed over a thousand percent.

The analysis revealed that CAP having a FAT figure of 2.51, generated the most revenue from each naira investment in fixed capital, and trailed by Portland (1.5), while others were below the industry average of 0.71

On the basis of ROA, CAP, Berger Paint, CCNN, Portland and Beta Glass recorded positive returns while Meyer, Premier paints and Grief were haunted by losses made in the period.

Nigeria’s most-capitalized firm, Dangote Cement, was excluded from the analysis to provide a clearer basis of comparison given that the cement maker accounts for a lion share in the industry’s profit and assets.

INSURANCE

Veritas Kapital’s 2018 gross premium surges 38 percent to 5-year high ...fails to turn the corner as bottom-line remains weak SEGUN ADAMS

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eritas Kapital Assurance, formerly Unity Kapital Assurance, has announced that it recorded 38 percent more gross written premium in 2018 than it did in the preceding year.

Figures in the insurer’s financials show a 5-year high.

The insurance company revealed in its 2018 audited financials that it received a total gross premium of N3.33 billion for its group compared to N2.41 billion in 2017 while the company realised N3.24 billion, 40 percent over 2017 figures.

Veritas Kapital, however, couldn’t shake off its weak performance from 2017 as bottom-line remained in the negative in 2018, although losses pared by 1 percent.

Loss after taxation in the recently concluded financial year stood at N695.25 million as against N700.64 million posted in 2017 on the heels of Veritas Kapital’s management expense and higher income tax.

The management, however, pointed out that while 2018 was a tough year for insurance businesses, Veritas Kapital predicts premium would rise 5.7 percent in 2019 in

USD terms.

Net premium of the insurer rose year on year by 16 percent to hit N2.1 billion while net claim incurred dropped by 38 percent, with Veritas Kapital expending N736 million in 2018 compared to N1.2 billion in 2017. Underwriting expenses rose by 3 percent to N562 million.

As a result, underwriting profit skyrocketed by 778 percent year on year to N897 million.

Among other items, investment income saw a 2 percent uptick of to N1.49 billion, operating income rose by 81 percent, impairments of financial assets declined by 75 percent

while finance cost was N1.15 million.

A 41 percent spike in management expense bit hard on earnings while a 204 percent increase in tax expense exacerbated loss as Veritas Kapital posted a loss of N695.25 million.

Veritas Kapital ( then UnityKapital) was created from the merger of Global Commerce and General Insurance Plc, Intercontinental Assurance Plc and Kapital Insurance Company Limited in 2005 following insurance regulation of 2005 which required insurance companies to recapitalised to the level of N3 Billion Naira for Non –life companies and

N 2 billion Naira for Life companies.

In a notice sent to the exchange and dated March 14, 2018, Veritas Kapital announced the divestment of Unity Bank Plc’s holding in the insurance

company and the change of name from UnityKapital Assurance Plc to Veritas Kapital Assurance Plc. Shares of Veritas Kapital currently trades at 21 kobo per share as at the close of trading on Friday.

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

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COMPANIES&MARKETS COMPANY

LCCI partners Russia to push trade beyond $1bn …says level of trade low DAVID IBIDAPO

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eing rather optimistic of the enormous untapped opportunities that exist within the Nigerian economy despite her current precarious state, the Lagos Chamber of Commerce and Industry (LCCI) in its bid to stimulate growth and development has initiated partnership with the Russian Trade Mission.

The aim is to push trade between the two countries beyond $1 billion.

Owing to the fact that both countries have some things in common; being oil producing countries and endowed with a colossal of natural resources which when developed can initiate rapid growth and development within the economy, LCCI believes Nigeria has a lot to learn from a developed country like Russia.

The partnership was initiated at the Nigerian Russian Business Forum held on the 23rd of May 2019 at the Commerce House, Lagos, with members of the Russian industrial delegation led by Nigeria ambassador to Russia, Steve Davies Ugbah.

Speaking on the slowdown in the global economy, ,” Babatunde Paul Ruwase, president of LCCI said the need to diversify Ni-

gerian and Russian economies cannot be more urgent than now.

“I believe that increased trade will enhance the realisation of our objective of economic diversification,” he said.

The par tnership be tween Nigeria and Russia is not new as it dates back to diplomatic relations established between the countries in 1991, after the USSR provided the Nigerian government with political and military assistance during the Nigerian Civil war which lasted for four years between 1967 and 1970.

According to Babatunde Ruwase, the current level of trade between Nigeria and Russia is still very low and less than $1 billion hence, “with closer cooperation between the private sectors of both countries, we can improve on the level of trade,” he said.

However, the Nigeria ambassador to Russia, Steve Davies Ugbah, explained that the level of trade between Nigeria and Russia is currently lesser than $300 million, adding that, “the Russian economy has a lot it can offer to Nigeria being one of the most developed countries in areas of power, technology, health care etc. to mention but a few.”

Nigeria, which currently

offers the largest market on the African continent, with GDP of over $450 billion and population of over 200 million, is richly endowed in natural resources, said Ruwase.

“Our macroeconomic fundamentals are still strong despite the current global issues with commodity prices,” he added.

Giving a platform for Nigeria businesses to partner with Russia, the forum also gave opportunities for delegates from Russian companies with significant market share in various industries to make presentations regarding their operations in areas of power, agriculture (fertilizer), food, and technology.

“We employ the Russian delegates to help Nigeria through partnership to alleviate challenges in the area of education, health care, solid minerals, and infrastructure building, among others, as Nigeria offers good opportunities in these space,” Knut Ulvmoen, deputy president LCCI, said.

“We are ready to partner with Nigeria as we have always perceived the country as the future of frontier markets with enormous opportunities and growth potentials,” Skripnik Bogdan, head of Russian Business Delegation, assured.

ICT

Huawei founder confident his company will prevail SEYI JOHN SALAU

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uawei Founder and CEO Mr Ren Zhengfei expressed confidence in the company’s business and capacity, saying the company had been preparing in anticipation of situations as of now, and it is well- prepared.

“We will certainly be able to continue serving our customers. Our production capacity is huge, and adding Huawei to the Entity List won’t have a huge impact on us.

We are making progress in bidding worldwide.” Ren said.

The U.S. Commerce Department has announced it will add Huawei Technologies Co., Ltd. and its affiliates to its so-called “Entity List,” a move aiming to ban Huawei from buying parts and components from U.S. companies without government-approved licenses.

The preparation he mentioned includes the company’s huge R&D investment

and contingency plan. According to the 2018 EU R&D Investment Scoreboard, Huawei ranks fifth,with steady growth in its R&D investment.

Huawei has a consistent Business Continuity Management System which has been certified by dozens of neutral third parties in Europe. The company has also been vigorously integrating BCMS into it global suppliers’ obligation.

Ren conceded that he expected Huawei’s growth to slow down, but expressed confidence in the company’s future prospects.

“In the first quarter of this year, our revenue grew 39% over the same period last year. This rate decreased to 25% in April, and may continue decreasing towards the end of this year. But the US ban will not lead to negative growth or harm the development of our industry.”

The leaders of Britain, Germany, France, Belgium and

the Netherlands said that their governments will not follow suit to ban Huawei from involvement in their networks.

French President Emmanuel Macron said it was not the aim of France to block Huawei, nor to launch any form of technological war.

German Chancellor Angela Merkel said companies could participate in expanding Germany’s 5G network if they met established safety criteria.

In an interview with CNBC Africa on Wednesday, Huawei Vice President of Corporate Communications, Glenn Schlosssaid.

“The device in people’s hands are completely unaffected by what’s happening in the US. For owners of Huawei handsets it will be business as usual.” Schloss said.

“We remain positive, but we are preparing for various eventualities. We are stockpiling components and have been working with our supply-chain partners for some time.” He added.

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Business Event

YIL founder pledges commitment to boosting Nigeria’s Human development index ...Holds second edition of Young Innovation Leaders Fellowship MICHAEL ANI

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he Young Innovation L e a d e r ’s ( Y I L ) — a platform which aims to raise young exceptional leaders in innovation management—would help greatly in boosting Nigeria’s poor Human Capital Index.

The programme would assist in developing the innovation skills of the youthful population by teaching them the way to solving critical problems in the country, according to Obichi Obiajunwa , a public sector expert and founder of the innovative programme.

“We create d the YIL platform to assist in raising young exceptional leaders in innovation management”, Obiajunwa told BusinessDay in Lagos last week when it held its 2019 edition of the Young Innovation Leaders (YIL) Fellowship to mentor 45 young talents. “We aim to raise people that will inspire, initiate and lead innovation in their different spheres”.

Africa’s most populous nation has been bedevilled with low budgetary funding to its education and health sector, two key sectors tipped by the International Monetary Fund (IMF), needed to curtail the

country’s high unemployment that soared to 23.1 per cent as at Q3 2018, and drive the country up the ladder in Human Development Index, In 2017, the country was ranked 157 in HDI among the 189 countries sampled, according to data from United Nations Development Programme, a New York-based developmental network that tracks health, education and income/standard of living indices across countries.

The IMF in its article IV report urged the federal government to tap into its growing population by providing them with the prerequisite skills that would enable them to meet up with the global standard.

“It is pitiable for Nigeria to be at that low point in Human Capital Index with all its human resources. It simply means that our human population is not skilled enough to face the challenges of today and that was why we created this platform”, Obiajunwa said The YIL started in 2018 and it is a 4-months fellowship where participants are trained on innovation management skills and are given capstone projects to solve under expert supervision.

After the fellowship, fellows are then provided life-long

career mentorship.

The 2019 edition of the fellowship kicked off on 22th May through 25th and started with a boot camp that graced the presence of both local and international experts who came to facilitate classes and motivate the participants.

This year’s, participants were recruited, after a rigorous selection process, from 21 States of Nigeria. There were also participants from South Africa and Ghana. Participants are skilled professionals less than 28 years old with a track record of excellence.

Sponsors of the program include the United Nations Population Fund and the Charles and Lynn Schusterman Family Foundation.

Resource Persons who spoke and educated the participants include Eyal Halamish, from Australia; Neta Hanien (Israel); Osaretin Adonri, Assistant Representative, UNFPA; Mazi Sam Ohuabunwa, President of Pharmaceutical Society of Nigeria; Osaze Ezekiel, Head of Big Data, Oracle Nigeria; Michael Nwoseh, Head of Youth Segment, FCMB; Oyindamola Assaju, Founder, Farm Republic; Nnamdi Ifeagwu, Director of Programmes, YIL Fellowship

L-R: Olumide Hanson, acting company secretary, Leadway Assurance, Martin Luther Agwai; Chairman, board of directors, Leadway Assurance, and Oye Hassan-Odukale, MD/CEO, Leadway Assurance, at the 47th annual general meeting of Leadway Assurance Company Limited held on Friday 24th May, 2019 in Lagos.

L-R: Joshua Ajayi, convener, BrandComfest/publisher, Brand Communicator; Lampe Omoyele, managing director, Nitro 121; Ayo Oluwatosin, group managing director, Rosabel, and Bukola Akingbade, founder/ partner, Neukleos, at the 2019 BrandComfest Edition organized by Brand Communicator with the theme; Digital Disruption and the future of brands and Marketing communications in Lagos.

Opera launches advertising platform for more than 30 million users DIPO OLADEHINDE

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ne of the world’s major browser developers Op era, developer of the most popular mobile browser OperaMini, is set to launch a new platform called Opera Ads, a content-based native advertising platform for its more than 30 million users in Nigeria.

The Opera Ads is expected to serve the needs of digital local marketers and give advertisers a unique opportunity to reach and engage with more than 320 million Opera users worldwide.

“With Opera Ads, we open the Opera ecosystem to advertisers allowing them to do more precisely targeted campaigns and improve the control of their media buy,” Per Wetterdal, VP Global Business

Development at Opera said. “We secure your ads will be served with a premium placement in connection to an engaging content experience.”

Based on user intent and contextual relevance, Opera Ads offers an intelligent advertising solution to Nigerian digital agencies, publishers and brands to connect and engage with the Opera audiences at a global scale with geo-targeting capabilities.

The platform offers transparency, unique and controllable ad placements, reach and budget management based on the support of fixed and dynamic pricing models.

The new platform is available in both traditional and programmatic buying models. In this way, Opera Ads provides a trusted and relevant enviwww.businessday.ng

ronment for users, advertisers and simplifies the campaign performance evaluation.

Opera Ads is the platform-of-choice for advertisers seeking the opportunity to reach a scaled and engaged audience, in a highly transparent fashion across the fastest growing mobile digital markets.

Opera holds 47 percent of the browser market share in Nigeria with more than 30 million monthly active users across its mobile products. Founded in 1995 in Norway, Opera delivers browsers and AIdriven digital content discovery solutions to more than 320 million people worldwide. The company remains one of the most innovative browser creators in the world. Opera is listed on Nasdaq under the OPRA ticker symbol.

L-R: Mohammed Iyamu, vice president trading, Cars45; Etop Ikpe, CEO Cars45; Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), and Olajumoke Obembe, people and business operations manager, Cars45, during a courtesy visit by Cars45 to the Lagos Chamber of Commerce and Industry in Lagos.

L-R: Bodunrin Olowolagba, British Airways sales manager Nigeria; James Duggan, Winner, British Airways business class ticket to London, and Justice Odigea, Co MC and ex-student of the Federal Nigeria Society for the Blind Institution, during the Federal Nigeria Society for the Blind May Ball, sponsored by British Airways recently.

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ON THE MONEY

Here are critical steps parents should take to secure their child’s future

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L-R: Fatai Lawal, past president, Chartered Insurance Institute of Nigeria(CIIN); Sakiru Oyefeso, deputy president, CIIN; Ibrahim Olaniyi, guest speaker and chief Imam, Igbarere Mosque Magodo; Eddie Efekoha, president, CIIN; and Edwin Igbiti, council member/chairman of Activities Committee CIIN at the 2019 CIIN Ramadhan Tafsir Lecture held at the Lagos State Secretariat Mosque Hall Alausa, Lagos

CEO justifies NAICOM increment of insurer’s capital, raise concern over optimum utilisation …see more mergers in the coming months Stories by Modestus Anaesoronye

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n insurance CEO, who seems indifferent from the general sentiments about the new increase in the paid-up share capital of insurance companies in Nigeria, said it was a necessary step to reduce from the industry too many weak and fringe players.

The CEO who did not want to be mentioned said “It was a good decision to make companies in the market big because it will bring efficiency in service delivery, better customer protection and increase the confidence of consumers.

He noted that it was not a surprise as everyone knew it was coming, though may be not to the level of requirement.

According to the CEO,

the biggest challenge now is to generate commensurate level of premium that will justify the new capital requirement.

Expectedly, an N18 billion capital should generate about N45 billion premiums, that is two and have of the capital to make business sense. So, the biggest problem for the operators will be on how to optimize the new capital to be able to create shareholder value.

On raising the new capital, the CEO said, this is a tough time to raise funds from the capital market given the state of the economy, and again, given the poor yields and returns insurance companies have made over time.

This is not likely going to be attractive for retail investors.

“I see quite a number of companies coming together to merge to remain in business, otherwise they will be consumed, the CEO said.

Insurance regulator the

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National Insurance Commission (NAICOM) last week increased the minimum paid-up share capital of insurance and reinsurance companies in Nigeria, giving them 30th June 2020 deadline for compliance.

NAICOM in the circular signed by Pius Agbola, director, Policy and Regulation directorate on-behalf of the Commissioner for Insurance, increased the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion to N20 billion.

According to the Commission, the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing insur-

ance and reinsurance companies shall be required to fully comply not later than 30th June 2020.

The circular reads “In the exercise of the powers conferred on the Commission by the enabling laws, the minimum paid- up share capital requirement of insurance and reinsurance companies in Nigeria is hereby reviewed” According to the circular, this shall apply to insurance and reinsurance companies other than Takaful operators and Micro insurance companies.

“The provision in respect of requirement of the statutory deposits as stipulated in Part III, section10 of the insurance Act 2003 shall apply on the effective date of commencement of the circular”.

Agbola concluding urged all insurance and reinsurance companies to comply with the circular.

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very parent envisions the very best for their children.

As a parent you can agree that providing your child with the right tools to help them succeed and secure his/her future is the best gift you can give your child. In today’s world, ensuring your child gets proper education is a step in the right direction towards that bright future you envision for your child.

However, reality has shown us that without the right financial steps, this future can be threatened or worse, unrealised. Hence, it is important for parents to take the right steps to protect their child’s education and help them secure their future. Here are 5 steps you can take to this end; 1.

Start Early: Planning for your child’s education should start with the birth of your child. By starting this financial planning early in their life your saving requirement is reduced thereby allowing you room for other life expenses. It is important for you not to delay on planning for your child’s future as life uncertainties leave little room for preparations.

2.

Identify the needs: As a parent, it is important for you to identify and outline your child’s educational needs. Costs are bound to change over the years so it important for you to factor in inflation. Identifying these needs and requirements guides you on what investment method you should adopt.

3.

Teach your kids: Teaching your child about personal finance early on in their life also plays an important role in their future

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financial decisions. Guide them on the importance of savings and setting goals, this will help them develop positive financial habits.

4. Have insurance protection: One of the biggest fears of every parent is picturing a future of their child when they are not there.

While this thought is scary, it is important for parents to face the realities and make the decision to protect their child’s future with insurance. The right insurance policies protects your child’s education from being affected when unforeseen events like accidents, illnesses or even worse, death prevents you from being present.

5. Get the Old Mutual Edusure: The Old Mutual Edusure Protection Policy, is an insurance plan designed specifically to protect a child’s continued education in event of death of the policyholder. The policy guaranteed a cash sum pay out for the education of the beneficiary on the death of the Life Assured, thereby giving the child a chance to continue schooling irrespective of what life may bring.

In conclusion, planning for your child’s education is an important part of securing their future. By taking the right financial decisions with Old Mutual Edusure Protection Policy, this future you envision for your child can be a reality no matter what life throws your way. For more information on Old Mutual Edusure Protection Policy, you can call Old Mutual on 01-2719393 or go to www.oldmutual. com.ng. We look forward to helping you make the right decision for your child!

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Linkage strengthens Customer Service Centre to enhance complaints resolution

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L-R: Daniel Braie, Managing Director/CEO; Joyce Ojemudia, General Manager, Marketing and Okanlawon Adelagun, Executive Director, Technical, all of Linkage Assurance Plc during the official opening of the Company’s refurbished Customer Service Centre at its corporate head office in Lagos

Fitch sees improved demand for cyber insurance protection Stories by Modestus Anaesoronye

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rowth in the cyber insurance market slowed d ra m a t i c a l l y in 2018 when compared with the previous year. However, analysts at Fitch Ratings expect a desire for improved risk management and pricing will benefit the sector over the long-term.

In total, the U.S. property and casualty (P&C) industry’s total direct written cyber pre-

miums grew by 8 percent in 2018 to $2 billion, and while growth did occur in the year, it slowed significantly compared with the 37 percent growth witnessed in 2017.

Director of Insurance at Fitch Ratings, Gerry Glombicki, said: “After several years of brisk growth, U.S. cyber insurance segment revenue moderated in 2018. However we continue to believe that high profile cyber events, desire for more sophisticated risk management and improved pricing will buoy the segment in the long term.”

According to insurer stat-

utory financial data in the ‘Cybersecurity and Identity Theft Insurance Coverage Supplement’, standalone cyber premiums increased by 12 percent last year.

Fitch notes that high profile events and uncertainty surrounding cyber terms in commercial policies continues to highlight a need for adequate protection.

Increasingly, although it does vary by company, insurers are looking to tackle the silent cyber threat, and this includes measures such as adding affirmative coverage in policies, including sublim-

its and cyber endorsements.

So far, the cyber market has produced strong profits, with statutory industry direct loss ratios for standalone policies being consistent and favourable in 2018, at 34 percent.

The ratings agency warns that the inherent complexity of cyber risk combined with a lack of historical data makes it very challenging for underwriters, stating that ultimately, insurers that do underwrite the risk do so with great uncertainty in measuring the likelihood and ultimate cost of potential cyber events.

Consolidated Hallmark records N407m profit, pays dividend

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nderwriting firm, Consolidated Hallmark Insurance Plc during the financial year ended December 31, 2018 recorded a profit after tax of N407.07 million, as against N406.21 million in 2017, which the company attributed to management’s disciplined approach to cost management.

From the profitability, the company paid out a dividend of 2 kobo, translating to N162.6 million in line with its policy of sustaining value creation for shareholders.

Obinna Ekezie, chairman of the Company who disclosed the result during the Company’s Annual Gen-

eral Meeting in Lagos said despite the economic challenges in Nigeria, the insurance group recorded a Gross Premium Written of N6.87 billion, an increase of 20.85 percent from 2017, the highest recorded since its inception.

He said the company remained committed to its promise of regular dividend payment, having paid dividends seven times in its eleven years of operations.

Going into the future, Ekezie noted that the boards and management commitment remains unwavering towards evolving into a leading provider of insurance and other financial services in Nigeria. www.businessday.ng

He said measures have been put in place in this regard while the deployment of funds generated through capital raise will no doubt ensure further improvement in the company’s income.

Eddie Efekoha, managing director/CEO, Consolidated Hallmark Insurance Plc said the firms revenue diversification drive was a major factor that aided the sustained financial performance through the challenging market conditions of 2018, further reinforcing its role as a formidable player in the Insurance Industry.

According to him, the Company continued to fulfill its claims payment obliga-

tions to customers promptly amidst rising claims in the industry, with N4.78 billion spent on claims settlement in 2018 when compared with the N3.35 billion in 2017.

Going into the future, Efekoha said the implementation of her Five-Year Corporate Strategy plan has continued with increased vigor, following the setting up of a full-fledged Strategy function. “Our internal processes are being reviewed to achieve operational efficiency and eliminate lapses; while our Technical Operations have been restructured into a Strategic Business Unit (SBU) model to drive greater efficiency.”

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ommitted to ensuring that its customers get the best of attention and are able to resolve their complaints without going through many protocols, Linkage Assurance Plc has strengthened its Customer Service Centre.

The service centre, which has been equipped with state of the art technological infrastructure and more trained personnel will ensure that customers have unrestricted access to the care officers for any complaints they may have before or after any transaction with the Company.

Daniel Braie, managing director/CEO of the Company who disclosed this during the formal launch of the refurbished Center at the firm’s corporate head office in Lagos said, this is in line with its vision to continue to enhance customer experience.

“What we have done today is one of the initiatives we have in our strategy to

increase customer service experience because as an insurer, customer is the reason we are in business” Braie noted that in the past customers with complaints were directed to the technical officers concerned but we have discovered that allowing the customer care officers to take their complaints and follow through until is resolved gives better experience to the customers. “This initiative is targeted at strengthening the customers’ dispute resolution process and enhances the confidence they have on our activities as an insurance company”.

Braie also noted that the centre was launched to provide the company’s customers a platform and channel through which they can register their complaints and also to build confidence in current and prospective customers about the firm’s services and ability to meet their expectations.

Custodian Investment MD, honoured for distinguished outing at NSE

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ole is the founder and Managing Director of Custodian Investment Plc., a financial services group with interests in Life Insurance, General Insurance, Pensions and Trusteeship. He is an industry leader with over thirty (30) years’ experience and has at various times been a member of the Presidential Committee on Pension Reforms, Chairman of the Nigerian Insurers Association, Council Member of the West African Insurance Companies Association (Ghana) and External Lecturer – West African Insurance Institute, Banjul, The Gambia. He sits on several Boards including the International Insurance Society, New York as well as Council member of the African Insurance Organization (Cameroun), Nigerian Insurers Association and Advisory Board Member of the Commonwealth Enterprise and Investment Council (United Kingdom). He has received numerous awards including a nomination as “African CEO of the Year” by African Reinsurance Corporation.

A graduate of Actuarial Science and a Chartered Insurer by Profession, he holds the Doctor of Finance

@Businessdayng

Wole Oshin

(Honoris Causa) and is a Fellow of the Chartered Insurance Institute of Nigeria, The Risk Managers Society of Nigeria and the Association of Investment Advisers and Portfolio Managers. He is a past President of the Lagos Business School Alumni Association (LBSAA), as well as an alumnus of the Harvard Business School.

He spends his free time doing philanthropic work through the WATO Foundation which runs the WATO Group of Schools. Wole is a firm believer in the building and transformation of the economy through the development of Risk management and Insurance.

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Monday 27 May 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Addressing the biases plaguing algorithms MICHAEL LI

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xecutives lured by the siren song of artificial intelligence need to understand both the possibilities and risks endemic in AI and data. There are many documented failures of AI attempting to speak and understand human language.

Here, we’ll highlight four recent, high-profile examples from Microsoft, Facebook, Google and Amazon.

— In March 2016, Microsoft developed a Twitter chat bot using AI named Tay, built by mining public conversations. The bot would also learn and adapt based on its con-

versations on Twitter. It took less than 24 hours for internet trolls to train Tay to spew out horribly racist, misogynist and generally offensive tweets.

— Facebook has a feature called “Memories,” highlighting what happened on today’s date in previous years. It can remind people of joyful occa-

sions. However, it can also remind people of painful memories, like the anniversary of the death of a family member. Or it might ask you to say hap-

py birthday to a deceased friend.

— Google Translate uses AI and deep learning to crunch through terabytes of text data to provide automated translation service for dozens of languages. But many other languages mark gender differently than English, and in November 2017, it was reported that its AI algorithms were sexist.

— Inundated with millions of resumes, Amazon reportedly tried to develop AI that could screen potential applicants. Unfortunately, the algorithm reinforced the biases of hiring for male-dominated roles like software engineering.

The biases in all these algorithms are the result of biased training data built

by humans. It’s not the fundamental technology that’s racist or sexist, but the data on which we train the algorithms.

Companies need to incorporate anti-bias training alongside their AI and machine-learning training, spot potential for bias in what they’re doing and actively correct for it.

In a world in which AI is permeating everything, companies need to instruct all their business leaders on AI’s potential and risks, so that every line of business can spot opportunities and flag concerns.

(Michael Li is the founder and CEO of the Data Incubator.)

Why every company needs to think like an entertainment company MARK PURDY AND GENE REZNICK

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etflix and other media companies are seeing the future of consumption in the convergence of content, gaming and interactive services. The next great content convergence will prove revolutionary, bringing together a host of next-generation technologies such as virtual and augmented reality, AI, the internet of things and haptic technologies (those that simulate touch and motion). It will be multisensory and interactive. We can already see four ways in which this convergence will change the nature of consumption and how consumers make decisions.

— BEING THERE: Nothing beats the roar of the crowd, the thrill of live action for a sporting event. But in a physical world of scarcity and distance, another so-

lution is at hand for people who are left out: Virtualization, smart objects and haptics now make “being there” a reality for many who would otherwise be unable to experience such spectacles.

— FORMING VIRTUAL COMMUNITIES: Many “consumption activities” — sport, travel, recreation, fine dining — are best enjoyed with friends, relatives or people who share a common interest. Far from encouraging solitary pursuits, immersive technologies will increasingly combine elements of community and real-time interaction.

— DISCOVERY: Today, consumer search and comparison shopping are still largely considered a timeconsuming chore. But the next great content convergence will enable much more stimulating ways for consumers to explore new products, services and lo-

cations.

— IMAGINATION AND STORYTELLING: If a picture is worth a thousand words, then how much more powerful must be the combination of sight, sound, touch and agency that virtualization brings.

To be successful in this

world, companies will need to think much more like an entertainer than a producer or retailer. What should they keep in mind?

— HAVE THE BEST MATERIAL: Businesses need to forge the right partnerships — with media companies, production and design —

to create the immersive experiences consumers will demand.

— GET PEOPLE TALKING: Successful entertainment generates a buzz — it gets people excited about what’s coming next.

— KNOW YOUR AUDIENCE: Popular entertain-

(C) (2017) Harvard Business Review. Distributed by New York Times Syndicate

YE

AR

S

Expertise It’s in our DNA

In an ever changing economy, with 125 years of serving YOU, we remain strong, trustworthy, dependable, safe and consistent.

You can be confident that we will continue to deliver innovative banking products and services which seamlessly and conveniently suit your lifestyle needs.

Visit www.firstbanknigeria.com to learn more about us.

ers often owe their success to knowing exactly what their audiences like, and providing it for them.

— MIND YOUR LANGUAGE: Companies operating immersive services will need to navigate a new thicket of ethical and related issues around privacy, addiction and virtual crime. Early engagement with regulators and adherence to principles of responsible immersion will be critical.

Entertainment can be more powerful than cold efficiency. In an age defined by immersive and interactive experiences, how will your company win the crowd?

(Mark Purdy is the managing director for economic research at the Accenture Institute for High Performance. Gene Reznik is Accenture’s chief strategy officer.)

Monday 27 May 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

31

In association with

Tesla’s strong brand gives it unusual expansion potential EDDIE YOON

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ost of the buzz about Tesla’s recent quarter is about its $700 million loss or its seemingly wild robo-taxi idea. Short-sellers smell blood in the water as the stock has declined more than 20% in 2019. However, lost in the shuffle is Elon Musk’s announcement that Tesla will offer a “compelling auto insurance product” within a month.

Auto insurance may seem like another distraction for a company that should be focusing on its core business.

However, what if insurance helps along the path to profitability and is just the first act of a powerful mega-brand adjacency that paves the way to Elon Musk’s grander visions?

Having helped several clients build multibillion-dollar mega-brands, I’ve found there are several critical success factors.

First, you must pick the right first adjacency to enter.

The first move is the hardest,

so you want an adjacency that either has a very similar go-tomarket model or has a partner who does the heavy lifting for you. Tesla is doing the latter by partnering with a unit of Markel to provide insurance.

Secondly, it should have attractive economics measured by the inherent financials of the adjacency itself — but also based on how it improves the

economics of the core business. In Tesla’s case, the latter element is particularly important, because one reason consumers buy electric cars is to save money by not buying gas. However, that savings is offset by the costs of insuring a Tesla, which are among the automotive industry’s highest. Therefore, if Tesla can reduce the price of

its insurance, it should help make owning a Tesla more attractive and drive more corebusiness car sales.

You might laugh at the idea of Tesla life insurance, but if it cracks the code on auto insurance, is it really that hard to imagine Tesla offering life insurance? The median age of Tesla owners ranges from 46 (Model 3) to 54 (Model S). The

average annual life insurance premium is nearly $1,100 for a 50-year-old nonsmoker. If we said the commission was 70%, that would add another $770 in commission revenue to Tesla, or another 135 basis points of margin on a Tesla Model 3.

The final critical success factor is the avoidance of too many mega-brand extensions. Your mega-brand is only as strong as its weakest category.

Mega-brand strategies need both the sizzle of new technologies and the steak of trillion-dollar categories where you can bring something unique to the table.

Tesla already has over $800 million in deposits for future cars. Having a successful mega-brand lets you play chess, while others play checkers.

(Eddie Yoon is the founder of Eddie Would Grow.)

Machines that speak and write will make misinformation worse view? Such a service could help keep consumers from falling into the trap of turning off their critical-thinking receptors.

Every technology created by humans comes with pros and cons. As we race headlong into the era of conversational machines, it’s time to start thinking about their cons and designing tools to combat them.

AMY STAPLETON

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echnologists have long dreamed of building machines that converse as nimbly as humans.

So, what’s the problem? We are not adequately prepared to address the hazards that could come with our successful launch of conversational machines. To anticipate the challenges ahead, it helps to take a quick look at the underlying technologies.

The coming era of proficient talking and writing machines holds many challenges that few seem to be seriously addressing. Here is a small list to ponder: — How do we ensure improved conversational technologies don’t result in a new generation of pernicious and convincing fake-news bots?

— How do companies protect themselves from rogue bots speaking on their

(Amy Stapleton is the founder and CEO of Tellables.)

behalf?

— How can we avoid scenarios in which machines try to please us by telling us only the things we want to hear?

— What methods can we employ to prevent verbose machines from dragging all human discourse down

to the lowest common denominator? (The software that generates automated responses relies heavily on data sets of the most mundane human-generated content and conversations.)

Those creating these powerful technologies should

focus attention on how to leverage them for the true benefit of the consumer. If we can create bots that spread fake news, can we create technology that exposes such falsehoods? Perhaps we can go a step further and highlight one-sided points of

Brought to you courtesy of First Bank Nigeria

32

Monday 27 May 2019

BUSINESS DAY

Start-Up Digest

In association with

How Victoria makes money from event planning

SIKIRAT SHEHU, Ilorin

Jonathan Aderoju

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or individuals and organisations, the thought of organising events can be a nightmare, but for Victoria Chinwe, chief executive officer of Greatgold Events, it is a pleasure.

Victoria was inspired to establish Greatgold Events in 2013 owing to her love for weddings and celebrations.

The young entrepreneur was able to raise her initial start-up capital from personal savings.

“I started my business with my personal savings. I started out by planning events for free for family, friends and church members and this was getting me referrals,” Victoria says.

Since starting, the teacher-turned-entrepreneur says that the business has continued to grow. “By God’s grace, Greatgold Events has grown to a level that we get good referrals, understanding clients, have best vendors and of course a committed and transparent planner in the person of me,” she boasts.

Victoria currently has seven vendors working with her. “We have seven vendors working with us currently such as caterer, photographer, videographer, decorator, master of ceremony (MC), DJ, and cake maker,” she says.

She tells Start-Up-Digest that all her accessories for decorations of event centres are sourced locally and also imported.

Speaking on the challenges confronting the business, she says, “Our major challenge is the fact that people don’t see a big deal about event planning. They feel it’s so easy and planners should not be well compensated for their jobs.

“As a result, we are badly priced for the services we render. This is killing the event planning industry,” the young entrepreneur

Victoria Chinwe

says.

Similarly, she points out that the country’s huge infrastructural gap is also another major challenge facing the business.

She urges the government to provide an enabling environment for businesses to thrive.

She encourages people to patronise her business, saying that Greatgold Events is an organised, committed and transparent organisation that gives the best in any event.

“We help to budget well as we are budget friendly. We also get the best of all items needed, best venues that suit your event, best vendors, and a committed planner to give exactly that wow dream events of yours.

We are 24/7, we are globally, and we are Greatgold,” she says.

Speaking on her expansion plans, she says that Greatgold Events is on track to meeting international standards in event planning. “We are aiming to get our online 24/7 website where you can do bookings and consultations.”

On her advice to young entrepreneurs, she says, “If you want anything, go for it.

Don’t sit at a place waiting for manna to fall from heaven,” she says..

“When I started, it took three to four years before I got my first pay of about N5,000 for a two-day event. You can achieve anything you want, yes anything. You only need patience, consistency, punctuality, commitment, sincerity and of all pray well and work hard,” she advises.

FGBMFI to encourage start-ups, business owners through seminars Gbemi Faminu

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Why banks reject loan applications - BOI, KWACCIMA

he Full Gospel Business Men’s Fellowship International-Nigeria (FGBMFI), in its aim to help enterprises grow and enable business owners thrive amid economic and business challenges, is organising a business seminar for start-ups and larger businesses to hold in Lagos in June.

Fola Aguda, president of the Southwest 3 District, said the programme aims to help micro, small and medium enterprises to achieve business goals regardless of the circumstances involved. He added that it was also aimed at making people better in the society in order to ensure peace and orderliness.

“It is an avenue to build people to weather the storm and as well help established businesses weather the storm and expand the scope of their businesses,” he said.

“Relevant topics will be discussed by quality facilitators and it is open to both members and non-members for just a token,” he added.

John Osagie, an executive member of the fellowship, said “the annual business seminar is regarded as a social responsibility to the society. It is an annual event and the upcoming edition will mark its 21st edition. We have recorded successes from the seminars by the participants and this has encouraged

the continuity of the programme.”

“The world is changing; digitalisation is taking the front row and rapid growth of technology is changing the face of business.

There is a need to carry everyone and every business along. Various issues of interest will be discussed which involve the lifestyle of the participants,” Osagie said.

“Besides providing a learning platform, there are other opportunities available for the participants. There is room for mentorship and it is an all-encompassing forum.

Aside from start-ups, business owners and career people, we are also interested in people who plan to retire so they have an idea of what to do after retirement.”

The seminar, which is an annual event, would be in two forms. First is themed ‘Achieving Business Growth in Today’s Economy’ while the second is entitled, “Imperatives for Building Modern Businesses”. Both will come up on the same day at the Academy Guest House and Event Halls and the Lagos Sheraton Hotels& Towers respectively.

L-R: Vitus Udumukwu, field representative, Full Gospel Business Men’s Fellowship International (FGBMFI) Nigeria; Charles Aladewolu, national director; Fola Aguda, district coordinator, South West 3; Femi Adesanya, national director; Sam Ohuabunwa, resource person and Edward Eworo, chairman, Annual Business Seminar, during a press briefing and unveiling of the fellowship’s 2019 seminars in Lagos last Thursday.

www.businessday.ng

https://www.facebook.com/businessdayng

eun Adekogbe, state manager of the Bank of Industry (BOI), has identified challenges preventing businesspeople from obtaining bank loans.

He enumerated them to include improper documentation, faulty loan application and request for loans higher than actual business.

Speaking in Ilorin at the 49th annual general meeting of Kwara Chamber of Commerce, Industry, Mines and Agriculture (KWACCIMA), the BOI manager said the bank has turned down such loan requests to prevent people from running into more financial problems.

He, however, advised businessmen to avail themselves of services of business developers and service providers to assist them in documentation and all other aspects of getting loans.

On his part, Ahmed Adeoye Raji, president and chairman of council, KWACCIMA, enjoined members to maintain a positive attitude and remain productive for the development of the state.

He said businesspeople must imbibe the attitude of saving and investing for their overall development and growth of Kwara.

Raji, however, urged the incoming administration in the state to implement State Business Agenda (SBA) of the chamber for future economic prosperity of Kwara.

The KWACCIMA president noted that the agenda would serve as a guiding principle for the incoming governor on what to do to take the state to next level of development.

“There are lots of things we want the incoming administration to do for business community in the state. We are trying to present what we call State Business Agenda (SBA) which will cover areas in agriculture, commerce, industry, both in formal and informal sectors of the state economy.

“We hope to make him know that there are lots of hanging fruits needed to be plucked to make Kwara state the place we want it to be in terms of commerce, industry, agriculture and mining,” he said.

“The KWACCIMA, as a mouth piece of the organised private sector, and a partner in progress with the government, will intensify efforts to facilitate meaningful economic development to the state.

Raji said discussion is ongoing to partner governmental bodies for Art and Culture Fair, adding that such would provide exposure and network for lasting business relationship and patronage.

“In furtherance of supporting agricultural production in the country, we initiated discussion with an agricultural corporation in Axco, Georgia in the USA, with 21 quotations all over the world, for possible establishment of agricultural equipment plant in the state.

“The leadership of the chamber had also succeeded in convincing Harvard Business School Management Board to establish a unit of the school in the state.

“This is planned in collaboration with the University of Ilorin, so that a number of businesspeople can easily access world-class business training that can be adapted into our environment,” he said.

The KWACCIMA president, who commended the outgoing government for allocating 10 hectares of land as permanent trade fair site to the body, said that the government also approved waiver as part of acquisition fee.

“But we will, like Oliver Twist, always ask for more. The chamber will therefore be glad for any possible further assistance from the state government in that regard to perfect acquisition of the site for immediate development.”

@Businessdayng

Monday 27 May 2019

BUSINESS DAY

33

Start-Up Digest

I closed over 100 deals, championed 5 real estate projects in my first job - Kabiru Ajisafe Unlike most millennials who avoid sales jobs as much as possible, Kabiru Ajisafe, head of sales at Polymaths, is a pacesetter and game changer. With his outstanding records, he makes real estate sales seem so easy. In this interview, he shares insights about winning real estate sales strategies and his work at Polymaths.

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Tell us a little about yourself. y name is Ajisafe Kabir Oluwaseun. I studied Economics and Development Studies at Igbinedion University Okada, Edo State. I also have a diploma in Strategic Management and Database Administration. I consider myself as strategic, crazy and creative.

In your previous sales position, what role did you play in achieving targeted revenue?

In my last sales role, I was able to close over hundred deals and champion about five real estate projects. I was the key account person for the projects. I was able to generate millions of naira in sales for the company. Interestingly, it was my first job.

My tasks started out as teamwork. Later on, it was based on personal effort. I had no break.

Sometimes, I would pick up calls and negotiate at midnights. It was an unusual experience.

How were you able to achieve this?

I united three crucial factors – sales, marketing and customer success.

These factors work hand-in-hand, but most sales people focus just on sales. I get multiple referrals once I

Do you think the Nigerian real estate market is overcrowded?

No, it’s not. It seems crowded because there are a lot of people thinking alike and trying to replicate the same process without innovation.

What do you do differently at Polymaths?

Firstly, our mode of operations is different. Our target audiences are corporations. We believe in creativity, and our staff members are young, vibrant and innovative.

Secondly, we see every client as a referral chain, so we are keen on client management and referral optimisations. Thirdly, we are looking at promoting real estate transactions online – making it better than what we have at the moment.

Kabiru Ajisafe

achieve customer success.

How do you see sales, marketing and customer success fitting together?

Sales, marketing and customer success to an extent determine how far a business will go and how profitable it becomes in the long-run.

Sales focus on the product, while marketing and customer success focus more on the client tastes and desires. To have a successful business, one must empathise, and one must put on the clients’ thinking cap. These three terms are crucial in every successful business empire.

Who is your mentor?

As a businessman, Warren Buffet is my mentor. Also, I have been privileged to be mentored by young and fantastic CEOs in the real estate industry. Dr Femi of Casafina Capital and Mr Nola Adetola of Veritasi Homes and Properties Limited have contributed a lot to my growth and development in the industry.

How did you venture into real estate?

…FG lost $1bn in 4 years

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ecent report by the Sustainable Entrepreneurs h i p a n d Ec o n o m i c Development Initiative (SEEDi) shows that Nigeria has lost over $1 billion (N306 billion) to corruption in MSME intervention programmes within the last four years.

The report entitled, ‘Stolen Dreams: How Corruption Negates Government Assistance to Nigeria’s Small Businesses’ states that money lost over the fouryear period exceeds the country’s capital expenditure on health and education combined within the same period.

“MSME-related corruption has siphoned over $1 billion from Nigerian state coffers between 2014 and 2018,” Celestine Okeke, lead partner SEEDi, said during the presentation of the key findings of the report in Abuja recently.

Do you think Polymaths will thrive amid current market competition and realities?

Polymath will thrive and go beyond. Do birds collide in the sky?

Have you seen birds-crash before?

The sky is big enough for everyone, especially those who sell value and are passionate about providing solutions.

What inspires you?

I am a spiritual person. Sometimes my inner man talks to me and gives me ‘ginger’. Also, the fact that I can change lives and solve a problem inspires me.

What does the future hold for Polymaths.

The future for Polymaths is awesome. We intend going digital with our transactions – making real estate investment easy and quick.

We want to be the people’s choice.

When people think real estate, or investment generally, Polymath should be the first choice.

EKSG partners NDI on youth, women empowerment

How Nigeria loses billions to MSME intervention programmes Josephine Okojie

My experience at Tolet.com.ng, now Propertypro.ng, groomed me for the real estate industry.

Real estate is something I have always wanted to do. I just didn’t know how to go about it until an opportunity was granted to me by Polymaths Real Estate Limited. I am thankful for this.

REMI FEYISIPO, Ibadan

“Corruption is endemic within the Nigerian government agencies meant to help MSMEs. Relative to their high cost, these agencies programmes appear to help very few actual small businesses.

“The agencies are set up to fail – eroding trust in government and functioning as conduits for embezzlement, contact fraud, deliberate waste and distribution of patronage,” Okeke, who is also a co-author of the report, said.

He stated that mismanagement within the various agencies to help MSMEs is inflicting a lasting damage and the opportunity cost on the sector that employs 84 percent of the Nigerian workforce and contributes 50 percent to GDP is high.

He called on the Federal Government to redefine how it provided support for MSMEs, noting that if the government fails to do this, money budgeted to grow entrepreneurship will continue to go down the drain without any reasonable results. www.businessday.ng

“The government needs to look for ways to improve the youths and create opportunities for them to create jobs for themselves,” he further said.

He called on the government to invest such funds in providing key infrastructural such as roads, rail and adequate power supply as well as address issues of overregulation’s to make it easier for struggling businesses to stay afloat.

The report, which was funded by the Carnegie Endowment for International Peace and Open Society Initiative for West Africa (OSIWA), gave a case study, citing South Africa and called on the Nigerian government to learn from it.

“Unlike Nigeria, the South African government programmes set up to assist MSMEs do not appear to have been captured by kleptocratic political elites intent of using them as mechanism for enriching themselves and distributing patronage,” the report states.

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Joseph Amenaghawon, programme coordinator of OSIWA, while speaking on the corruption within the MSMEs sector, said that there are incidents of corruption in the schemes government have created to support small business operators in the country.

Amenaghawon called on the government to make use of the report as a spotlight to investigate further if the corruption cases with the agencies are true “In the report an investigation was carried out in the Trader Moni as Wuse Market in Abuja and it was discovered that only very few beneficiaries were actually traders while the larger population where either civil servants or people who were not traders,” he said.

Abiodun Ihebuzor, chairman, Nigerian Association of Small and Medium Enterprises (NASME), Abuja chapter, said that the operating systems and institutions are corrupt while calling for the need of a paradigm shift in the sector. @Businessdayng

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kiti State government will partner with the National Democratic Institute (NDI) to achieve higher mileage in programmes targeted at empowering youths and women across the state.

Ayodeji Ajayi, state head of service, stated this while receiving delegates of the NDI in his office in Ado-Ekiti.

Ajayi, who noted that the current administration had lined up several programmes meant to aid women and youths in the state, observed that women are well represented in the political appointments made by the Kayode Fayemi-led administration in the state.

He cited different gender-based laws formulated in the state to protect the interest of women as well as efforts made to productively engage youths to avoid being involved in negative tendencies.

Earlier, Raymond Esebagbon, leader of the NDI delegation, who is also the deputy country director, stated that the institute chose to partner with the state consequent upon the good foundation already laid out

by Governor Kayode Fayemi during his first term.

34

Monday 27 May 2019

BUSINESS DAY

real sector watch

In shoes’ paradise ...How Aba craftsmen redefine shoemaking

ODINAKA ANUDU

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ebruary 12, 2019. It is a sunny Tuesday morning at Imo Avenue, one of the several leather clusters in Aba, the industrial capital of Abia State.

Christian Nnajiaku is cutting leather and fabrics into shape. He has been in this business for more than 15 years, so he understands shoe-making as a lion knows its prey.

To produce a pair of shoes, a shoemaker needs processed leather, adhesives, fabrics, nails, dye, heel, fittings, decorative items, and finishing materials such as polish, lacre and waxes. And Nnajiaku has all of them.

As chief executive officer of the small-scale ChrisKenzy Industries, he calls the shots and ensures that customers get value for their money.

He handles the cutting process, but his neighbour, Agapitus Mmadu, does the stitching with a manual sewing machine. As in a typical manufacturing setting, there is division of labour. The sewing machine used by Mmadu costs about N40, 000, but a sophisticated electric one is five times the price. Yet, he is not perturbed as this is what he can afford now.

Stitching is over and it is time to set the shape of the toe box and heel counters.

Amaechi Okoye, a young man in his thirties, handles this process with a machine fabricated locally in the industrial city. He uses coking

stoves to get the shoes into shape, unlike in a modern shoe plant where a thermoplastic machine heats the counters inside the toe and heel. But there is little Okoye can do. In fact, he has come to see his manual machine as an old wine that tastes better with age. He employs two young men in their 20s and has two others as apprentices.

Nnajiaku takes back his shoes and begins the sole and leather assembly process. But this time, he is assisted by his two staff members who themselves have mastered the art of shoemaking. It is a simple process that involves using a steamer to soften the shoe uppers. Then cementing starts and lasts for 20 minutes. After this process, wheeling begins.

This time, it is handled by another man who is vital in the entire production value chain. Success Ebere J. Hebert is a pastor but this has not prevented him from doing something he loves most. He uses a locally fabricated machine to smoothen soles. The machine cost him N15, 000 two years ago, but an electric type sells at over N130,000. He spends at least 20 minutes on a pair of shoes but electric machine ‘wheels’ 12 pairs in three minutes.

Th e p ro c e s s ha s n o t ended. There are others responsible for pressing. The pressing process compresses the bottom, sides, heel of the sole and upper together. At this stage, the shoes now take shape, but they still need to be ‘finished’.

Finishing shoes is the last

still sluggish,” he barks at a female apprentice, who is desperate to become a shoe exporter.

His supply contract is one of the best things that have happened to him.

He stands to rake N960,000 in profit if he is faithful to his South African customer.

Okenna has no registered business name, though he tells friends and patrons that he is the managing director of O’ Sam Enterprises. Yet, he gets contracts because he is skilful.

Success Ebere J. Hebert ‘wheeling’ shoes at Imo Avenue

stage, but it is sometimes seen as the most important.

It means ensuring that the shoes are smooth, consistent and wearable.

The edges of a properly finished pair of shoes are often smooth and maintain stability. However, a roughly finished pair of shoes is derided by consumers.

“If you finish your shoes badly, you won’t be able to sell,” Nnajiaku tells this writer in Aba. The industry is big The Aba shoe industry is made up of clusters such as Powerline, Imo Avenue, Bakassi, Aba North Shoe Plaza, Omemma Traders and Workers, ATE Bag, and Ochendo Industrial Market, comprising input suppliers, among others.

These are places where Nnajiaku, Okoye, Mmadu, Hebert and thousands of others get their daily bread.

Data show that there are over

Amaechi Okoye at his factory www.businessday.ng

80,000 shoemakers in the industrial city who produce one million pairs of shoes and slippers each week. All together, they make 48 million pairs every year at an average price of N2, 500, putting the market size at N120 billion, BusinessDay calculations show. This means the industry can feed 200 million Nigerians for one day (at N600).

Nnajiaku specialises in women’s shoes and makes 30 pairs each week. Three months before, he had got a contract from a secondary school in Owerri, a neighbouring Imo State capital, to produce 150 pairs at N2,500.

He had been paid N375,000 and he made a profit of N120,000.

“There is money in shoemaking but you need to know your onions,” he says. “Your products must be seen as top quality,” he adds.

Leaving Nnajiaku’s small factory, I enter Sam Oken-

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na’s. He is a middle-aged shoemaker who knows his onions. But he seems in a hurry. He is shouting at the top of his voice and has no time for frolic. On enquiry, I am told that he just got a contract from a South African school through a Nigerian representative.

He must produce 1,200 pairs of shoes in one month.

Failure to do so will deny him of further contracts.

It has been a good business. His client pays him N2, 300 for a pair of shoes. So, he will make N2.760 million in revenue if he completes production within the stipulated time. If he fails, getting his money will take him another two months.

“Drive the nail into the sole, fast. Don’t be lazy,” he shouts at one of his three staff members, named Obi. “Joy, allow the glue to dry.

I don’t like the way you work.

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Foreigners’ haven Francis Goldman, who has lived in Nigeria for 12 years, is moving round Aba this Tues day afternoon. His group consists of four traders from Spain, who are looking for new shoe designs.

“Apart from that, they are also looking to see if we can give them the exact Spanish designs they have in their bags,” Onyeka Onyenweaku, another small-scale shoemaker, tells me on enquiry.

That Aba is a foreigners’ haven is better seen than told.

Traders from West African neighbours storm the industrial city every week to buy different product designs, just as Southern African schools place orders directly from the shoe makers or indirectly via their representatives. Canadians, Europeans and the Chinese are also in the party, placing orders themselves directly or through their Nigerian proxies, BusinessDay was told in Aba. However, shoemakers do not earn foreign exchange as they are paid in naira.

Online shops are on It is no longer business as usual as many shoemakers now sell their products online through platforms such as Gada Africa, Jiji.ng and abanaijamade.com.ng, among others. These platforms handle marketing and distribution of shoes, including belts and trunk boxes.

They take 20 to 50 percent as commissions.

The government steps in As of 2017, the Nigerian military bought 50,000 pairs of boots from Aba shoemakers at cost estimated at N300 million. This means that each boot cost N6, 000.

There were also orders from the Nigerian Navy, the National Youth Service Corps (NYSC), the police and Civil Defence Corps, Okezie Ikpeazu, Abia State governor,

Monday 27 May 2019

BUSINESS DAY

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real sector watch tells BusinessDay in an exclusive interview.

The Nig er ian Pr is ons bought more than 50,000 pairs of shoes from Aba in 2017, apart from direct orders from Aisha Buhari, Nigerian president’s wife, for the supply of thousands of pairs to school children in internally displaced persons (IDPs) camps in the North East.

These government agencies used to import footwear from China, Italy and Spain.

But raw materials are scarce It is not all ‘uhuru’. Before Nnajiaku of Chris-Kenzy Industries started the production process, he had to buy goat and sheep skins. Original goatskins cost $2 to $5 per square foot in the global market. But they are hard to come by. They are locally available and ordinarily should be easy to acquire from local Fulani herdsmen. However, the herdsmen sell mostly to tanneries which process them for export. This is purely a business case, but shoemakers feel it is putting them on the spot.

“We go to China to buy what we have here,” Nnajiaku says.

“Unfortunately, what we get in China is inferior synthetic leather,” he adds.

Synthetic leather costs N300 to N400 (around $1) per square foot, findings show, but no one produces highquality pairs with that.

Nnajiaku is not the only one who feels that Nigeria’s penchant for exporting raw materials is killing local industries.

“What happens is that the tanneries in Kano and Kaduna process animal skins and sell them as leather in the global market, earning foreign exchange,” says Chinatu Nwagbara, coordinator of Made-in-Aba Project, who produced shoes for Olusegun

Obasanjo, former Nigerian president, in 2016.

“It is good to earn foreign exchange, but what impact does that have on local industries using the products as raw materials?” he asks.

Qu e s t i o n s hav e b e e n raised over Nigeria’s penchant for exporting raw materials or products. In the last quarter of 2018, Nigeria exported finished products valued at N75.6 billion, according to the National Bureau of Statistics (NBS).

The value of raw materials exported was N137.7 billion, when considered that the majority of agricultural products exported were raw materials for companies in Europe, China and the United States. Some of agricultural products exported were cocoa, leather, and shea butter, among others.

Italy, Spain and China are the biggest buyers of Nigeria’s leather (animal skins) because they use it to produce high-quality, expensive shoes. Similarly, the Netherlands, Spain, and many European countries are biggest buyers of cocoa, which they process into chocolates and tea.

Little money for shoemakers Shoemakers lack sophisticated machines and cannot meet demand because they lack funding.

“Requests come to us every day, but we cannot meet up because we don’t have money to buy good machines,” Ken Anyanwu, secretary of the Association of Leather and Allied Industrialists of Nigeria (ALAN), who produced shoes for the Nigerian Armed Forces in 2016, tells me.

“The Bank of Industry has done its best by giving few people N300,000 each, but it takes 100 or 200 times that money to set up a standard

Christian Nnajiaku at his mini factory

shoe factory,” he says.

“Again, commercial banks are not interested,” he adds.

A standard shoe factory costs $250,000 to $750,000, findings show.

More so, lending rate to the manufacturing sector averaged 22.21 percent in 2018 and 22.84 percent in 2017, according to a recent survey by the Manufacturers Association of Nigeria (MAN).

Nigeria’s monetary policy rate (MPR), which is a benchmark interest rate in the country, is 13.5 percent.

Deposit money banks lend as high as 25 to 35 percent, according to BusinessDay

checks.

The current repo rate (central bank lending rate to commercial banks) in South Africa is now 6.75 percent while the prime lending rate (lending rate to customers) is 10 percent, BusinessDay understands.

Similarly, Kenya Central Bank’s monetary policy committee cut the determining bank rate in late July of 2018 to nine percent from 9.5 per cent.

Kenyans now borrow at an interest of 13 per cent (as against from 13.5 percent earlier) in line with the interest rate capping rule that limits lending rates to four

percentage points above the CBR. Zambia cut benchmark lending rate by 50 basis points to 9.75 percent in February last year, citing lower consumer inflation and weaker economic growth, according to Reuters.

In October 2017, the central of Ethiopia raised its benchmark interest rate to seven percent from five percent.

At least the benchmark interest rate of most SSA countries have remained single digit, barring few, meaning that it is cheaper for businesses to access funds there than in Nigeria.

Bismark Rewane, CEO of Financial Derivatives Company, has been consistent on asking the CBN to cut rates to aid economic recovery for a country that just exited recession.

A senior bank official, however, says many businesses lack of proper documentation, structure, plan, and financial history.

“This is only a half-truth,” Ozuora Ikem, chief executive of United Shoes, says.

“We cannot afford their collaterals,” he adds.

MAN, an association of over 2,000 companies, says only a single-digit funding plan can spur industries like Aba. It also wants the government to earmark more cheap funds for manufacturing.

it a cynosure of all eyes,” he recommends.

Then the roads Bakassi, one of the leather clusters, is often seen as an eyesore during the rainy season. It is wet , muddy and grubby.

“Aba generally lacks adequate road infrastructure, “one of the shoemakers, who does not want his name published, says. “We need to attract big shoemakers, but they will look at your infrastructure and doing business numbers before coming,” he adds.

No formal structure Many shoemakers in Aba do not have business plans and are not registered at the Corporate Affairs Commission.

In fact, there is no record of export done by these manufacturers.

“We need to have even proper physical structures in Aba,” Nnajiaku demands.

“Ariaria is not an organised market. Government needs to step in and make

Power too Aba is powered mainly by individually-owned energygenerating sets. Many of them have two to three in their small spaces. It is expensive to run a business with generators, as it wipes off some of profits, experts say.

Geometric Energy is set to berth in Aba to power the industrial city and shoemakers are excited. However, this news has been on for two years now.

Julius Ndukuba, chief operating officer of Aba-based Starline Industries Limited, says improved power supply in the area will bring down production costs and increase the production capacity of manufacturing firms.

“The tendency is that you can now produce more at a cheaper rate, because one of the biggest and important inputs for every production is power,” he says.

Eleanya Okoroji, former president, Aba Chamber of Commerce, Industry, Mines and Agriculture (ACCIMA), believes that improved power supply will have appreciable impact on commercial activities in the city. He notes that Aba business community eagerly awaits Geometric Energy.

zero tolerance to substandard products. We are going to take the fight to everywhere. We have done enlightenment and awareness, so, every Nigerian is expected to play the game right.”

Speaking on the next line of action, Okon said that “after this, we are going to embark on serious enforcement, we will look at all sectors and as well as limit ourselves to each sector.

“The reason why textile industry is no more is due to substandard products. We all allowed our country to be flooded with lots of fake products, so, we are not going to allow it any more,” she added Popoola Ayobami, who presented a paper titled,

‘Substandard Products: Identification, Effects and Solutions’, said SON set standard for production, products certification, capacity building, consumer complaints for economic development and business growth.

He disclosed that Nigeria spends N50 billion every year on substandard products, which are actually affecting our economy.

While encouraging manufacturers to always produce quality for consumers and for their businesses to be able to compete favourably in the market, he said it can minimise waste, increase productivity, guide production and sales, while guaranteeing safety of the products as well as ensuring a healthy nation.

SON eyes synergy in fight against substandard products SIKIRAT SHEHU, Ilorin

A

s part of measures to rid Nigeria of substandard products, the Standards Organisation of Nigeria (SON) has sued for synergy between the agency and stakeholders to fine-tune ways of fighting substandard products and developing the economy.

Osita Obaloma, directorgeneral and chief executive of SON, stated yesterday that SON was committed to collaborations,capacity building and improving infrastructure as part of strategy for satisfactory service delivery that meets the expectation of consumers,

manufacturers, importers and traders at local and international levels.

Obaloma requested collective support towards improving the living standards of Nigerians by effective and efficient provision of increased access to standard quantity and safe products to consumers.

In her remarks, Esther Okon, Kwara State coordinator of SON, called on Nigerians to reject from substandard products and focus on doing things right.

According to her, the problem of fake products in Nigeria market has caused so much harm in our society.

While expressing the need for proactive measures, she www.businessday.ng

said: “We are creating awareness among stakeholders on the ills of substandard products.

“So far, it has created a very huge gap in the economy, making it impossible for

us to actually meet up with the global standard products.

“We have lost lives and properties, lots of waste among others.

“To the manufacturers, right now, SON stands for

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Monday 27 May 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Why wealth preservation fails, and how to fix it The Solid Wealth Messenger

Grace Agada

I

f you’re an active parent, it is natural that when your child is preparing for an examination, say JAMB examinations, there are certain things you would do to ensure he or she is successful. First, you will seek to understand the criteria for passing the examination. For this, you will study the JAMB syllabus and you would also review the JAMB brochure.

Next, you would apply for JAMB, taking the terms and conditions into careful consideration.

You will then buy your child the materials and textbooks required for study and encourage him or her to start preparing for the exam as early as possible. Where you can, you would also be a part of the study process. For example, since JAMB has adopted a computerbased system for the exam, you would ensure to brush up your child’s familiarity with a computer where he or she isn’t very computer savvy.

As the exam draws closer, you would get past question papers, register your child for tutorial classes, and even prepare your child for the practical JAMB mock exam which is a simulated version of Jamb. All of these you would do, just so you can increase the chances of your child passing the examination. At the end of the day, you would have helped your child: Understood the criteria for

passing the exam, applied for the examination, studied past question papers, learn the necessary skills, form helpful relationships with present and past jamb candidates, and start preparing early.

This is what responsible parents do when they want their child to pass an exam. Yet, when it comes to probably one of the most important examinations in a child’s life – “the wealth exam”, it is almost as if parents do not want their children to pass. They leave preparation till the last minute, they leave it to chance in hopes that their child will grow up and somehow be ready for the exam.

These parents make the costly assumption of thinking that their child will grow up and become prepared with age. They equate age to wisdom and good decision making. They forget that the reason the adult prisons is full of adults is because there are still many adults who cannot make the right decisions without help.

If the most important exam that can ruin your years of hard work is left without the necessary preparation, your wealth is set up to dissipate. How are you preparing your children to qualify and pass the wealth exam? Are you preparing them at all? There are three things you can do right away to begin the preparation process: The first thing you must do is to set clear criteria for the wealth exam. How do you know the person that is qualified to take over from you? What does this person need to do, what skills must this person have, and what ground rules must this person adhere to in order to qualify? No one ever passes an exam without first understanding the criteria.

Many times, parents find it hard to articulate these criteria themselves; other times, they

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

keep these criteria as secrets locked inside their heads, for fear of relinquishing control and also for the liberty of changing the criteria as they deem fit. Whatever your reason, it is better your child know these criteria and starts preparing now that you are here to make the necessary changes.

The second thing you must do is to equip your child with the necessary skills he or she needs to pass the wealth exam. The traditional school system will equip your child with theoretical knowledge that alone cannot help your child. Your child needs to gain relevant skills through the wealth mock examinations, extra lessons learned from past experiences, as well as engage in a level of handson practical training.

The final thing you must do is to surround your child with the important relationships he or she needs to prepare, receive motivation and thrive. Your Child needs relationships they can relate to at their level as well as relationships they can look up to for guidance.

The forming of these relationships must not be left to chance.

There must be a process and system for forming these relationships.

Leaving the preparation for the wealth exam until the last minute is the reason why most wealth creators reach the end of their lives without a worthy successor to take over their wealth. It is, thus, important that this preparation starts on time. If you invest so much time in preparing your child for basic examinations that have little impact on their lives, how much more time should you dedicate in preparing them for the ultimate wealth examination?

When your children do not

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know what to do or have the skills and competence to preserve wealth, the best thing you can do is to help them prepare and qualify and not wait and see if they qualify by themselves. Your goal is to help your children become the successors you want them to be before your time is up.

You have made the right choice to create wealth for your family and you have performed the noble job of providing for your family. Now is the time to lay the groundwork and make sure your family knows exactly what to do and how to carry on with your wealth affairs when you are no longer here.

What a gift it will be to replace the guesswork, fear, dependency on you and confusion, with preparation, self-reliance, confidence, and the courage to steward generational wealth.

Successful wealth preservation and preparing your children for wealth requires many of the same skills required for the preparation of a basic exam.

If you need help with preparing your children for the Wealth exam or even knowing what to prepare them for send “Wealth Exam” to 08101860042 to get a copy of the Checklist “The 12 Systems your Child Need To Master for Wealth Preservation”.

‘

Your Child needs relationships they can relate to at their level as well as relationships they can look up to for guidance

Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer.

Email: info@createsolidwealth.com Tel: 08101860042 @Businessdayng

Monday 27 May 2019

BUSINESS DAY

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38

Monday 27 May 2019

BUSINESS DAY

CEOINTERVIEW Interview with Private Sector Leaders

Why we pioneered USSD payment in NIYI TOLUWALOPE, managing director and CEO of E-Tranzact, one of the leading switching companies in Nigeria in this exclusive interview with BusinessDay’s FRANK ELEANYA revealed why the company pioneered the Unstructured Supplementary Service Data (USSD) payment in the country and the first mobile money transaction in Nigeria.

T

ell us about your background I started out as an accountant at PricewaterhouseCoopers (PwC), joining the audit and advisory team back then. I worked on a couple of privatization deals which I was asked to oversee. I also did some advisory work in PwC, like the purchase of Starcomms; I actually led that transaction. The work I did at that time was what picked my interest in core corporate finance and investment banking. On some of the transaction we worked on I partnered with some of the investment banks at the time. I marveled at their approach, metrics and the quality of the stuff they were talking about. I started researching how to get into that world. I went for MBA at the University of Virginia and graduated as a Dean’s scholar. I joined investment banking quickly at Citi Group, in their mergers and acquisition department where I worked for 12 years. After that I got an opportunity to go to London and head the alternative business focusing on Africa. But I wanted to stay back in Europe so I went to join JP Morgan’s investment banking team. I was there for a couple of years and moved to Credit Suisse with focus on power (energy). My father is a professor and his specialty is in power systems, so I had always known a lot about Nigerian Electric Power Authority (NEPA).

I had the intention to raise a fund that I will invest in power sector. But the power sector in Nigeria is a different dinosaur; it is beyond fund raising.

I came back to Nigeria in 2010-2011 and had a small stint with the Honeywell Group. I was advising them on the sale of their investment in Airtel at that time. At $10 million, it was the biggest transaction in telecommunications in Nigeria. I worked on that transaction with one of the shareholders who owned 20 per cent of the business.

Shortly after, I was approached by Capital Alliance who is an investor in E-Tranzact.

They had an investment and they needed a chief of finance (CFO) to come and do. I had the requisite background for financial accounting, corporate finance, investment banking, and private equity. Also my big 4 PwC background; as a chartered accountant, was what they needed because they have been in investment for a while and they needed a CFO that will guide them to exit. In private equity you invest for a while and you exit. That was what they wanted.

I knew nothing about fintech then. One of my key strength growing up was being a fast learner, once I understand the dynamics. I am a numbers person; if can always see it in everything and if can tell the numbers story I can easily tell a great story and the strategy becomes clearer. Those were the things that have gotten me to where I am today.

Joining E-Tranzact in the early stages,

we struggled a bit with profitability. This was largely because we were doing so many products, being a very innovative business.

I felt that we were not optimizing our ability to sell them properly and dominate the market. One of the things we did quickly was to streamline our products and look at what was profitable and what wasn’t. We focused on that and things started to change. Our remittance business, mobile banking business, corporate banking business everything transformed into profitability over the last couple of years.

What specific problem was E-Transact created to solve?

Electronic payment; at that time – around 2002 to 2003 – Nigeria was heavily cash dependent. Suddenly the influx of telcos and mobile phone created new opportunities. www.businessday.ng

‘‘

We need to have agents every length and breathe of the community to keep activities flowing more regularly

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Based on the issuance projections, it was expected that about 20 million people within the next five years will have mobile telephones. At that time also, if you looked at the number of bank accounts it was probably less than 20 million. Hence, the expectation was that mobile telephones were going to grow quick. But the country was still heavily cash dependent and if we wanted to move transactions to digital, mobile might be the best way to do so. So we began to think and develop a solution around mobile money and mobile banking. That was what E-Tranzact was founded on, to leverage on the growth potential of mobile phones, mobile subscribers and create solutions that can allow them use their mobile phones and devices to do transactions.

Tell us about your first electronic product Our first product was mobile and it was largely SMS

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Monday 27 May 2019

BUSINESS DAY

39

NIYI TOLUWALOPE MD/CEO, E-Tranzact

Nigeria – E-Tranzact boss based. Look at the challenges we had then when we all started using mobile phones. I send you an SMS today and you can only get it the next day. I remember some of the patents the founders gave the Central Bank of Nigeria (CBN). They did the transaction there and nobody got the SMS, but the next day they received it.

You need infrastructure to be right for these solutions to really grow and perform. When you travel abroad and you are buying something at the till, you just swipe your card and cashier gets it. If you card is going to be declined, it will be done immediately and if it is going to be successful, it is immediately. You don’t see “approval”, “resending” “authentication” etc that you spent almost 2 minutes making a transaction. It is all based on infrastructure. Even though things have significantly improved but we are still far away. The backbone we need is still not there so we still need a lot of investment from government, telcos and people like us, into infrastructure to ensure seamless and convenient payment flow and through.

So we started a mobile SMS based. At the time not a lot of people bought into the story. There is a Nigerian culture which is still prevalent today; we have that need to feel cash. A lot of it has to do with trust. If you are making a payment to the average person out there, he wants to take that money or give you that money while he is looking at you in the eye so there will be no stories. For instance, if I am I did a transfer and told you I have done it, you can tell me you did not receive it or I tell you it’s done even though I didn’t do it. There are trust issues that hinder the growth of digital payments.

However, this is an innovation hub; we are market leaders in innovation. That can be verified.

Over time our development team realized that we can actually build apps that rely on data to do this. So the apps and the data made it easier to provide the solutions rather than relying strictly on SMS. There is a school of thought that sometimes SMS is not secure. Gradually, SMS side of things is in decline, that today it is only for notification of credit and debit alert. But it is still a big business.

Transactions however have evolved into smartphones using the apps. The people who can afford smartphone apps, sadly, are just two per cent of the market while the bulk of the market is still using Nokia 3310 and black screen phones – feature phones. That was the market we were trying to break into. We realized that the people who can afford smarpthones probably already have bank accounts, and they do bank transactions.

What is the other innovation you created?

The other innovative thing that came was the USSD (Unstructured Supplementary Service Data) which includes the *389* and the *737*. That innovation started from here in 2012.

How did it happen?

We were having a conversation. Steve Jobs, when he created iPod he was just passing by and saw the Discman people were using. He thought, “Why can’t you create a solution that on two to three clicks you can hear the music?” That was the birth of the iPod. That was what we thought about here, why can’t we make payment just “*” this, press Enter”, with fewer clicks. We started from here, register, debit your account and recharge your phone with airtime, it started right here. When that came out it created a direct access to get the other hundreds of millions of Nigerians that did not

‘‘ What wakes us up every day is how do we make wallet funding easier? have smartphones to be able to have USSD streams they can build transactions on. Look at how that has evolved over time; practically every bank has a USSD stream and we power switching transactions for all the banks. The fastest growing channel today is the USSD. I have clients that started in December 2018, doing 35,000 transactions a day on that channel; today they are doing 78,000 transactions a day. It has more than doubled because everybody is doing it. It is so easy the CBN has even pegged it to N20, 000 once and N100, 000 a day. Before now, people who wanted to transfer N100, 000 could send it once. But today you have to do it five times. So it is increasing transaction activity and also security.

If you want to do more we can profile you to do a lot more. That is bringing a lot more people into the banking sector. Today, loans are done

by USSD. These are all the cumulative things that have built what everybody is driving now.

to buy all the equipment that the banks will need. We say to them, “this is what you want to do, take it we sell it free. Use it for three months, if you like it, pay us.” The rest is history.

You have to be bold to crack the market.

Look at the records today, in 2018, there were about 800 to 900 million individual inter-bank transactions, this year the target is about 2 billion because the growth is there. Already, this year we have done about – year-to-date- 400 million in the first four to five months, which is already about half of what was done last year. I believe we should exceed the target as an industry.

Talk to us about PocketMoni and how the name was originated?

One of our major focus as a brand here is financial inclusion. The focus has always been on the 20 to 30 million bank accounts – but those guys are already banked. They understand electronic payment. They are the ones that are doing all these transactions I am talking to you about. There is data that we always use here when we do our strategy and our focus. There are about 180 to 200 million Nigerians and we have about 40 million bank accounts. When we streamline it, a couple of Nigerians have two to three bank accounts which make up the 40 million. By the time you add it up, and look at the BVN; one BVN can have about 5 accounts – you might get about 20 to 25 million authentic BVN accounts which also brings the number of people that are actually banked to 20 to 25 million.

So what happens to the about 160 to 150 million Nigerians? You have net-number after streamlining, about 90 to 100 million people in the country without an account. Let’s assume that all those that have mobile phones have bank accounts. So if you take 25 million

What was the relationship with banks back then being a non-bank entity coming into a space they dominated?

How has the relationship evolved over the years?

Yes we are a non-bank financial institution giving a license switch by CBN. Nevertheless, we are the only CBN entity with about 6 to 7 licenses. We have a switch license which is the entry we have here and in the banks that allows you to move money from your account in GTBank to another account in First Bank, for instance. It also allows people to send money from abroad or through Western Union directly into your account or your wallet using our PocketMoni.

Back then no one knew anything about switching. All the transaction that happened was, print out a statement send it to National Clearing Service (NCS) which is now NIBSS, who disburses the money to the different bank and send a message to the customer. That is why in those days it takes two to three days for money to clear. A switch allows you to send money directly to someone who gets instant value without money actually moving. To achieve that you needed the banks.

One of the entry strategies we had was www.businessday.ng

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from 90 million you have 65 million. This 65 million people have mobile phones and they are making calls; to do that you need to put hand in your pocket and buy airtime. That means they are making money. Why are they not banked?

They don’t trust the banks or the banks do not have the infrastructure in the area or the people are not educated enough. On the other hand they do contributions, esusu and ajo because there is always one person in that rural community they trust. They can give the person their money and expect to get it back. They understand the trust issue and the fiduciary relationship in the person they see all the time.

Hence those who have exemplified themselves as a trusted entity within the community can become banks. You just need to find a solution that enables that person function as a bank in the rural areas. That is where the ETranzact agent bank comes in. We find those kinds of people, train them, equip them with the solution where they can collect cash and have it as electronic float. They can pay out cash from their e-wallet as well, and three they can do transactions for those rural people.

They can then recruit everybody in that community to own a wallet. So they do not need to call the agent all the time for transactions.

The only thing is you can come to them and say take N5,000 cash and load in your e-wallet or you can even do it yourself. That is what a PocketMoni came out to achieve.

We got our mobile money license in 2011 but we started providing mobile money since 2005. CBN did not have a clue then. One of the examples we like to give, is the World Bank assisted project where some of the executives here went to Kano State and they faced the cattle rearers and traders. We were presenting this e-wallet that day and one Alhaji stood up and said “So you can put money in this wallet and I will travel and nobody knows there is money in it? And when I get there I can use it?”

All of us said “Yes”. The man brought out N200, 000 cash and said, “Put this in the wallet.” We signed him up immediately. He was probably one of the first people we had back then.

Today we have about 15,000 agents and 3-4 million registered users on the PocketMoni app. Activity can be a bit low sometimes; you still need a larger agent network to create transaction activity and the specific location where people can go and fund their wallets.

What wakes us up every day is “How do we make wallet funding easier?”

Unlike MPesa in Kenya through Safaricom – Central Bank in Kenya does not cover that – they could use airtime to move your wallet as cash. In Nigeria there is a regulation that forbids that because the Central Bank has to control financial inclusion. If that is not there you need to think of other ways to fund the wallets. We have created several ways to achieve that but much of it still flows from the population that is banked. With their cards, they can fund their PocketMoni today and from there can transfer to any other PocketMoni account or to any bank account in the country. We need to have agents every length and breathe of the community to keep activities flowing more regularly.

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Monday 27 May 2019

BUSINESS DAY

INTERVIEW Children’s Day: We have to build pride in Nigerian children concerning the nation - Titi Adewusi Titi Adewusi is Vice President, Global Business Development and co-founder of 9ijakids. The App- based platform for education in academic, business and financial knowledge and more importantly values learning weaved in fun games for children was introduced by three sisters, all engineers, a year ago. In this interview, Titi told Daniel Obi that their intention is to build generation of children who become successful in business at same time become great citizens with right values using games as a tool to help children develop an entrepreneurial mind-set, teach them the values that make them upright. The App which contains many games makes learning in financial literacy, business, understanding Nigeria better and other areas fun.

What we are doing is to utilise technology to make learning exciting and entertaining for our children. Excerpts Could you tell us more about 9ijakids concept which is focused on children? e saw the need to promote education, values and Nigerian brand. We found out that among families, children and Nigerian youth, there is disdain for anything Nigeria. Unfortunately, things about Nigeria that get on the public space are about corruption and scam. We decided to build a platform to promote Nigeria among children. We thought of coming up with puzzle books, but we changed our mind on the realisation that children these days are not much into reading but on the tablet. These days, parents are struggling their phones with their children. Based on this information, we came up with games to pass across the same message but in a fun way. Take for instance, the game of Monopoly allows people to remember the streets in London even before individuals visited the city. This created traction for London. Also individuals build literacy skills playing Scrabble. This means that through playing a game, individuals can learn something. We are also developing destination Lagos and Pan- Nigeria destintions and other concepts.

This is exactly the concept of 9ijakids platform.

This is to teach children something using the means they enjoy, which are games. Now that technology is the driving force, we decided to make it an App. What exactly do the children learn through the App? It is not just for academics. For us, it is not just Mathematics, English, Sciences and so on which is though good but we feel that there are other things that should form the foundation for every child. To us, the first are values, teaching about honesty, integrity and mostly the Nigerian identity. Some people really say unpleasant things about Nigeria, which is one side of the story, but we as a nation can actually push our second narrative. This is what the game does. Nigeria is not all about corruption. Secondly with the way the World is, it is also important for Nigerian children to inculcate financial literacy. This includes value of money, savings and revenue etc. The App which contains many games makes learning in financial literacy, business and other areas fun. What we are doing is to utilise technology to make learning exciting and entertaining for our children. We are teaching our children values that are Nigerian while pushing for excellence but in a fun way that they will enjoy doing.

Are you saying that it is only App based learning for children?

It is an App-based learning platform.

Once there is a smart gadget, the App can be downloaded and the children can play it. It is one App that has different bundles of games and values. It depends on what you want your child to focus on. For instance, there are games on entrepreneurship, financial literacy, democracy and football etc. In playing the game, the child gets points to determine his/ her level of knowledge. Do you imagine that when you tell your child to read his/her book, the child begins to form excuses but when you tell him/her to come and play a game,

W

Titi Adewusi

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narrative and tell you what you want to hear and our children buy into it, deepen their knowledge about foreign events than Nigerian events. Our passion with 9ijakids therefore is to begin to create a different narrative about Nigeria by involving the children through the App. In Nigeria there are potentials, that is why multinationals are bent on coming to Nigeria but Nigerians never appreciated what they have.

For how long has the project being in existence?

Just over a year.

This is a wonderful concept that keys into enhancing learning and promoting Nigerian values. But are you involved in partnerships to further the concept?

When we started, Nigerians were occupied with 2019 elections and now the elections are over, we will take it up from here. For me, this is what I really desire, that is, to push Nigerian positive narrative forward by catching the

‘

For me, this is what I really desire, that is, to push Nigerian positive narrative forward by catching the children through games

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‘

the child jumps at it. There is also citizenship game that tells a child all about citizenship, talking about longest river, when Nigeria got its independence, national symbol, many personalities in Nigerian history and meaning of National flag and many more. We have to build pride in Nigerian children concerning the nation. We should not have a check-out mentality. People can still check-out, that is fine but if you don’t make them proud of who they are now, there is nothing tying them back home. One thing is that no matter what you hear about Nigeria, some people are excelling in the country. Interestingly, there are other things we should be proud of about Nigeria.

The country really has a lot of positive firsts.

Some people will argue that all those firsts are history but we need that narrative to propel us. My hope is one day; Nigeria will be a force to reckon with. At the grassroots, there is a negative mind-set that is prevalent and this is constantly passed on to generations but we can change the narrative with our children by telling them the sunny side of Nigeria and good name is better than riches.

Are there other areas of study for the children?

What we have done is to take school curriculum and put it into learning game App for children. Apart from the academics, we have other things which are values and skills such as financial literacy, business, democracy and sports all designed in a fun way for children taking into consideration the Nigerian culture.

For instance, when we teach music through the game, we are not teaching only with Piano and with French or English instruments but we will add indigenous instruments. To us, whatever the children are learning, we make it fun for easy understanding. We want our Nigerian children to know more about Nigerian history. Foreign countries guard their

children through games. One area government needs to held in advancing education is access to technology. Whenever we go to schools with systems, children show great interest in playing the games as they want to have high scores in the game. This enhances their learning. Children are enthused with technology as they navigate through mobile handsets easily. Our desire is to advance this skill and employ it to teach them values and academics.

Is the App locally developed and what is the cost of download?

All we do, we do locally. We have a team that conceptualises the whole games and develops them. Downloading the App is free.

It comes with some free packages but other packages come at a cost as low as N3,000. My hope is that the more funding we get, we will likely drop fees so that many children and families can access it. In the modern day, technology has to be a regular part of a child.

The game appears to be an elitist one for particular children, as only the wealthy children can afford smart devices, do you agree?

This is where we need support to make all children or most children have access to smart devices for learning. The elitist children don’t really do well in the game than common man children. The common man children have hunger to know more and they don’t give up.

Therefore the common man children need access to devices and this behoves on the leaders to introduce technology to education as technology has become significant in today’s life. Companies can partner with schools and government to introduce technology in schools for children use.

Tough environment is a big challenge in allowing youth achieve their dream learnt through such platforms like 9ijakid App, what is your take?

What I have realised is that there are some people and organisations that help the youth in the practical aspect. I met a woman who helps public schools manage vocational studies. I agree that the practical aspect is important. There is not much white collar jobs, so it is important that at secondary school level, students are exposed to entrepreneurial skills and vocations and financial literacy.

Talking about partnership, would you accept partnering with banks to advance their products?

It is about pushing education on how to save and invest and teaching financial literacy than promoting specific bank products. If we want Nigeria to be the next China, Dubai, it involves a conscious effort on the education.

Education is also mind-set. In Nigeria, we have the resources, the brain to make it happen. Therefore how do we cultivate that mindset, it is to believe in Nigeria that it is possible here with integrity and values.

For one year of the concept, what have been the challenges?

Some Nigerians are still doubtful what the concept is all about. Ordinarily Nigerians have condensing attitude of things made in Nigeria.

Another challenge is funding but when prices of tablets come down, many Nigerians will key into it for learning.

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Monday 27 May 2019

BUSINESS DAY

MARKETS INTELLIGENCE

41

Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Insurers’ profit margin pressure increases as expenses rise BALA AUGIE

D

eteriorating rates and rising combined ratios have prevented insurers from turning each Naira realized in revenue into higher profit as experts call for a mergers and acquisition that will help unlock potentials in the industry.

Analysis of the 2018 audited financial statement of the largest insurers and reinsurers shows aggregate net income reduced by 22.18 percent to N31.15 billion from N40.03 billion a year ago.

Combined average net profit margin fell to 9.51 percent in December 2018 from 22.03 percent in the period under review despite a 13.31 percent uptick in cumulative premium income to N261.11 billion.

Analysts are of the view that the disparities in rates insurers charge corporates are undermining revenue growth whilst the cost of doing business is increasingly ballooning operating expenses.

“Corporate clients are always looking for a bargain, that is, they want lower rates as the industry is constrained or compelled to take those transaction,” said Owolabi Salami, Executive Director of Allianze Insurance Plc. “Meanwhile cost of doing business is going up. We incur car, rent AND electricity expenses. We increased staff salaries by between 27 percent and 28 percent,” said Salami.

The federal government have said that a minimum of $3 trillion investment would be needed if the country is to bridge the infrastructure gap in the next 30 years.

Companies rely on diesel oilwhich is very expensive- to run factories and offices across the country as power from the national grid remains unreliably unstable.

Growth in Nigeria’s fragile economy slowed to 2.01 percent in the first quarter as the country’s dominant oil sector shrank, according to the latest report by the National Bureau of Statistics Insurers have seen cumulative operating expenses increase by 34.73 percent in December 2018 from N48.62 billion the previous year.

However, average return on equity (ROE) increased to 15.40 percent in the period under review as against 13.45 percent as at December 2017 while shareholders’ fund fell by 21.40 percent to N239.31 billion as at December 2017.

A breakdown of the figures shows Leadway Assurance Limited, the largest insurer by premium and asset, recorded a 56.45 percent drop

in profit after tax to N6.02 billion in the period under review while net profit margins fell to 8.41 percent in December 2018 from 19.81 percent a year ago despite a favourable underwriting performance.

Zenith Bank Insurance Plc’s net profit margin dipped to 33.46 percent in the period under review as against 44.93 billion a year ago as net profit reduced by 23 percent to N2.79 billion as at December 2018.

NEM Insurance Plc’s net margin fell by 26.61 percent to N2.03 billion in December 2018 from N2.77 billion the previous year while net profit margin fell to 19.04 percent in the period under review from 28.31 percent the previous year.

AxA Mansard Insurance Plc’s profit fell by 7.20 percent to N2.48 billion as at December 2018 while

net profit margin reduced to 12.60 percent in December 2018 from 19.40 percent the previous year.

Wapic Insurance Plc’s net profit dipped by 77.05 percent to N351.19 million in December 2018 from N1.53 billion; net profit margin fell to 5.18 percent in December 2018 from 27.08 percent the previous year.

Linkage Assurance posted a loss after tax of N290.11 million to end 2018 financial year as net profit margin stood at (8.34) percent in the period under review from 1.01 percent as December 2017.

Veritas Kapital Assurance posted a loss after tax of N695.25 million in the period under review from N700.64 million as at December 2017.

However, some insurers bucked the trend as they recorded an uptick in profit and margins amid a tough

and unpredictable macroeconomic environment.

FirstBank Insurance Limited saw profit after tax increase by 61.83 percent to N5.94 billion in December 2018 from N3.67 billion the previous year while net margins increased to 21.30 percent in December 2018 from 18.35 percent as at December 2017.

Aiico Insurance Plc’s net income rose surged by 145.58 percent to N3.15 billion in the period under review as against N1.28 billion the previous year. Net profit margin moved to 9.89 percent in December 2018 as against 4.59 percent as at December 2018.

Nigeria, with a population of 180 million, has an insurance penetration of 0.30 percent.

That compares with South Africa (14.7 percent), Kenya (2.8 percent), Angola (0.8%) and Egypt (0.6%). Similarly, the sector’s insurance density (a measure of industry gross premium per capita) is still one of the lowest when compared to peers – South Africa ($762.5), Egypt ($22.8), Kenya ($40.5) Angola ($30.5) and Nigeria ($6.2).

Moronfola Monsuru - Actuarial Analyst - Wapic Insurance Plc, said that that insurers should do more of retail business because it is more profitable and reduces risk. “You tend to retain more when you do retail because you cede less.

Salami said there has to be an aggressive merger and acquisition scheme in the industry because they are too many firms with a weak capital base that hinder them from taking on more risk.

The regulator has increased the capital bases of firms, and the new policy is expected to spur more mergers and acquisition, but big players will have to cough up cash to embark on such an exercise.

The minimum capital base for reinsurance companies has been increased from N10 billion ($27.7 million) to N20 billion ($55.5 million), and from N3 billion ($8.3 million) to N10 billion ($27.7 million) for general insurance.

Additionally, the minimum capital base for life insurance companies has been raised from N2 billion ($5.5 million) to N8 billion ($22.2 million), and for composite insurance from N5 billion ($13.9 million) to N18 billion ($49.9 million).

Insurers will have to carry out cost control exercise that will help them trim cost and bolster profit margins.

They can optimize operations by acquiring latest technology like most banks are doing.

Another way to bolster margins is by investing their floats in government securities like treasury bills and bonds or invest in real estate to earn income from rents.

P.E

SHORT TAKES 2.01% Nigeria economy expanded 2.01% in the first quarter of 2019. Growth was however slowed when compared with 2.38% reported in the previous year. Year-on-year, the economy grew 0.12 percentage points compared with 1.89% in similar quarter of 2018. GDP growth is still below population growth rate of 2.6%.

11.37% The consumer price index, (CPI) which measures inflation increased by 11.37 percent (year-onyear) in April 2019.

This is 0.12 percent points higher than 11.25% recorded in March. Food inflation accelerated to its 12-months high at 13.7% in April, 2019.

N145.3 Average price paid by consumers for premium motor spirit (petrol) decreased by -3.6% year-on-year and increased by 0.4% month-onmonth to N145.9 in April 2019 from N145.3 in March 2019. States with the highest average price of premium motor spirit (petrol) were Bayelsa (N148.64), Kogi (N147.88) and Yobe (N147.82).

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

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

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BUSINESS DAY

MARKETS INTELLIGENCE A snap shot of Banks’ Q1 profit BALA AUGIE

B

anks have recorded an uptick in profit, but the restriction the Central Bank of Nigeria (CBN) is about to place on government securities could cast a pall on future earnings.

Fees and commission income, reduction in impairment charge, and foreign exchange gains help compensate for a slow growth in gross earnings.

The cumulative net income of 12 largest lenders that have released first quarter results increased by 16.50 percent to N223.96 billion from N192.24 billion as at March 2017.

Drilling down the figures shows Access Bank recorded the fastest increases in profit, but Stanbic IBTC Holdings and Union Bank fell of the cliff as bottom lines shrank.

Lenders future earnings could be under threat as CBN moves to restrict their appetite for Federal Government Securities.

The Abuja based bank is set to roll out a comprehensive framework that would discourage the current high appetite by com-

‘

Restricting banks’ investments in government securities in the face of continued borrowing by the government, may imply an increase in rates on these instruments as a high percentage of the demand from banks would be cut off and rates would need to remain attractive to fill that demand

mercial lenders for government securities and encourage increased credit flow to the poorly-served productive sectors of the economy.

“The truth is that according to our own regulation, there is a particular minimum percentage of government securities that the banks must invest in to remain liquid, but again, we have observed unfortunately increasingly that banks rather than focusing on granting credit to the private sector tend to direct their focus mainly in buying government securities,” Emefiele said.

“The Monetary Policy Committee has frowned on that, and

has directed the management of the CBN to put in place policies or regulations that will restrict the banks from unlimited access to government securities,” he said.

The first quarter financial statement of Nigerian banks shows profit has been growing at a slow pace while interest income on loans and advances and treasury bills shrank.

Analysts say it is practically difficult to turn on the tap of lending to the economy when the real sectors are not de-risked.

Decrepit infrastructure, high cost of doing business and low consumer purchasing power have

hindered companies from magnifying operating profit that will enable them pay interest on loans borrowed from financial institutions.

Additionally, banks are still recovering from deteriorating asset quality, brought on them by the precipitous drop in crude oil price that crippled business in 2016.

“Restricting banks’ investments in government securities in the face of continued borrowing by the government, may imply an increase in rates on these instruments as a high percentage of the demand from banks would be cut off and rates would need to remain

attractive to fill that demand,” said analysts at CSL Securities Limited.

“Apart from the negative impact on profitability, as returns on these investments are guaranteed, banks may see an increase in funding costs as deposits will naturally leave the banks for more attractive yields on fixed income instruments,” said analysts at CSL Stock Brokers.

Banking sector index has shed -12.81%, this compares with NSE ASI of -1.18 percent.

First Bank (-11.32%), GTB (-9.72%), Zenith (-17.57%), UBA (-25.32%), Access (-14.71%), all underperforming the NSE ASI Index.

‘

Eight insurance firms elevate dividend pay-out 80 percent in 2018

D

espite rising operating expenses and low rate environment, eight insurers rewarded shareholders from distributable profit but there are room for improvement if a scheme of merger & acquisition is carried out.

The cumulative dividend payout of Leadway Assurance Plc, Axa

Mansard, AIICO, Mutual Regency, NEM, Lasaco, Consolidated Hallmark, Continental Reinsurance and Law Union, accelerated to N9.26 billion, indicating 80 percent uptick over N5.15 billion paid to owners.

Nigeria’s largest-listed insurer by market capitalization, Axa Mansard, excited shareholders with

a 6 kobo dividend per share, the highest since 2014. This translates to N63 million pay-out.

AIICO Insurance delivered N414 million to shareholders in full year 2018, indicating a 20 percent increase over N345 million paid in the preceding year.

The insurer’s dividend payout hits a 5-year high at 6 kobo

in 2018, compared with 5 kobo, 2 kobo and 5 kobo in the previous three years.

Although Consolidated Hallmark maintained status quo at 2 kobo, its pay-out surged 35 percent to N162 million from N120 million, on the back of 2.1 billion rise in its shares outstanding.

NEM Insurance elevated pay-

out by 30 percent to N689 million in full year 2018 from N530 million in the prior year, while cash dividend to Law and Union’s shareholders was slashed by half to N86 million last year.

Insurance stocks shed 14 basis points after Friday’s trading, and down some 8.3 percent year-todate.

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Access Bank Rateswatch Market Analysis and Outlook: May 24th– May 31st, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

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

Broad Money Supply (M2) (N’ trillion)

35.17

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

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

24.90 21.59

Increased by 3.76% in Apr’ 2019 from N23.99 trillion in Mar’ 2019 Increased by 0.25% in Apr’ 2019 from N21.53 trillion in Mar’ 2019

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

11.37

Increased to 11.37% in April 2019 from 11.25% in March 2019

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

13.5 Adjusted to 13.5% in March 2019 from 14% 13.5 (+2/-5) Lending rate changed to 15.5% & Deposit rate 8.5%

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

45.07 75.76 1.82

May 22, 2019 figure — an increase of 0.42% from May start May 24, 2019 figure— no change from the prior week April 2019 figure — a increase of 5.27% from March 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

Friday

24/05/19

17/05/19

30,881.29 13.60

28,871.93 12.72

Volume (bn)

0.29

0.27

Value (N’bn)

6.63

7.52

MONEY MARKET NIBOR Tenor

Friday Rate (%) 24/05/19

Friday Rate (%)

Change(%)

Indicators

24/05/19

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture 9.79 Cocoa ($/MT) (11.91) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Change Gold ($/t oz.)

Silver ($/t oz.)

(Basis Point) Copper ($/lb.)

1-week Change

YTD Change

(%)

(%)

75.76 2.57

4.18 (2.28)

17.53 (15.90)

2437.00 94.20 67.84 11.62 477.00

2.91 3.35 2.05 (0.60) 1.27

25.88 (27.65) (12.46) (24.20) 10.03

1281.88 14.57 269.05

(0.28) 0.69 (1.72)

(2.71) (15.24) (17.92)

6.96 6.96

17/05/19

OBB

11.14

4.57

657.0

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

12.00 11.44 10.97

5.29 5.07 12.13

671 636.6 (117)

Tenor

38.7

1 Mnth 3 Mnths

9.99 10.52

11.29 10.54

6 Mnths 9 Mnths 12 Mnths

12.02 12.60 12.82

12.76 13.52 13.87

90 Days

12.58

12.19

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

24/05/19

Friday

1 Month

(N/$)

Rate (N/$)

17/05/19

24/04/19

Official (N) Inter-Bank (N)

306.90 360.39

306.95 360.50

306.90 360.23

BDC (N) Parallel (N)

0.00 361.00

0.00 361.00

0.00 360.00

Friday

Friday

Change

(%)

(%)

(Basis Point)

24/05/19

Indicators

Friday

AVERAGE YIELDS (%) 17/05/19

(%)

Change (Basis Point)

10/05/19

3-Year 5-Year

0.00 14.39

0.00 14.04

0.0 35.6

7-Year 10-Year 20-Year

14.05 14.33 14.30

14.49 14.31 14.69

(44.1) 2.0 (38.9)

30-Year

14.69

14.69

0

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

Change

(%)

24/05/19 Friday

(75) (92) (106)

Friday

(%)

Friday

(130) (2)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

BOND MARKET Tenor

17/05/19

(Basis Point)

17/05/19

Index

2892.40

2890.46

0.07

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

8.70 5.41

8.70 5.42

0.07 (0.17)

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

17.75 -38.04

17.67 -38.14

0.08 0.10

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

91 Day 182 Day

4,384.18 12,920.90

10

12.3

15-May-2019 15-May-2019

364 Day

71,074.82

12.77

15-May-2019

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

Rate(%)

Date

Global Economy In the US, manufacturing Purchasing Managers' Index (PMI) declined to 50.6 in May 2019 from 52.6 in April according to IHS Markit.

The latest reading pointed to the weakest pace of expansion in the manufacturing sector since September 2009. This came on the back of broad-based slowdown in the rates of expansion for output, employment and preproduction inventories, while new orders declined for the first time since August 2009.

Elsewhere in the UK, consumer prices rose to 2.1% year-on-year in April from 1.9% in March according to the Office for National Statistics.

It is the highest inflation rate in four months, spurred by a rise in energy bills as Britain's energy regulator raised a price cap on energy providers by 10%. The annual core inflation rate, which excludes prices of energy, food, alcohol and tobacco, advanced by 1.8%, the same as in March and slightly below market forecasts of 1.9%. In a separate development, China inflation rate advanced to 2.5% yearon-year in April 2019 from 2.3% reported the previous month. The National Bureau of Statistics China said it is the highest rate since October last year with food cost rising the most in three years as an outbreak of African swine fever sent pork prices soaring further.

Annual core inflation, which strips out volatile food and energy prices, notched down to 1.7% in April, the lowest in seven months, from 1.8% in March. China's producer price index also increased by 0.9% from a year earlier in April, from a 0.4% rise in the previous month.

Domestic Economy The Nigerian economy expanded to 2.01% year-on-year (y-o-y) in Q1 2019, higher than 1.89% recorded in the corresponding quarter of 2018, but lower than 2.39% recorded in the Q4 2018. The non-oil sector was largely responsible for the growth seen in the economy as it advanced 2.47% in the quarter, 1.72% higher when compared to the rate reported in Q1 2018. It was majorly driven by Information and communication technology (9.48%), Agriculture (3.17%), Transportation and Storage (19.50%) Trade (0.85%) and Construction (3.18%). The economy growth was impacted by the decline in the oil sector as it contracted further to -2.4% in Q1 2019 from 14.02% recorded in the corresponding quarter of 2018, and -1.62% in Q4 2018.

In a separate development, the Central Bank of Nigeria (CBN) concluded its third meeting for the year last week. The committee members voted to retain the Monetary Policy Rate (MPR) at 13.5%, Asymmetric corridor around the MPR at +200/-500 basis points, Cash Reserves Ratio (CRR) at 22.5%, and Liquidity Ratio (LR) at 30%. The MPC called on the CBN to institute modalities and policies that will restrict Nigerian banks' access to government securities and refocus banks to private sector lending. It also directed the CBN to ensure that Nigerian banks prioritise consumer, mortgage, agriculture, and manufacturing lending to drive economic growth. In a separate development, the Manufacturing Purchasing Managers' Index (PMI) stood at 57.8 index points in May 2019.

This indicates an expansion in the manufacturing sector for the twenty-sixth consecutive month. The index grew at a slightly faster pace when compared to the previous month (57.7 points). This was shown in the latest PMI report by the Central Bank of Nigeria. A PMI above 50 points indicates that the manufacturing sector is generally expanding, while a reading below 50 points indicates a contraction. Thirteen of the subsectors surveyed recorded growth during the month, while the primary metal subsectors recorded decline in the period under review.

Stock Market Indicators at the local bourse continued a bullish run driven by cross deals. The All Share Index (ASI) gained 6.96% to close at 30,881.29 points from 28,871.93 points the preceding week. Similarly, market capitalization increased by 6.96% to settle at N13.60 trillion from N12.72 trillion the prior week. This week, we expect the Nigerian stock exchange to investors take advantage of the low valuation to rebalance their portfolio ahead of Q2 numbers, given plans by the CBN to reduce banks' participation in government securities, while boosting private sector lending to drive economic activities and investment.

Money Market Last week, rates at the money market climbed owing to the net Open Market Operation (OMO) sale of � 253bn. Shortdated placements such as Open Buy Back (OBB) and Over Night (O/N) rates soared higher at 11.14% and 12% from 4.57% and 5.29% respectively the previous week.

Likewise, the 90-day NIBOR closed at 12.58% from 12.19% the previous week.

This week, rates may likely trend lower due to expected OMO maturity of N133 billion.

Foreign Exchange Market The local unit appreciated against the dollar across all market segments. At the official window it ended at N306.9/$, a 5 kobo appreciation from the previous week.

Similarly, at the NAFEX window the local currency witnessed slight appreciation of 11 kobo to close at N360.39/$. The parallel market remained unchanged at N361/$. The market continues to be supported by the Central Bank intervention and rising foreign reserves. This week, we expect rates to continue to trade within a tight band as the CBN sustains its intervention program.

Bond Market Bond yields further declined on the medium end of the curve in the week ended May 24, 2019 as the market traded with bullish sentiment. Yields on the seven-year debt instrument settled at 14.05% from 14.49% respectively. Consequently, the Access Bank Bond index rose marginally by 1.94 points to close at 2,892.40.46 points from 2,890.46 points the previous week. This week, market is expected to remain positive owing to the renewed interest in the Bond market.

Commodities Oil prices retreated last week as the escalating U.S.-China trade war came into the spotlight again, dampening the outlook for economic and oil demand growth just after the EIA reported further increases in US stockpiles of crude. OPEC benchmark crude, shed $4.05, or 6% to $8.56 per barrel. Precious metals prices went in varying directions as Gold prices slipped while silver prices rose. Gold prices declined as strong gains in equities eroded the appeal of the yellow metal as a safe haven asset. Gold dipped by $3.54, or 0.28%, to $1,281.88 an ounce. On the other hand silver rose by 10 cents or 0.7% to $14.57 an ounce.

This week, we expect prices to remain pressured as the world awaits the outcome of the US-China trade talks. For precious metals, prices slip further in the face of dovish bias by major central banks.

MONTHLY MACRO ECONOMIC FORECASTS Variables

May’19

Jun’19

361

362

362

Inflation Rate (%)

11.30

11.23

11.21

Crude Oil Price (US$/Barrel)

70

72

72

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

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Jul’19

Exchange Rate (Interbank) (N/$)

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NEWS DIBAN’s embarks on advocacy International tourism numbers, GTBank improves access to education for rural children with #BeatTheDistance campaign to curb underage drinking confidence on the rise JUMOKE AKIYODE-LAWANSON

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s part of efforts to curb underage and excessive drinking in the country, the Distillers and Blenders Association of Nigeria (DIBAN), under the auspices of the Manufacturers Association of Nigeria (MAN), has stepped up its advocacy campaigns to promote responsible consumption of alcoholic beverages while discouraging its sale to users below the age of 18.

In a statement by Patrick Anegbe, the chairman of DIBAN, the association said it had taken up the advocacy as a corporate social responsibility through outdoors messaging on billboards, mass transit buses and radio campaigns to sensitise consumers about the dangers of excessive alcohol consumption and advocating moderation. Some of the campaign themes include: “Drink moderately,” “Health is Wealth,” “Enjoy life to the fullest” and “Don’t mix.”

Patrick Anegbe said: “As part of DIBAN’s corporate social responsibility initiatives, we will also embark on various advocacy campaigns, which will include massive training of our distributors and retail-

ers on the need to avoid sales of alcoholic beverages to underage. This will require the development of appropriate training manual, which will be in major Nigerian languages.

To restrict access of the underage to alcohol beverages, the industry will strengthen the supervision of distributors and retailers.

“In addition, we will employ advocacy campaign programmes in order to strengthen the efforts towards reducing alcohol consumption, underage drinking and improving responsible drinking in collaboration with civil society groups, under the supervision of National Agency for Food Drug Administration Control, Consumer Protection Agency and Federal Ministry of Health.”

According to the association, the third phase of its campaign is expected to commence in March 2020. This phase will engage the National Identity Management Commission (NIMC) in working out the modality for the enforcement of compulsory possession of the National Identity card, which includes information on age as basis for age verification before sale of alcoholic beverages.

JONATHAN ADEROJU

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atest issue of the UNWTO World Tourism Barometer from the World Tourism Organisation shows that international tourism continued to grow over the first quarter of 2019.

Though at a slower rate when compared with the last two years, the 4 percent increase registered in early 2019 is a very positive sign.

The Middle East (+8%) and Asia and the Pacific (+6%) experienced the highest increase in international arrivals. Numbers in both Europe and Africa were up by 4 percent, and in the Americas growth was recorded at 3 percent.

According to Zurab Pololikashvili, UNWTO secretarygeneral, “International tourism continues to perform strongly worldwide fuelled by a positive economy, in-

creased air capacity and visa facilitation.”

Zurab says, “Growth in arrivals is easing slightly after two years of exceptional results, but the sector continues to outpace the global rate of economic growth.”

Europe, the world’s largest tourism region, reported solid growth (+4%), led by destinations in Southern and Mediterranean Europe and Central and Eastern Europe (both +5%).

Growth in Africa was driven by ongoing recovery in North Africa (+11%). In the Americas, the Caribbean (+17%) rebounded strongly after weak results in 2018, following the impact of hurricanes Irma and Maria in late 2017. In Asia and the Pacific, results for the first three months showed a 6 percent increase led by North-East Asia (+9%) and a very solid performance from the Chinese market.

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s the country marks the 2019 Children’s Day, Guaranty Trust Bank plc (GTBank) has launched a nationwide initiative, tagged #BeatTheDistance, to improve educational outcomes for children in rural communities by easing the difficulties they face with mobility to school and back. Through the initiative, the bank is providing students in remote parts of the country with bicycles to reduce the time and energy they expend in getting to school whilst helping to boost their attendance and focus on academics.

One of the biggest barriers to education for millions of children in Nigeria’s rural communities is often the physical act of getting to school, which could be as far as 10 kilometres away from home. The challenge of covering such distance twice every day on foot, coupled with the responsibility of do-

Finance minister calls for intensified efforts to boost revenue IHEANYI NWACHUKWU

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igeria’s minister of finance, Zainab Ahmed, has called for intensified efforts to boost revenue generation in line with President Muhammadu Buhari’s emphasis at his 2019 budget speech.

Speaking at the quarterly world press conference held in Abuja, the minister discussing the trends and achievements of the economy over the last quarter, underscored the vital role of domestic revenue mobilisation for continued economic success and inclusive growth in Nigeria.

Pointing to the directive of the President for the acceleration of all revenue initiatives, Ahmed said, “The time to act is now – if we do not address the long standing issue of ‘unsatisfactory revenue performance’ in our country, particularly in the non-oil sector, we will never realize our shared goal of ensuring appropriate financing for critical sectors such as health, education, infrastructure, and ultimately to co-creating a Nigeria leaving no one behind.”

As minister of finance, Ahmed has taken on the President’s important call to action by prioritising revenue generation and formally launching in January 2019 the Strategic Revenue Growth Initiatives (SRGI), a suite of comprehensive cross-cutting

interventions aimed at boosting revenue performance.

Since the launch of the initiative, revenue performance, in her opinion, continues to show improvements, with revenues amounting to N3.96trillion as at the end of fourth-quarter (Q4) 2018, this represents a 31percent increase over the performance in 2017. However, this performance of 3.96 trillion still falls short of this Administration’s budgeted target as the aggregate revenue performance is still only 55percent of the projected revenue of N7.16 trillion.

Consequently, the Ministry of Finance would continue to prioritize revenue generation, and the implementation of the Strategic Revenue Growth Initiatives (SRGI).

Whereas there has been progress since the launch of the initiatives, the global economy, as anticipated, has slowed down in 2019 with a revised growth projection of 3.3percent. This trajectory, according to her, is mirrored in Africa, with the continent projected to grow slightly more at 3.5 percent in this same year.

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ing chores in the morning, significantly curtails school attendance rate, increases the chances of students dropping out, and hampers academic performance. By providing them with bicycles, the Bank aims to empower the children most affected by these challenges beat the distance, not just to school, but between their present realities and immense potential.

“Children are our greatest hope for a better future, and it is our duty to ensure that every child has access to quality education regardless of their socioeconomic background or geographic location,” said Segun Agbaje, managing director and CEO, GTBank.

“As an institution that is passionate about empowering young people to reach their full potential, this initiative reflects our commitment to building a society where distance is no longer a barrier to education for any child, and in every community,” Agbaje said.

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news New capital requirement for insurers...

Continued from page 1

behalf of the Commissioner

for Insurance.

With this development, deep pocket investors now have on a platter of gold the opportunity to acquire both life and non-life companies in the new capital regime given the paucity of funds in the economy and the capital market, where a lot of the insurers would have hoped to take advantage.

Besides, retail investors in the capital market who have not realised good yields and returns on their investment over a long time, particularly since the last insurance industry recapitalisation between 2005 and 2007, are wary of putting more money into insurance stocks.

The chances for the deep pocketinvestorsarefurtherwidened since about 41 out of the 51 registeredinsurancecompanies may need external funding to meet the minimum paid-up share capital requirement, according to industry analysts.

“Why should we the retail investors continue to put money in insurance companies when we are not getting returns and some companies have not paid any dividend at all,” said Sunny Nwosu, national president, Independent Shareholders Association of Nigeria, faulting NAICOM’s decision to increase capital requirement at this time.

Nwosu who has, however, changed his earlier position to mobilise shareholders against the recapitalisation exercise,

urged insurance companies to rise to the challenge and recapitalise to avoid takeover.

“You must brace up to the challenge to avoid being caught napping like some banks during the recently concluded examination by the Central Bank of Nigeria,” Nwosu said the Annual General Meeting of an insurance firm.

An insurance chief executive who was not against the decision of NAICOM to increase the capital base of insurance companies said the industry was in need of big companies to drive growth.

“We really need big companies here to experience the kind of competition we anticipate to enable growth happen in the industry. Again, the number of operating companies is much with so many weak and fringe players; this will no doubt clean

up the industry for real business,” the chief executive, who asked not to be named, said.

“No doubt, this is a tough time to raise funds from the capital market given the state of the economy, and again, given the poor yields and returns insurance companies have made to shareholders over time. This is not likely going to be attractive for retail investors. I see quite a number of the insurance companies taking to merger to remain in business, otherwise they may be consumed,” said the chief executive.

Mohammed Kari, commissioner for insurance/CEO of NAICOM, had said that the Nigeria’s Development Plan 2020 described the country’s insurance sector as a “gross untapped opportunity” with low market penetration.

Accordingtohim,theforeign

investors, having noted these greatopportunities,areattracted by the huge potential in the Nigerian insurance space.

“These investors are ready to position themselves for the future,” Kari said.

He said it was the same potential that attracted the likes of AXA Mansard, Prudential, Liberty, Swiss RE, Sunu Group, Saham, and Allianz, who have all taken position in the industry and in partnership with indigenous companies for development and growth.

NAICOM, in increased the minimum paid-up share capital of insurance and reinsurance companies in the country, had given them deadline of June 30, 2020 for compliance.

According to the Commission, the minimum paid-up share capital requirement took effect from the commence-

ment date of the circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies would be required to fully comply not later than June 30, 2020.

“In the exercise of the powers conferred on the Commission by the enabling laws, the minimum paid-up share capital requirement of insurance and reinsurance companies in Nigeria is hereby reviewed,” the circular said.

Accordingtothecircular,this would apply to insurance and reinsurance companies other than Takaful operators and micro insurance companies.

“The provision in respect of requirement of the statutory deposits as stipulated in Part III, section10 of the Insurance Act 2003 shall apply on the effective date of commencement of the circular,” it said.

May’s replacement to determine future...

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failing to convince the par-

liament on many occasions to go with her Brexit plans, there is little or no choice left but for her to quit,” said Jide Ojo, a development consultant and public affairs analyst. “I think that Theresa May came at the wrong time. She did her best but the system just didn’t work for her.”

Interestingly, the race to occupy No.10 Downing Street gathers momentum as party bigwigs throw their hats into the contest. Notable among them include Boris Johnson, Michael Gove, Jeremy Hunt, Andrea Leadsom and Amber Rudd.

Boris Johnson, 54, is widely regarded as the frontrunner in the Conservative leadership race. His plan is to see the United Kingdom leave the European Union in October with or without Brexit deal.

Micheal Gove is the UK Secretary of State for Environment, Food and Rural Affairs and has consistently shown his support for May’s deal.

Also, Jeremy Hunt, UK’s Secretary of State for Foreign and Commonwealth Affairs, has declared his intention to bid for the seat in the leadership election.

Andrea Leadsom is also being rumoured as a major contender for the Conservative leadership after resigning from

the UK government as leader of the House of Commons.

Amber Rudd, who returned to cabinet as the Work and Pensions Secretary, refused to rule out the likelihood for running to succeed Theresa May. Rudd is regarded as one of the pro-EU members of the cabinet. She has vowed to quit the UK government if the no-deal Brexit becomes government policy.

The contest will be an internal process in the ruling Conservative Party, as candidates will be whittled down, in a series of votes, to two candidates

by Conservative lawmakers in the coming weeks. The final two left standing will then be put to party members for a vote.

However, this new development has raised concerns about the likely impact on the existing bilateral relationship between Nigeria and the UK. Nigeria is Britain’s secondlargest trading partner on the African continent after South Africa. According to Britain’s Minister for Africa, Harriet Baldwin, the yearly trade between Nigeria and the United Kingdom stood at £4.2 billion.

According to UK trade statistics, Nigeria’s top exports to the UK include crude oil and gas, while exports from the UK include refined oil, pharmaceutical products, general industrial machinery,andelectricalgoods.

Dangote still most admired African...

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in Africa and shows year-onyearconsistencywith80percent of the top 100 brands having been in the top 100 Most Admired Brands in previous years.

Overall, African brands faltered to an all-time low 14 percent share of the top 100 most admired brands in Africa.

However, MTN (South Africa), Dangote (Nigeria) and Safaricom (Kenya) are the most admired highest listed brands on sub-Saharan Africa’s leading bourses, the JSE, Nigeria Stock Exchange and Nairobi Securities Exchange, respectively.

Faced with a relentless focus on the African opportunity

Investors’ interest in Nigerian refineries...

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billion loss, while Warri Refinery lost N38.5 billion.

Despite the much-acclaimed turnaround maintenance, the refineries have not performed above 15 percent since the NNPC confirmed going on with the programme.

Adeola Adenikinju, a professor of Energy Economics, told BusinessDay that the Federal Government must ensure it uses all available options to attract investment into the downstream sector, considering its huge economic impact.

“If we get the investors www.businessday.ng

L-R: Gabriel Foluso Fasoto, special guest of honour; Cyril Ikemefuna Ede, president, Chartered Institute of Taxation of Nigeria (CITN), and Olajumoke Simplice, vice president, at the CITN 40th induction ceremony in Lagos.

The UK is also among the foremost destinations for Nigerian students and tourists.

However, Akinola Olawore, president, Nigerian-British Chamber of Commerce (NBCC), said the resignation of the British Prime Minister would not impact negatively the existing bilateral relationship between the two countries.

According to Olawore, Nigeria plays a big role on the continent and the trade volume between the two countries keeps growing on a yearly basis.

“The new prime minister will still have to do business

with Africa, and Nigeria remains the largest economy on the continent,” he said.

During May’s three-day visit to some African countries, includingNigeria,in2018aspartof her efforts to deepen economic and trade ties with growing African economies ahead of the Brexit Plan, the prime minister promised that the British government would continue to increase its military support to Nigeria and help protect its citizens and British workers in the country from terror attacks.

May announced that the two countries had signed a defence

and security partnership which could see the UK train for the first time, full army units to combat insurgentsinthenorth-eastofNigeria.Insecurityisoneofthemajor challenges facing the MuhammaduBuhari-ledadministration.

According to May, tackling the “menace” from groups like Boko Haram was in the UK’s interest.

May also agreed on a £10.5 million package to help victims ofmodernslavery.Aspartofthis, the UK will provide counselling to up to 1,700 people who have been subjected to forced labour, domestic servitude and sexual

abuseandhelpthemreintegrate into their communities.

A joint initiative with France will also see the UK assist Nigeria and Niger strengthen their border cooperation to prevent trafficking of migrants to Libya and Europe.

May said Brexit plan would increaseopportunitiestoextend existing commercial links with Nigeria, particularly in the area of financial services. She announced £4bn of extra British support for African economies, noting that the UK would overtake the US to become the G7’s biggestinvestorinAfricaby2022.

and investment by non-African brands,Africa’sshareofthemost admired brands has been rapidly declining over the past three yearsfromahighof25percentin 2013/14 to lows of 16 percent in 2015/16, 16 percent in 2016/17 and 17 percent in 2017/18.

“Today at the JSE, at an event with industry leaders from across Africa, hosted by the JSE in partnership with Geopoll, Kantar and Brand Leadership,

Brand Africa announced the Top 100 brands in Africa in their 7th annual Brand Africa 100: Africa’s Best Brands. Nike, MTN, Dangote, Ecobank and BBC were recognised as the most admired brands on the continent,” a statement from Brand Africa read.

“Non-African brands have entrenched their positions in Africa, with North American brands, dominated exclusively

by United States of America brands (28 percent), leading with a growth of 17 percent versus 2017/8. The strength of USA brands was boosted by the entry and/or re-entry of stalwart American brands such as number 71 Levi’s, number 91 Chevrolet and Pepsi’s Miranda at number 80, who are all among the 20 new entrants.

European brands (41 percent) are up by 2.5 percent and Asian

brands (17 percent) down by 10 percent, round up the continental spread of brands Africans admire,” it said.

The Brand Africa 100 rankings are based on a survey among a representative sample of respondents 18 years and older, conducted in 25 countries across Africa.

ready, let the government also ensure that the value chains of the petroleum sub-sector are harvested for wealth creation as has been done by the Gulf countries who have diversified their revenue base away from oil,” Adeniknju said.

Austin Onuoha, a research analyst in the petroleum sector, said the Federal Government

must be able to encourage local investors to invest in Nigeria’s refineries by ensuring they are attracted with various incentives.

“The funds can be sourced at home for refinery investments. Can we find a way and reach out to deep pocket investors in Nigeria even if it means giving them some measure of concession and

tax rebate while using that to repair our refineries which is long overdue? The pension fund is also there, can’t we explore that option?” he stated.

Speaking further, Suleiman said the Federal Government has, however, recorded some appreciable feats in the modular refineries.

“When we started, it was

only about 23 refineries that had been registered for several years. We expanded the registration of modular refineries to about 44, both modular and large-scale refineries. Out of the 44, 16 have reached an advanced stage – to a level of what we call authority to establish.”

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NEWS Nigeria, others lose $3bn to counterfeit products yearly JUMOKE AKIYODE-LAWANSON

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usinesses are at risk of being sold more counterfeit print supplies than ever before, as global economies lose as much as $3 billion yearly to counterfeit products, according to a recent HPcommissioned study by Harris Interactive.

According to the report, market trends show an increase in counterfeiting, even as enforcement scores significant wins. In Nigeria, HP, in collaboration with security agents, has raided several hideouts in Lagos where counterfeit HP consumables are sold and arrest effected.

Already costing the global economy $3 billion per year according to the Imaging Supplies Coalition, the growing risk of fake products is driven by an increasingly broad supplier ecosystem, lack of certainty by buyers that their purchases are genuine, and a lack of awareness of the risks of purchasing counterfeit goods.

Analysing the report, Glenn Joness, the director of global anti-counterfeit programme at HP, said: “Every one of the key market indicators we monitor show a significant increase in the risk of counterfeit print supplies. For companies like HP, counterfeits undermine decades of focused research and testing aimed at creating superior ink and toner, and reliable, high-quality cartridges for our customers. “For users, fakes cause a significant increase in print failures, low page yield, poor print quality, leaks and clogs, in addition to voiding hardware warranties.”

According to Harris Interactive surveys, the past four years have shown a 30 percent plus drop in companies working with a trusted, primary supplier, and a 27 percent increase in companies buying purely on availability.

With a broader, less trusted supplier network, Small and Medium Enterprises (SMEs) are losing the ability to discern the authenticity of their cartridges with absolute

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confidence. All regions heavily affected by counterfeiting, in particular the Middle East, Eastern Europe and Africa, with almost three quarters of businesses surveyed feeling confident their 6purchases were genuine.

While the market trends are concerning, HP and other print Original Equipment Manufacturers (OEMs) are continuing their significant efforts to battle this issue by actively engaging with local authorities. According to HP, across Europe, Middle East and Africa (EMEA), over the last five years, approximately 12 million counterfeits and components have been seized by local authorities, supported

by HP. “HP has conducted over 4,500 inspections of reseller stock and suspicious deliveries for customers. Through HP’s Anti Counterfeiting and Fraud (ACF) Program, the company also actively educates its customers and partners to be vigilant against fake printing supplies,” HP said in a statement.

I’m fulfilled with projects executed in four years, says Ambode JOSHUA BASSEY

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utgoing governor of Lagos State, Akinwunmi Ambode, says he was fulfilled with the projects executed by his administration in the last four years.

Ambode made the declaration while unveiling another art theatre in Epe, saying the theatre would serve the ancient town and its adjoining communities.

The art theatre in Epe is one of the four built by the Ambode’s administration in the effort to promote art, tourism and culture in the state.

Facilities at the theatre include standard furnishing, gallery, artiste changing room, rehearsal hall, restaurant, restrooms, power generating sets and well-laid out car park, among others.

Ambode, who is exiting office on May 29, said it was particularly fulfilling that he was able to implement a number of projects that ‘changed the outlook

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of the town and made life further comfortable for the people,’ as well as improve the Gross Domestic Products (GDP) of the state.

“We are very delighted that among the art theatres that we have established, we have the opportunity to come and commission the one in Epe. The first one the Lagos Theatre in Oregun was commissioned by Mr President and then followed by the one in Igando.

That of Badagry would be commissioned on Monday (today) making four out of the six that we had actually planned. Two to go and believing strongly that the vision to actually bring out the best of the talents of our younger ones is part of this structure that you are seeing here,” Ambode said on Friday.

He added that the initiative to construct the theatres across the state was borne out of the vision to create a framework to bring out the creativity and innovative skills of talented youths as well as serving as a platform to

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scale up communal bonding among the people.

On other initiative in the tourism sector, Governor Ambode said: “We are also renovating Glover Memorial Hall; it’s been fully paid for and in another few months, they should be able to commission it also so that we can have top class tourist attractions in all these locations. People can decide to come and watch a play in Epe and then drive back to Lagos.

“Beyond the fact that we are trying to bring out the talents from the younger ones, the ultimate goal is to increase the GDP of Lagos because in the services provided here and all the other things that would be done in other locations, you have more people that would be earning income; you would have more people that would be paying taxes; you have more people that you can generate income from which you can now use back to improve on the lot of Lagosians,” he said.

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NEWS

Experts urge women to leverage tech for career growth JUMOKE AKIYODE-LAWANSON

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CT experts have called on women across Nigeria to leverage technology to grow their career paths.

Speaking during the celebration of International Girls in ICT Day, Abigail Iyabode Sholanke, who represented the CEO of Nigerian Communications Commission (NCC), at the event, said, “This is a medium to inspire young girls as well as educate them on the vital role of women in ICT. “Indeed, your gender should never be a limitation for you but rather an asset.

This is even truer of women who are natural leaders, planners, administrators and strategic thinkers. That is why in the modern world we have great women doing great things.”

She said further, “As young ladies gathered here today, I wish to categorically inform and educate you that your capacity in the digital space, and indeed in anything you wish to do in this world is determined by your own drive, your ambition, your hard work, determination, tenacity, intellect, study, analytical thinking, personal self-confidence and poise, and your strive for excellence.”

According to Habeebat Umeike, data analyst, SystemSpecs, during her speech, ICT is fast changing to include more potentials to transform industries and

economies. “ICT is revolving, things that were inconceivable even a year ago are now being done. The remarkable thing is that, it is being done by women,” Umeike said.

In her address to the students, Umeike said, “One of the underlying secret to attaining excellence in ICT as a woman is passion and interest. You need to be passionate about ICT. You need to train yourself and be better at what you do.

Get mentors to encourage you. Mentors that will relate their challenges and tell you, and tell you how they overcame. Whenever you are being corrected or criticised take it positively.

Whenever you are being praised, do not let it get into your head either.”

Families mindset about gender should be scrutinised, she said, saying, “The female child should never be treated as inferior to the boy child. Parents should give their girl child the same opportunity as they would give the male child. Always regard their interest. Allow them to face the career they choose. Never make choices for them. Only guide them in their choices.”

She further advised the girls never to let anyone talk them out of their dreams.

She called on the government to sponsor some ICT related courses for students. “In Nigeria, we have not completely attained international standard yet.

Improved services, processes, procedures take centre stage for FAAN IFEOMA OKEKE

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ederal Airports Authority of Nigeria (FAAN) has reiterated that the focus for the authority going forward will be to improve services, processes and procedures across the nation’s airports.

Rabiu Yadudu, new managing director of FAAN, disclosed this Thursday after he received the reins of office from Saleh Dunoma, his predecessor, in a brief ceremony, insisting that the agency should imbibe key qualities of respect and discipline to attain increased professionalism and growth.

“The industry is moving, new technology, new processes and its either you are going forward or you are moving back, and so we have to keep improving services, improving on our processes and procedures.

“Primarily, I need to say in the next few months, we are going to concentrate on

improving ourselves and I think the best way we are going to improve the agency is to discipline ourselves.

We must sustain a high level of discipline year-in year-out, as it allows you to perform to the best of your ability,” he said.

He spoke on the need to maintain a high standard of personal discipline in the discharge of staff professional responsibilities.

In a brief handover ceremony, Yadudu commended his predecessor, saying he was a thorough leader whose wealth of experience could and would still be tapped into.

“As long as you remain here, your experiences are still key. We are still going to maintain some communication on issues that concern consultations, recommendations and so because if you want to succeed, it is not only about the people that are with us now, some are retired, some others are outside the country. www.businessday.ng

L-R: Misan Eresanara, board member, Special Olympics Nigeria (SO Nigeria); Dolapo Ogunbawo, board member, SO Nigeria; Victor Osibodu, chairman, SO Nigeria; Haruna Jalo-Waziri, managing director/chief executive officer, Central Securities Clearing System (CSCS) plc, and Ayokunle Adaralegbe, chief risk officer, CSCS plc, at the cheque presentation ceremony to Special Olympics Nigeria as Champion Partner in Lagos on Friday.

EdoJobs-backed start-ups pitch to investors, seek to expand clientele base … as Obaseki assents to bill affirming Edo Polytechnic name change

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igh-potential start-ups groomed by Edo State skills development agency, EdoJobs, at the Edo Innovation Hub in Benin City, are on a tour of the investment community and innovation hubs across Nigeria, including Lagos, looking to expand their frontier and attract more funds to boost their businesses.

The start-ups are a mix of businesses engaged in renewable energy solutions, agrictech, fashion and ecommerce, and pitched to seed investors and others in the early-stage start-up investment space, including co-founder, Bluechip Technologies, Olumide Soyombo, and CEO of Plus TV Africa, Kayode Akintemi, and many others. Some of the investors played a part in the growth of notable start-ups such as Paystack, Piggybank, among others.

The start-ups also got an opportunity to pitch their ideas at the Elevate Conference, attended by representatives of MTN Plc and other blue-chip companies.

Senior Special Assistant to Edo State Governor on Skills Development and Job Creation, Ukinebo Dare said the trip was to acquaint the start-ups with Nigeria’s bubbling start-up space, get them to attract investment into the state and build their clientele base.

According to Dare, “There is no denying that we have a thriving tech ecosystem in Edo State anchored at the Edo Innovation Hub. We are doing a lot to get the youths at the centre to understand that they are getting the best of training and support.

Their trip was to expose them to the larger tech space in Nigeria and also showcase their amazing ideas to the

Hollandia No Kid Hungry Foundation set to champion cause against child hunger

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ome May 27, 2019, the Hollandia No Kid Hungry Foundation would be reaching out to children in the internally displaced persons (IDP) camp located at Bogije community in IbejuLekki, Lagos, to celebrate Children’s Day as well as World Nutrition Day marked the next day, May 28, 2019.

The intention is to reach out to over 300 children at the camp who are vulnerable as a result of limited access to food.

Hollandia, a dairy brand in Nigeria from the stables of CHI Limited, believes every child has the right to good nutrition, and has over the years been involved in activities aimed at providing food for disadvantaged children through the Hollandia No Kid Hungry Foundation.

According to UNICEF, about 2.5 million Nigerian children suffer from severe acute malnutrition. The report further states that Nigeria has the second highest number of stunted children in the world, mostly resulting from child malnutrition and hunger. Being a dairy brand loved by children in households across Nigeria, the Hollandia brand is passionate about children and views these facts as further impetus to battle against hunger and malnutrition among Nigerian children.

Speaking about the Hollandia No Kid Hungry Foundation, Deepanjan Roy, Managing Director of CHI Limited stated that the Bogije IDP camp visit would be a notable milestone in the journey of the foundation in her drive towards alleviating child hunger and malnutrition.

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investor network.”

Those on the tour include cofounder, X-crete Initiative, Eghareva Uyiosa; founder, Procode Kids, Lolita Oyibo; founder, Agriployee, Godsent Izinyon, and co-initiator, First Valley Gate Energy, Osarumen Racheal Omoregbe, among others.

They expressed appreciation to the state government for the experience, which has exposed them to the opportunities in Nigeria’s growing tech scene, noting that they were excited on the prospects of getting some funding from the investors who were impressed with their pitches.

Meanwhile, the Edo State governor, Godwin Obaseki, has assented to a bill changing the name of the Edo State Institute of Technology and Management (ESITM) to the Edo State Polytechnic, Usen, as part of moves to reposition the institution

for greater impact in learning and research.

The Rector of the institution, Abiodun Falodun, a professor, who disclosed this in an interview with journalists, hailed the governor for sustaining efforts at repositioning the institution, noting that the new identity will drive them to work harder towards meeting the expectations of the polytechnic’s founding fathers.

Falodun said, “I will like to convey the appreciation of the Management, staff and students of Edo State Polytechnic, Usen, formerly ESITM to Governor Godwin Obaseki and the state government for the name change. Our new name is now formal. It has been a long time coming and we will like to appreciate the governor and the Speaker of the State House of Assembly, Kabiru Adjoto for their support.”

Wema Bank expands branch network to Ilorin

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s part of its expansion strategic reach, Wema Bank, Nigeria’s longest surviving indigenous bank, has launched a new branch at 155 Ibrahim Taiwo Road, Ilorin, Kwara State.

The new branch, designed with innovative features for improved customer experience, will strengthen the bank’s business in Ilorin and also provide local residents and business owners with their banking needs. The 24-hour ATM foyer is available to customers after bank hours.

“We are excited to open a new branch which will help us as a bank meet the growing demand for financial products and services by the residents of Ilorin,” Ademola Adebise, managing director of Wema Bank, said. “For us, it is not about just opening branches, we are targeting communities where there are opportunities.”

With the new national status, the bank has reopened formerly closed-down branches in the @Businessdayng

North and South East. Some of the cities with reopened branches include Kano, Kaduna, Bauchi, Minna, Lokoja and Aba. The bank also plans to launch new branches in Gombe, Onitsha and other leading cities in Nigeria.

In addition to its expansion, Wema Bank is also providing financial services through digital channels such as ALAT by Wema and *945#. Through these channels, Wema Bank has been able to onboard more customers and provides easy banking services with its digital channels. The bank is also providing agency banking to meet the needs of customers all over the country.

Wema Bank remains committed to growing its network to support business owners and other Nigerians with effective retail banking services across the country.

To find the nearest Wema Bank branch to you, you can use the branch locator on the Wema Bank website at www.wemabank. com/branch-locator

Monday 27 May 2019

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cityfile Residents laud Edo Govt on road projects

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Members of coalition of Eastern Social Cultural Groups, FCT, during a protest in support of Nkeiruka Onyejeocha, member for the speaker-ship of 9th House of Representatives held at the entrance of National Assembly in Abuja.

Pic by Tunde Adeniyi

How police smashed child theft syndicate in six states JOSHUA BASSEY

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he police have arrested three members of a syndicate which specialises in child theft and sale, with an illegal orphanage in Benin, Edo State, but spreads its tentacles across five other states, including Lagos, Enugu, Rivers, Imo and Anambra States.

Chidi Nwabuzor, spokesperson of Edo police command, said at the weekend, that the police acted on intelligence and had been working to burst the syndicate since 2018.

“The command, on the 4th of June, 2018, received complaints of missing children, ages two and four

years respectively, from their parents, Edos Osarounamwen of Otesi village, Benin.

“Subsequently, the operatives of the anti-kidnapping and cybercrime unit through hi-tech intelligence probed into the phone of the couple’s co-tenant.

“Our probing revealed that the co-tenant was the last to be seen with the children,’’ he said.

Nwabuzor added that the intelligence eventually led to the arrest of a 33-year suspect at Ondo town in Ondo State.

According to him, during intensive interrogation, the suspect confessed that she received the stolen children from the co-tenant of the children’s parents before

she disappeared with them to Onitsha in Anambra.

He said that the suspect confessed to have sold the children to a 49-year lady for N450,000 and N300,000 respectively.

The police spokesman said further that the command thereafter extended its investigation to Anambra, where the suspected buyer was arrested.

Nwabuzor quoted the Edo Commissioner of Police (CP), Danmallam Mohammed as saying that the command would not relent until the perpetrators were brought to justice.

He said the CP directed the officer in charge of the anti-kidnapping and cybercrime unit, to go after the other suspects, after receiv-

ing the brief of the case.

“This spurred the operatives into action and one Ogechi Ejike was arrested on May 1, 2019 at Afam community in Rivers State.

“She made a statement and confessed to selling one of the children to another suspect who runs an orphanage at Okigwe in Imo State for N500,000.

“The operatives moved to Okigwe, Imo State and arrested the suspect, who also made confessional statements.

“The statements led to the arrest of other members of the syndicate in Enugu, Rivers and Lagos States,’’ he said.

The police spokesman said that all those arrested had been charged to court.

NDLEA nab suspected hard currency smugglers

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at i o na l D r u g Law Enforcement Agenc y (NDLEA) said it had apprehended two suspected hard currency smugglers at the Nnamdi Azikiwe International Airport, Abuja.

Jonah Achema, head of the agency’s public affairs unit, said on Friday in Abuja, that the arrest was made by its special area command at the airport, and named the suspects as Obasi Chidi, from Enugu State and Nebo

Lloyd, from Abia.

He said that the suspects were apprehended as they arrived at the airport aboard an Ethiopian Airline flight 911, connecting from Tel Aviv.

“They were arrested with various sums of hard currencies neatly concealed in their travelling bags.

“They, however, failed to declare the currencies at Ben Gurion Airport in Israel or upon arrival at the airport in Abuja.

“Upon intensive search www.businessday.ng

by officers and men of NDLEA, Lloyd was found with the sum of 371, 203 dollars, 20, 000 Euros and 20 Shekels.

“Chidi was found with 318, 000 dollars,” it said.

According to Achema, preliminary investigation indicated that the money was to be delivered to a recipient in Abuja, “the recipient whom they claimed was expected to disburse same to supposed beneficiaries.

“So far, the couriers

could not give account of the source and purpose of the money.”

He added that the money was neither declared before take-off in Israel nor on their arrival in Nigeria.

Achema said that the suspects and the monetary exhibits had been transferred to the appropriate government agency for further investigation.

The agency said that the challenging security situation in the country called for vigilance in all areas.

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esidents in Edo have applauded t h e s t at e g overnor, G odwin Obaseki, for continuing efforts at infrastructure development, especially the construction of roads.

A cross-section of the residents, who spoke to journalists, said the governor has sustained road c o n st r u c t i o n t h e reby opening up communities that were hitherto unreachable.

Isibor Omo, a resident in St. Saviour Road, in Sakponba road axis of Benin city, said Obaseki was giving a good account of his stewardship in terms of road construction, maintaining that the project would ameliorate the suffering of the people.

According to her, “the construction of this road is a relief to many of us in this side of Benin. We also see what is happening in other parts of the state.

The government is doing well in road construction.”

Residents of Ohovbe Quarters in Ikpoba-Okha area of the state also hailed Obaseki for constructing the Christ Chosen Church road off Benin-Agbor road.

A community leader in the quarters, Egheomhan Sunday, said this during a visit to the area by officials of Edo State Employment

and Expenditure for Results (SEEFOR).

The project was delivered by the state government through the Edo SEEFOR programme.

Egheomhan said “for years, the road was impassable. But now, we can heave a sigh of relief. It will go down in history that Obaseki helped to lift this burden.”

Project coordinator, SEEFOR, Toju Onaiwu, noted that the state government will not relent in executing road projects in urban and rural communities to spread development.

In Edo Central, road projects being carried out by the state government include asphalt pavement/ drainage construction with kerbs on Anslem Ojezuwa Street in Esan Central local government area; Irulele road linking Uromi-Ubiaja road to Ubiaja-Ilushi road; Ogbe street, Ekpon in Igueben local government area and Ukpogo Ekekhen, Igueben.

In Edo North, the projects include Enwan market road, Enwan; Ugboshi Afe road, off Igarra-Ibillo expressway; Ogugu township road, off Benin-Igara-Ibillo expressway and Secondary School road Uneme Osu in Akoko-Edo local government area.

BEDC loses 39 transformers to vandals IDRIS UMAR MOMOH, Benin

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enin Electricity Distribution Company (BEDC) says it has lost 39 transformers to vandals in Edo State.

Funke Osibodu, managing director of the company, stated this while addressing newsmen in Benin, Edo State capital, at the weekend. She said several transformers were also lost in Delta State.

Osibodu lamented that the two states recorded the highest number of vandalism of the company’s facilities, adding that security operatives have commenced investigations into the incidents.

She also disclosed that 49 communities have since been connected to the national grid while nine communities were about to be connected.

She listed some of the communities reconnected after several years to include Erinijiyan, Ipoleloro, Ikogosi as well as three communities connected to Ilawe/Aramoko feeder.

She said this was achieved in collaboration with Niger @Businessdayng

Delta Power Holding Company (NDPHC) under the National Independent Power Project (NIPP).

Others, Ode-Aye community and Igbokoda in Ondo South local government that have been without power supply for between five and 14 years.

The BEDC boss also said power supply was restored to Illah and Idumuju-Unor communities in Oshimili North and Aniocha North local government areas of Delta State, as well as Onichi Uku, Onichi Ona and Patani among others.

Commending Edo State House of Assembly for passing energy theft bill, Osibodu noted that the passage would help to fight corruption and energy theft.

“However, as part of giving back to the society, selected schools will get educational materials from BEDC, which includes branded exercise books and snapper frames inscribed with safety tips, safety message, school materials and upgrades amongst other items.

Monday 27 May 2019

BUSINESS DAY

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NEWS

Apapa: 120 hours after presidential order, 72-hour ultimatum CHUKA UROKO

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he 72-hour ultimatum given by the presidency for trucks to vacate all roads and bridges in Apapa, Nigeria’s port city, ended last Friday.

Perhaps, it is still early in the day to assess the success or failure of that presidential order, but truck activities and motorists’ experiences in and around Apapa in the last five days, despite the presidential directive, are pointers to the fact that Apapa and its stakeholders may be in for another ruse or hoax.

It has been really tough since Wednesday last week when the directive was given, but last weekend, particularly Saturday, was worse and those who had any business to transact or social function to attend in Apapa and Lagos Island had tales of woe to tell as they spent hours in nervestraining gridlock at all approaches to Apapa.

Sunday was also tough as trucks being guided by security agencies, ostensibly members of the taskforce, took over Ijora Bridge, occu-

pying two lanes instead of the usual one and, in some cases, blocking the entire bridge and denying other road users access.

The Wednesday, May 22 presidential order, which apparently, was part of decisions reached at the Federal Executive Council (FEC) meeting, was the second of such directives on Apapa gridlock. The first was given in August 2018 by the then Acting President Yemi Osinbajo. That one turned out a mere pipedream, an empty order that was never complied with.

Nigerians and, indeed, the whole world, were told on that fateful Wednesday that a new taskforce had been set up by President Muhammadu Buhari with a matching presidential order to clear ports congestion in two weeks, cause trailers and tankers to vacate port access roads in 72 hours, and start emergency cleanup of the Apapa gridlock.

That announcement was well received and celebrated in the media which came out with varying headlines expressive of relief and

hope for not only the dying port city, but also the economy of the country which is being badly affected by slowing export and import activities in Apapa.

The celebration was more among the traumatised Apapa residents and business owners who, on daily basis, see their investments lose value due to the siege on their environment by rampaging trucks from every part of the country.

Expectation was that with the new directive, which was said to have President Buhari’s backing, immediate respite would come the way of residents, business owners, motorists, port users and anybody who has something to do with/in Apapa. Five days after, it is still the same old story. But the government urges patience, assuring that Apapa story will soon change for good.

Adedamola Kuti, federal controller of works in Lagos, hinged his assurance on the Tin Can Trailer Park which, he said, would be completed very soon because “we are working hard on it”.

Osinbajo to Nigerians: Don’t allow anyone take advantage of our fault-lines TONY AILEMEN, ABUJA

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ice President Yemi Osinbajo on Sunday charged Nigerians against falling prey to persons who might want to exploit the nation’s fault lines.

The Vice President, while speaking at the interdenominational service organised as part of activities heralding President Muhammadu Buhari’s second term inauguration at the Ecumenical Christian centre, Abuja, on Sunday, also urged Christians to lead in giving Nigerians hope.

Osinbajo, who expressed confident that the nation’s future was bright, said, “We must not permit anyone to take advantage of the country’s fault lines.”

According to Osinbajo, “Our days will be better and better. This is the reason why I am so confident; our ministry is that of reconciliation.

“Our country stands at the threshold of phenomenal great, the end of the story light and joy. We begin with darkness and confusion but the

Bolanle Ambode, wife of the Lagos State governor (l), and Ibironke Sanwo’olu, wife of the governorelect, Lagos State, during the handover ceremony of the incoming first lady of Lagos State in Alausa Ikeja.

Pic by Olawale Amoo

Global Rights trains journalists on business, human rights JOSEPH MAURICE OGU & DESMOND OKON

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lobal Rights Nigeria, a human rights-based organisation committed to building grassroots movements that protect and promote the rights of marginalised populations, held two-day media training on Business and Human Rights in Lagos.

The training equipped journalists with knowledge on the intricacies of reporting the relations in business and human rights. The meeting was also an avenue to educate media professionals on, and expose them to the dynamics

of the legal instruments applicable to dealing with business and human rights issues, including UN Guiding Principles on Business and Human Rights (UNGP).

Speaking during the opening session of the training, the executive director, Global Rights, Abiodun Baiyewu, tasked the media on upholding its role as the ‘fourth estate of the realm’ by holding the government accountable.

Baiyewu, who decried the devastating impact of mining companies in host communities in Nigeria, further spurred journalists to take up projects that expose human rights violations by the mining companies. www.businessday.ng

According to Baiyewu, the relationship between civil society and the media is on the assumption, and so there is so much interaction between business and human rights that we need not ignore.

“Environmental Impact Assessment is a crucial undertaking for any government that is serious about the entrenchment of corporate accountability, protection of lives of its citizens and sustainable development,” she said.

She further cited notable examples of some Nigerian extractive companies with a history of environmental degradation in host communities.

Dayo Aiyetan, executive director, International Centre for Investigative Reporting (ICIR), spoke on the principles for investigative journalism and the use of the Freedom of Information Act for journalists.

He also stressed that since 2011 when FOI Act was passed, it has shown efficacy in exposing secrets about government activities and provided credible information, adding that journalists could effectively utilise the Act for good journalism.

However, he outlined the limitations of the Act, and revealed the on-going efforts to amend the areas that restrict access to information.

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end of our story is bright, the future of our nation is bright.”

The guest speaker, Cardinal John Onaiyekan, standing in for the President of Catholic Bishop Conference, Augustine Akubeze, gave a message he titled “ Let us chose life, not death - Deuteronomy 30: verse 19.

The last election, he said, left behind thick cloud of acrimony, which was still to clear.

While noting that Nigerians are still waiting for the final verdict of the various election petition tribunals, Onaiyeka said, “This is not time for any celebration of victory or lamentations over defeat, rather, it is time to put all our efforts together to tackle the serious challenges facing us.

“The days of pointing accusing fingers at others will not carry us far,” adding that “for sincere change to take place, we must all be ready for a sincere change of heart, from the highest to the lowest, but especially at the highest levels.

“Empty boasts and barefaced denials of the realities

around us cannot build a nation. We are in the house of God and before God, we must tell each other the truth.

“The truth is that our nation is not in the state for us to rejoice.”

He noted that ranks of the poor were swelling by the day, hopeless and helpless, as they watch in frustration the affluence of the very few cruising in a different world.

He noted that such wide socio- economic disparity had actually led to wide spread anger, tension, violence and outright criminality in the land, adding that but all was not well.

For him, however, while noting that all is not lost, called on the government to change its ways and build a prosperous nation for Nigeria.

While also noting that God endowed Nigeria with enormous resources, which has been unfortunately turned into curses and problems, however, urged government to beware of those who seek powers to divide and rule for self aggrandisement.

BIG equips more bakers with modern bakery practices TEMITAYO AYETOTO

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akery Initiatives Group (BIG), a Dutch bakery consulting firm, in its resolve to impart modern bakery practices and techniques to help bakers in Nigeria run bakeries profitably, held another series of trainings for bakers in Yaba, Lagos.

The two-week series of trainings, which had over 50 participants benefitting included a “train the trainers” programme conducted by a co-founder and expert baker of more than 35 years’ experience in bakery and milling technology, Jacob Molenaar.

At the “train the trainers” programme, Molenaar told participants that the essence of the programme was not only to increase the theoretical and practical knowledge of participants in the bakery and confectionary industry but also equip them to be able to transfer such knowledge to others thereby creating a large pool of knowledgeable people in Nigeria.

Ephraim Mbanaso, country representative and CEO, Bakery Initiatives Nigeria, said the series of trainings are aimed at addressing one vital area of need Bakery Initiatives identified while interacting with bakery operators in Nigeria over the years, which is dearth of professional @Businessdayng

bakers.

He also informed participants that the idea behind the training centred on skill acquisition for all categories of human resources needed for the effective and efficient running of bakery businesses.

The training programme saw the participants trained on various aspects of bakery, such as technology and practice of baking of bread, cakes and pastries with special emphasis on recipes, effects of basic ingredients, cost calculations, among others.

The company put the programme together to train and re-train bakers in Nigeria with a view to equipping them with the requisite knowledge to succeed in bakery business.

With support funding from BMZ/develoPPP.de, BIG used the programme to acquaint participants with baking skills and other necessary knowledge needed to run bakeries profitably, while also exposing them to international best practices and emerging trends in the industry.

“I was thrilled not only by the exposure to the new insights about baking various products but how different ingredients can be utilised to achieve a desired effect in the finished products among many other benefits,” said Fibian Ehizibolo, who participated in the “train the trainers” programme.

Monday 27 May 2019

BUSINESS DAY

NEWS Why we intervened in Lagos health sector - Ambode JOSHUA BASSEY

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ife of the outgoing governor of Lagos State, Bolanle Ambode, who doubles as chairman, Committee of Wives of Lagos State Officials (COWLSO), explains that the interventions of the committee in the state’s health sector were driven by the need to fill observed gaps in the provision of healthcare services to the citizens, especially women and children.

Ambode stated this at the official handing over of the leadership of COWLSO to Ibijoke Sanwo’olu, wife of the governor-elect of Lagos State, who would be sworn in on Wednesday, May 29.

According to Ambode, such interventions by the committee in the last four years had seen several children, women and men benefiting from free surgeries, donations of aids to patients, upgrade of facilities and provision of hitech medical equipment

to different hospital and health institutions across the state.

She listed some of the interventions to include sponsorship of goitre surgery for 30 women, hearing aids for 15 children, three women and two men and upgrade of ENT Department of the General Hospital, Odan, Lagos, installation of audiology equipment, including Otoread OAE capable of detecting hearing defects in newborns.

In addition, Badagry, Ifaiko-Ijaiye, Ikorodu, Shomolu, Alimosho and Gbagada General Hospitals were equipped with Otoread Portable OAE, and an Intensive Care Unit was also donated to the Island Maternity Hospital.

She said: “Other phases of the intervention included the procurement and donation of two Transport Incubator Ambulance to Gbagada General Hospital and Island Maternity Hospital, coupled with the donation of 32 neo-natal

incubators to 13 general hospitals and six fully fitted birthing suites for AmuwoOdofin Maternal and Child Centre, Epe General and Island Maternity Hospital, Lagos, among other interventions.”

Ambode, who appreciated members of the committee for their support and steadfast, however, urged them and other segments of the society to extend same support to the incoming chairman, Ibijoke Sanwo’olu.

In her response after the signing of various documents related to COWLSO, Sanwo’olu’s wife commended the outgoing firstlady, and pledged to work together with the women to further raise the bar in service to Lagos.

“We are going to diagnose the society, challenges and take COWLSO to the next level. Don’t be surprised if you see your firstlady clean the gutters and sweeping the streets. We’re going to do it together,” she said.

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FINANCIAL TIMES

World Business Newspaper

NEIL MUNSHI AND ANJLI RAVAL

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igeria has begun renegotiating oil contracts with Royal Dutch Shell that could lead to major energy companies generating billions of dollars less in revenues from lucrative offshore blocks in Africa’s largest producer.

“We’ll be looking to better terms than the previous [productionsharing contracts],” Emmanuel Ibe Kachikwu, minister of state for petroleum, said. “We would like to get better packages.”

Nigeria has several types of contracts with energy majors including joint ventures for onshore blocks, in which the government has an equity stake, and productionsharing agreements for the deepwater ones.

The state signed production sharing contracts in the early 1990s with companies including Shell, France’s Total, Norway’s Equinor, Italy’s Eni and ExxonMobil of the US. Nigeria produces 1.8m barrels a day of oil.

Mr Kachikwu said the old agreements favoured the foreign companies, giving them as much as 80 per cent of the oil that was produced after costs — known as profit oil — against the 20 per cent for the state.

“That is a non-starter,” Mr Kachikwu said. “It’s got to be better.”

He said the new contracts should start at 60 per cent or lower in the company’s favour.

Under these types of contracts, the companies take the greater share in the initial stages of operation, before gradually shifting in favour of the state as the companies recover their investments.

Gail Anderson, at consultancy WoodMackenzie, said: “Nigeria just doesn’t want to have to wait

Nigeria and Royal Dutch Shell begin contract negotiations Outcome could result in revenues falling by billions from lucrative offshore blocks

Emmanuel Ibe Kachikwu, Nigeria’s minister of state for petroleum © AFP

until these blocks are producing huge amounts of oil to generate the profits they believe they are owed.”

Mr Kachikwu said the state energy company, the Nigeria National Petroleum Corporation, had already entered into renegotiations with Shell, which in 2023 will be the first company to see a contract expire.

Others will expire by 2028.

“The Shell model, when they finish, will then be the basis of what we do with all other PSC contractors,”

Ukraine oligarch urges Volodymyr Zelensky to default on debt

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kraine’s new president Vo l o d y m y r Z e l e n s k y should follow Greece by rejecting the International Monetary Fund’s austerity programme and defaulting on its external debt, according to his contentious oligarch supporter.

Igor Kolomoisky’s comments in an interview with the Financial Times will ring alarm bells with Kiev’s western backers even though Mr Zelensky has said he would stick to the terms of Ukraine’s $3.9bn bailout.

Concern among Ukrainians and western officials about Mr Kolomoisky’s influence over the novice president was heightened after the billionaire returned to Kiev this month after two years of self-imposed exile and his former personal lawyer was appointed Mr Zelensky’s chief of staff.

“In my opinion, we should treat our creditors the way Greece

Chancellor says a prime minister seeking to leave EU without agreement ‘cannot expect to survive’ LAURA HUGHES AND SEBASTIAN PAYNE

does,” Mr Kolomoisky said. “That’s an example for Ukraine.” In its stand-off with creditors in 2015, Athens became the first developed country to fail to repay an IMF loan, albeit temporarily.

Ukraine needs IMF loans, which come under a standby arrangement, to service its external debt that amounts to about 60 per cent of gross domestic product.

With payments set to peak this and next year, Mr Kolomoisky also suggested Ukraine had nothing to fear if it defaulted.

“How many times has Argentina defaulted? [ . . .] So what, they restructured it. It’s fine.”

Mr Zelensky — a comedian who rose to fame on Mr Kolomoisky’s television channel playing a fictional president — won the presidency in a landslide last month despite his lack of political experience, shaky grasp of policy and widespread suspicions about his ties to the oligarch. www.businessday.ng

the huge revenue shortfall for the state of up to $28.6bn over the decade to 2017, according to a recent report by the Nigeria Extractive Industries Transparency Initiative.

“At the time of renewal, you have an opportunity to review it, and we’ll be looking at it in terms of have you recovered your investment, have you made money out of it?” Mr Kachikwu said.

Current contracts will be honoured, and renegotiations “must

Philip Hammond warns Tory leadership hopefuls on no-deal Brexit stance

Concern grows over Igor Kolomoisky’s influence on the novice president MAX SEDDON

he said.

New terms will affect Shell’s final investment decision on developing the new $10bn Bonga Southwest deepwater project, for which it issued a tender for contractors in February.

Bayo Ojulari, managing director at Shell Nigeria Exploration and Production Company, said at the time the development would be subject to a “revised commercial framework”.

Nigeria has for years sought to overhaul these contracts and stem

be done [as] partners trying to find solutions and not government holding a big stick,” he said.

The original production-sharing contracts stipulated that they had to be renegotiated likely in terms more favourable to Nigeria, once oil passed $20 a barrel, which the government did not do. Brent crude has been above this mark since the early 2000s.

Last year, Nigeria’s Supreme Court ruled in favour of a group of oil-producing states that had sued the federal government for not collecting enough of the proceeds from the country’s oil wealth, which the lawsuit estimated at about $20bn.

Mr Kachikwu said the government did not plan seek to collect that money from the oil companies.

“What’s done is done. We need to go forward and avoid that happening again,” he said.

But he said he hoped it would give it leverage in settling another lawsuit, in which the court ruled that Nigeria owed the oil companies roughly $6bn for over-collecting oil from the joint ventures.

The minister said he hoped the national assembly would soon pass a slate of decades-in-the-making reforms that are widely expected to bolster investment in the industry, and which are also thought to be key to negotiations over the productionsharing contracts.

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hilip Hammond has warned that any successor to Theresa May who seeks to push a nodeal Brexit through parliament “cannot expect to survive very long”, as Michael Gove joined the crowded contest for No 10.

In a warning shot to Eurosceptic contenders for the Tory party leadership, the chancellor refused to rule out voting down his own government in a no-confidence motion if the new prime minister sought to take the UK out of the EU without a deal.

“I think it would be very difficult for a prime minister who adopted no deal as a policy — we are leaving with no deal as a matter of policy — to retain the confidence of the House of Commons,” Mr Hammond told the BBC’s Andrew Marr show on Sunday.

Asked if he would vote to bring down his own government, he responded: “I’m saying this is a very difficult situation. It would challenge not just me, but many of our colleagues, and I hope we will never get to that position.”

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One official close to Cabinet said: “100 per cent there will be MPs out there who would join with Hammond and vote the government down if it became the only way of avoiding no deal.”

Boris Johnson, who set the tone of the Tory leadership race on Friday when he announced his intention to take the UK out of the EU on October 31 “deal or no deal”, is the favourite to become the UK’s next leader.

Many MPs believe he offers the best chance to win over the party’s grassroots and take on Nigel Farage’s new Brexit party.

“Boris is focused only on showing colleagues why he is the best placed candidate to deliver Brexit and beat both Corbyn and Farage with an exciting agenda that is in step with the priorities of the public,” said an ally.

But Mr Johnson remains a divisive candidate and a group within the parliamentary party has launched a campaign known as ‘Operation Arse’ to prevent him making it through to the shortlist that will be voted on by the Conservative party membership.

Throughout the weekend the airwaves and news pages were pep@Businessdayng

pered with calls for a new prime minister who is has a command of detail — one of Mr Johnson’s perceived weaknesses.

“It’s really hard to know whether any of the attacks matter,” said a senior Conservative MP. “He is so fundamentally flawed, he’s the Kama Sutra candidate: he’s held every position on every conceivable topic.

That’s why we don’t trust him.”

Other candidates setting out their pitch for the leadership include former Brexit secretary Dominic Raab, who said he was prepared to leave the bloc without a deal.

“I would fight for a fairer deal in Brussels with negotiations to change the backstop arrangements, and if not I would be clear that we would leave on WTO terms in October,” he told the BBC. Other would-be leaders have said the UK should be focused on getting a deal. Rory Stewart, a centrist Tory who was recently promoted to the cabinet as international development secretary, said he could not serve in a government that pursued a no-deal Brexit or was led by Mr Johnson.

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Monday 27 May 2019

BUSINESS DAY

FT

NATIONAL NEWS

Fiat Chrysler and Renault consider share swap as part of tie-up

Carmakers set to announce collaboration on electric vehicle technology and production PETER CAMPBELL, DAVID KEOHANE, JAMES FONTANELLA-KHAN, KANA INAGAKI AND LEO LEWIS

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utomakers Fiat Chrysler and Renault are considering an exchange of shareholdings or investment in each other as part of wide-ranging tie-up talks that will be confirmed on Monday, according to people close to both companies.

Renault has agreed to delay any plans to merge with Japan’s Nissan in the short term if an agreement is reached with FCA, a condition stipulated by the Italian-American carmaker for its co-operation, according to two of the people.

Discussions between the two sides about joining forces were first reported by the Financial Times on Saturday. A deal would help the companies pool resources as they battle to survive in an industry beset by falling sales and technological disruption.

The two carmakers are expected to announce that they are in talks to collaborate in several areas including connectivity, electric vehicle technology and manufacturing platforms, the people said.

The carmakers are also likely to say that discussions include the possibility of an exchange of shareholdings, which could take the form of a share swap or an investment in each other’s business, one of the people added.

The condition of Renault shelving plans to merge with Nissan, which is unlikely to be included in Monday’s expected announcement, would cool immediate tensions between the French and

Japanese partners, which have fired up in the wake of former alliance leader Carlos Ghosn’s arrest eight months ago.

The delay to the merger would also allow the two companies to focus on their own businesses, rather than the internal politics of or possible changes to their alliance.

Discussions between Renault and FCA are ongoing and may not lead to a deal, people close to the talks cautioned.

However, an announcement is scheduled for early morning on Monday, with Renault expected to hold a board meeting immediately afterwards to discuss the proposals.

A tie-up with FCA would allow Renault to broaden its options as its global alliance with Nissan is grappling with deteriorating profits in the US and an industrywide shift to self-driving electric vehicles.

The reason behind the talks was purely strategic and there was no intent of strong-arming Nissan over other potential scenarios, according to one person close to the French company’s senior management.

“It’s really a win-win for everyone. It’s not to hurt or to disavow anyone,” said another person briefed on Renault’s thinking.

Still, the talks are expected to put pressure on Renault’s longtime partner, Nissan, which was not directly involved in the discussions even though they may result in FCA joining the RenaultNissan-Mitsubishi Alliance in the future, according to people close to the Japanese group.

Goldman Sachs to speed up push into US wealth management LAURA NOONAN

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oldman Sachs will use newly acquired United Capital to speed up its assault on middle America’s wealth management market, deploying an army of investment advisers to target the employees of corporate clients.

The bank recently agreed to pay $750m for California-based investment adviser United Capital, as new chief executive David Solomon diversifies Goldman from the trading and investment banking powerhouse he inherited.

The new business will operate alongside Ayco, the workplace financial counselling service Goldman had been using to target mass-market wealth management. “United Capital ramps up our growth plan by five years,” Ayco chief executive and Goldman Sachs partner Larry Restieri told the Financial Times in an interview.

“There’s a huge base of clients that need financial counselling that we think we can serve. We haven’t even scratched the surface.”

Goldman manages about $40bn of the estimated $28tn in assets held by the US’s “mass affluent”, a term that describes individuals or households with between $500,000 and $10m in investable assets.

The expansion into this market puts the bank in direct competition with brokerages such as Charles Schwab, as well as its traditional trading house rival Morgan Stanley. Asked about the prospect of more competition from Goldman on the sidelines of his bank’s annual general meeting last week, James Gorman, Morgan Stanley’s chief executive, told the Financial Times: “It doesn’t bother me at all.”

“It just reaffirms what I’ve believed for 20 years, which is that wealth management is under-appreciated in terms of its stability and importance to global financial institutions,” he added.

Mr Gorman described the deal as a competitor buying a “small firm” relative to the $2.5tn his bank manages at its wealth business. United Capital’s assets under management are about $25bn.

Ayco has provided a full wealth advisory service to the most senior layer of executives at the 425 companies it counts as clients. Last year it began trialling a broader wealth management offering for mid-level employees and has a smaller digital-only service.

Mr Restieri said he planned to use United Capital’s 220 advisers to enable Goldman to offer “widespread wealth management” to the employees of corporate clients. www.businessday.ng

Haptemu Mariam, centre, is one of the thousands of ethnic Gedeo displaced by conflict in Ethiopia

Ethiopian ethnic violence has forced almost 3m to flee homes

World’s biggest displacement of people threatens reforms of prime minister Abiy Ahmed TOM WILSON

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n a drenched field in southern Ethiopia, hundreds of members of the ethnic Gedeo community are huddled together with nothing to do but wait. It had rained all night and the ragged shelters they had strung together were sinking in the mud.

“We can’t go back,” said Haptemu Mariam, 28, a father of six who fled his home in the Guji area of the neighbouring Oromia region last year.

“The Guji people are dangerous,” he said, referring to a group with which his people had lived peacefully until a recent flare-up of violence between the two groups.

About 700,000 people have been displaced by the Gedeo-Guji dispute, according to the UN. Yet it is just one of many inter-ethnic conflicts raging in Ethiopia that have given the country an unenviable distinction: last year more people fled their homes there than in any other nation on earth.

In total, 2.9m people were displaced by December 2018, more than those dislodged in Syria, Yemen, Somalia and Afghanistan combined, according to estimates published this month.

The upsurge in communal vio-

lence has coincided with the early days of Abiy Ahmed’s tenure as prime minister and is arguably the greatest threat to his lofty ambitions.

Bar chart showing the number of people displaced by conflict in various countries.

Elected prime minister in April last year, Mr Abiy has won international praise for his sweeping political and economic reform in Africa’s secondfastest growing economy. But the huge displacement during his tenure is the biggest black mark against the ambitious leader’s first year in office.

“Officials and others [outside the Abiy administration] have been focused on the opportunity for democratic progress, and they have been reluctant to also recognise this serious humanitarian and security crisis,” said William Davidson, senior analyst at the International Crisis Group, a think-tank.

Appointed by the ruling party to steady Ethiopia after two years of anti-government protests, Mr Abiy has won over much of the country with promises to reform the country’s authoritarian politics. He has released journalists and political prisoners, welcomed exiled dissidents back into the country, declared peace with long-

time foe Eritrea and been nominated for a Nobel Peace Prize.

But this freedom has had dangerous consequences. Ethiopia is a complicated multi-ethnic federation with more than 80 ethno-linguistic groups. In many parts of the country, the new political atmosphere has allowed long-running tensions between communities to erupt into conflict as hate speech has flourished.

More than 200,000 ethnic Oromos have been evicted from the western Benishangul-Gumuz region since September, while Benishangul authorities last month accused members of another ethnic group, the Amhara, of killing more the 200 people in a territorial dispute. Similar disputes have flared on Oromia’s eastern border with the Somali region.

In southern Ethiopia, Guji and Gedeo groups have periodically clashed over access to productive farmland, but the recent conflict was marked by an unusual intensity.

In the villages around the town of Dilla where Mr Haptemu and his family are huddled, the government has begun putting displaced people on buses to return them to their homes, in what they said was an effort to regain the initiative.

Second-hand private jet market boosted by Donald Trump US president’s tax cuts prompt increase in prices for most sought-after models JOSH SPERO

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ax changes by US president Donald Trump have halted a decade of price falls for the most popular models of secondhand private jets.

The average price of the 13 most sought-after models has increased 2 per cent to $6.4m compared with last year, according to an annual study by Colibri Aircraft, which specialises in the marketing and resale of private jets.

These models included the Falcon 7X (up 11 per cent to $25m), the Gulfstream G550 (down 1 per cent to $23.1m) and the Challenger 605 (up 30 per cent to $13.1m).

Oliver Stone, managing director of Colibri, said it was “a significant rebound”, which he attributed to a tax change introduced by Mr Trump after years of declining prices.

This allows taxpayers to immediately take as a tax deduction 100 per cent of the cost of new and second-

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hand aircraft bought between 2017 and 2027.

The average price of these 13 models fell 15 per cent in 2017 and 21 per cent in 2018, according to Colibri’s earlier studies.

However, according to other data, average prices in the broader second-hand jet market are still below levels a decade ago in the wake of the global financial crisis, which undermined the market.

Amstat, a business aviation data service, showed the average asking price of a second-hand private jet had fallen a fifth from $5.3m in 2010 to $4.2m in 2019.

Chris Miller, managing partner of Shearwater Aero Capital, which finances business aviation transactions, agreed that the average increase in prices in Colibri’s study was due to the Trump tax cuts and to a more buoyant US economy in general.

But he added that the tax relief would only provide a short-term @Businessdayng

bounce: “I believe the effect of these changes has stabilised and we will start to see more normalised depreciation in pre-owned aircraft in the next 12 to 24 months.”

John Matthews of private jet operator AirX said there might have been a slight uptick in particular types of plane, but said there had not been a broad rebound in the market.

“The price of used aircraft is still depreciating at the low end of $250,000 a quarter; at the high end, it’s depreciating $1.7m a quarter, which is the highest we’ve ever seen.”

Adam Twidell of PrivateFly, a jet charter company, said the uptick was against the trend: “Over the past 10 years it hasn’t got easier for [sales brokers] and this year is as hard as previous years.”

The Colibri study took in 300 aircraft in total, which is 14 per cent of the market. There were 2,200 second-hand aircraft for sale at the end of March 2019, Amstat data showed.

Monday 27 May 2019

BUSINESS DAY

65

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Investors should be wary as private equity firms switch structures It is only a matter of time before one of the big investment groups runs into trouble SEBASTIEN CANDERLE

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ince Blackstone’s 2007 initial public offering, US alternative fund managers have scrambled to join the stock market, with the idea of giving their founders a way out — a notoriously challenging process in private partnerships.

As at accountancy and law firms, partners at investment firms are only offered the option to sell when they leave the organisation. Fellow partners are the main escape route — they buy the shares, preventing retiring partners from participating in any future upside.

Until recently, most private equity groups have retained a partnership structure to avoid the 35 per cent tax rate on US corporations. But now that US president Donald Trump’s 2018 tax changes have cut the corporate rate to 21 per cent, the advantages of a partnership are less clear. That has made a C-corporation structure a lot more palatable.

Ares and KKR were the first fund managers to take the conversion plunge last year. In April, Blackstone followed suit and in early May, Apollo Global Management made the same call. Blackstone’s Stephen Schwarzman said: “The decision to convert . . . should drive greater value for all of our shareholders over time.”

The advantages of switching seem obvious for founding partners, who are way past retirement age and need to buoy liquidity to ease future share disposals. Should public investors believe the argument that the new structure will also lead them to riches?

If history is any guide we can predict that it is only a matter of time before one of the big investment groups runs into trouble. There is a precedent: the Wall Street banks that morphed into corporations with hapless results.

Like today’s private capital firms, Salomon Brothers, Bear Stearns, Drexel Burnham Lambert, Lehman Brothers and Merrill Lynch were set up as partnerships and were avid dealmakers. They incorporated and experienced brisk, unrestrained growth in the 1980s thanks to deregulation. But it didn’t take long for things to turn sour.

In 1986 Drexel faced scandal when a managing director was charged with insider trading. Two years later, bond trader Michael Milken was accused of self-dealing and bribery. The bank settled criminal and civil charges, but by 1990 it had gone bust.

Within a decade of its own conversion, Salomon stood accused of market rigging when, in 1990, trader Paul Mozer submitted false bids in an attempt to purchase more Treasury bonds than permitted. Weakened by the criminal proceedings, the firm was acquired by insurance group Travelers.

As for Bear Stearns, Lehman and Merrill, the extent to which their behaviour during the subprime mortgage bubble contributed to the end of their independence is well known.

Historically, partnerships led to more prudent decisions because partners were jointly and severally liable. To make it less risky to establish businesses, the concept of limited liability partnerships was introduced, providing separation between outside investors and liable executives running the business. The PE groups use the LLP model.

Even so, managers in a partnership are rewarded in illiquid shares that yield wealth only if the business creates value over time. Senior officers must consider the firm’s reputation and survival as paramount. By contrast, executives in a public corporation receive annual bonuses and share options that are exercisable and tradable within a few years.

Government contracts become Amazon’s new target market Companies complain that the tech giant may take their business as it has in retail RANA FOROOHAR

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hould Amazon be the US government’s Everything Store?

It’s a question being raised as a small but seismic tweak has made its way into the legislation governing how the federal government buys its annual $50bn-worth of commercial goods — from machinery, to potato chips, to toilet paper.

Thanks to what has become informally known as the “Amazon Amendment” to the 2018 National Defense Authorization Act, government officials must come up with an ecommerce solution for all purchasing — and wholesalers are complaining it will allow Amazon to eat their lunch, just as it has in retail.

Amazon started courting government business a few years ago, and in 2017 signed a lucrative deal with 1,500 local public agencies, which was criticised by non-profit advocacy groups like the Institute for Local Self-Reliance, alleging that the deal would leave the public sector paying more, rather than

less, for goods. Last year, Amazon almost nabbed a $10bn Pentagon cloud computing contract before the deal was squashed, in part due to complaints from competitors that Amazon had hijacked the bidding process. It is now a run off between Microsoft and Amazon.

The National Association of Wholesaler-Distributors, a group that represents the biggest companies in a sector worth $5.6tn in sales a year, is waging a public relations war to try and ensure that its members don’t lose government contracts to Amazon.

In particular the trade group is upset that the General Services Administration, the part of the government tasked with figuring out which ecommerce model to use, is piloting only an “e-marketplace” version that they, and a number of others, including ILSR, believe will favour a single player. Other ecommerce options, such as a government-managed portal for multiple suppliers, were discarded. www.businessday.ng

London Capital & Finance advertised 8 per cent annual returns on a tax-free ISA savings product and emphasised that the company held FCA authorisation

Standard Life Aberdeen rebuked by rival fund managers over pay Top 10 shareholders including M&G and Jupiter vote against executive pay OWEN WALKER

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tandard Life Aberdeen suffered a rare rebuke at the hands of other UK active fund managers over executive pay at its annual meeting, including top 10 shareholders M&G and Jupiter.

It is unusual for active fund managers to break ranks and vote against a rival’s pay report but shareholders owning 42 per cent of SLA stock did so at the group’s annual meeting. The rebellion came after proxy advisers Institutional Shareholder Services and Glass Lewis recommended rejecting the pay report.

“We don’t typically like to throw stones from our glass houses — but this was one occasion where we had to take a stand,” said one large shareholder. “We tried engaging with the company but that didn’t seem to work.”

Other managers to vote against

the pay report included Janus Henderson, HSBC Global Asset Management and Axa Investment Managers.

Scores of institutional investors also voted against SLA, including Norway’s sovereign wealth fund, another top 10 shareholder and influential North American and European pension funds.

In a further embarrassment for SLA, the Investment Association, the UK trade body, gave the company’s pay report an “amber top” in its guidance to members, meaning it raised concern over corporate governance.

SLA is a member of the IA and Keith Skeoch, its chief executive, sits on its board.

At least two large UK shareholders said their objection was the £600,000 base salary and potential 350 per cent bonus offered to Martin Gilbert, the former co-chief executive who stepped down in March to become vice-chairman. Shareholders said his pay was out of step with his role.

ISS and Glass Lewis advised clients to vote against SLA’s remuneration report, citing concern over the pay of Stephanie Bruce, the new chief financial officer. Ms Bruce is due to join from auditor PwC next month and will receive a salary of £525,000, almost 17 per cent more than her predecessor Bill Rattray, as well as company shares worth £750,000.

Several shareholders raised objections to Ms Bruce’s pay in talks with SLA before the May 14 annual meeting.

In response, SLA agreed to apply performance conditions on Ms Bruce’s award. This, though, was not enough to persuade a large minority of investors to support the report.

Douglas Flint, SLA’s new chairman, has taken part in discussions with shareholders. The vote by HSBC’s asset management arm is another source of awkwardness, as Mr Flint was previously chair of the bank.

What will it take to lift US inflation?

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

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hat will it take to lift US inflation?

The US Federal Reserve is growing jittery about subdued inflation. There was “a risk that inflation expectations could become anchored at levels below those consistent with the committee’s symmetric 2 per cent objective”, warned Fed officials at its most recent policy meeting.

Some measures of US inflation remain stubbornly low, despite low unemployment, tariff pressures on prices and the central bank halting interest rate rises.

The 10-year break-even rate — a measure of the market’s inflation expectations — has now sunk to just 1.8 per cent, from a peak of 1.98 per cent earlier this year.

“At some point the Fed has to ask itself if the current rate structure is too tight,” said John Herrmann, a rates strategist at MUFG Securities.

“Even though [interest] rates are low, maybe they are still too high for the Fed’s objective [of 2 per cent inflation].”

Other investors are less convinced the Fed has much power to lift inflation, given concerns over low global

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growth.

“We are entering this new phase of the trade war at a very fragile state,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

“There is a level of hubris on the part of the Fed that they think they can get to 2 per cent like this is some sort of video game.” Joe Rennison How much steam is left in India’s equities rally?

India’s benchmark indices hit record highs last week after Prime Minister Narendra Modi secured a thumping victory in the country’s general election.

Investors have bought into the idea that a solid majority for Mr Modi’s Bharatiya Janata Party will ensure the continuity of businessfriendly reforms, such as a national goods and services tax and a new bankruptcy code.

But there are reasons to believe the rally rests on shaky foundations.

Vinay Agarwal of First State Investments says the “results of the election will have little bearing on the long-term investment case for Indian equities”, adding that the role of the @Businessdayng

central government is often overplayed in India’s federal economy.

Problems loom on the horizon. Businesses are facing a credit squeeze as struggling nonbank financial companies are starved of liquidity. Headline GDP growth is also slowing and the central bank has seen its independence and credibility eroded. More broadly, investors are fleeing emerging markets as an escalation in the Sino-US trade war leads them to seek haven assets.

Then there is the possibility that an emboldened Mr Modi launches another ill-conceived policy, such as the overnight demonetisation of banknotes in 2016 which crippled India’s cash-dependent businesses and did little to curb untaxed wealth in the economy. Siddarth Shrikanth Can copper prices continue falling in the face of disruption?

The intensifying trade war has taken its toll on copper, with the metal’s price falling to $5,888 a tonne last week, its lowest level since January. That could be about to change, though, as several flashpoints threaten to choke global production.

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Monday 27 May 2019

BUSINESS DAY

ANALYSIS

FT

Trump plays down North Korea missile tests US president undercuts his national security adviser ahead of talks in Japan DEMETRI SEVASTOPULO AND EDWARD WHITE

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resident Donald Trump has played down the significance of recent North Korean missile launches, saying in Japan that the tests did not bother him in comments that appeared to undermine John Bolton, his national security adviser.

“North Korea fired off some small weapons, which disturbed some of my people, and others, but not me,” Mr Trump tweeted on the second day of his four-day state visit to Japan, which will include talks about North Korea.

His comment came a day after Mr Bolton told reporters in Tokyo that there was “no doubt” that two sets of recent North Korean missile launches had breached UN Security Council resolutions banning ballistic missile tests.

“I think the prime minister and president are going to talk about making sure the integrity of the UN Security Council resolutions are

presidential contender said Mr Trump had been foolish to trust North Korea.

“Also smiled when he called Swampman Joe Bidan [sic] a low IQ individual, & worse. Perhaps that’s sending me a signal?” Mr Trump wrote.

Negotiations between Washington and Pyongyang have stalled in the wake of Hanoi. At the summit in the Vietnamese capital, Mr Trump refused to accept a limited deal that would have seen North Korea destroy its Yongbyon nuclear facility in exchange for the lifting of some sanctions. Mr Trump insisted that Mr Kim had to abandon his entire programme in order for the US to start lifting any of the economic sanctions that have hurt the North Korean economy.

Talks between Pyongyang and Seoul have also paused since Hanoi. South Korea has tried to resurrect talks by downplaying the missile tests. South Korean president Moon Jae-in has also

President Donald Trump presents the “President’s Cup” to the Tokyo Grand Sumo Tournament winner Asanoyama at Ryogoku Kokugikan Stadium on Sunday © AP

maintained,” Mr Bolton said just hours before Air Force One landed in Tokyo on Saturday evening.

Mr Trump is expected to discuss North Korea during his meetings with Mr Abe. The US president played golf with the Japanese prime minister on Sunday morning before accompanying Mr Abe to watch the final day of a Sumo championship. The two leaders will also have further talks on Monday after Mr Trump has an audience with Emperor Naruhito, who recently ascended the Chrysanthemum Throne after his father became the first emperor to abdicate in 200 years.

No r t h Ko re a t h i s m o nt h launched three ballistic missiles over the course of several days, marking the first such launches since 2017. Some experts interpreted the move as an attempt to put pressure on the US to ease the denuclearisation demands that Mr Trump made during his failed summit with Kim Jong Un in Hanoi in February.

Mr Trump originally said that nobody was “happy” with the tests, but he has since played down concerns, saying he thought Mr Kim was intent on reaching a deal that would remove nuclear weapons from the Korean peninsula.

“I have confidence that Chairman Kim will keep his promise to me,” Mr Trump said in his tweet on Saturday.

Mr Trump added that he smiled when North Korea recently slammed Joe Biden as having a “low IQ” after the former vicepresident and now Democratic

proposed to meet Mr Kim and has pledged to boost humanitarian aid to North Korea.

“We will do our best to steadily improve inter-Korean relations in a way that will lead to the resumption of North Korea-US talks at an early date,” Kim Yeon-chul, South Korea’s unification minister, said on Friday.

In the weeks since the missile tests, North Korea has shown no sign of wanting to rush back to the negotiating table. North Korea’s foreign ministry on Friday said talks would not resume unless the US took a softer approach on denuclearisation.

“Unless the US puts aside the current method of calculation and comes forward with a new method of calculation . . . dialogue will never be resumed,” a foreign ministry official was quoted as saying

by North Korean state media.

Further fuelling tension, Pyongyang this week issued a fresh rebuke over the US seizure of a North Korean cargo ship used to help Pyongyang export coal in contravention of UN sanctions.

The US seized the ship named Wise Honest last year, but the move was not made public until early May as part of a request to a US court to allow the US to take ownership of the vessel.

Han Tae Song, North Korea’s ambassador to the UN in Geneva, told Reuters this week that the ship was “the biggest issue” in improving ties and that Washington had to make a “big decision” on easing sanctions before talks could resume. www.businessday.ng

Mining: prosecutors and investors add to Vale’s woes After the Brumadinho dam disaster — that killed 231 — the Brazilian group is facing intense scrutiny BRYAN HARRIS, ANDRES SCHIPANI AND NEIL HUME

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hortly after employees broke for lunch on January 25, a dam at Vale’s Córrego do Feijão iron ore mine in southeastern Brazil ruptured and collapsed, unleashing a tidal wave of sludge that devoured everything in a 5km path.

When the thick, brown discharge finally abated, almost 300 people were missing. Many drowned, buried alive in the industrial waste. Others were killed by the force of the impact, their bodies broken into pieces, and some suffocated while submerged in their vehicles. Investigators would later find scratch marks on the windows, where they had tried desperately to escape.

“This was murder,” says Andresa Rodrigues, whose 26-year-old son, Bruno, an engineer at the facility, was among the 231 people killed. More than 40 are still missing.

Four months on, the ripples of the disaster in the rural town of Brumadinho are being felt worldwide.

From the potential threat from Brazil’s courts to emboldened regulators and sceptical institutional investors, Vale, the world’s largest producer of iron ore, is facing an unprecedented crisis that could transform the way mining is conducted.

The rupture in January has triggered a far-reaching criminal investigation, amid claims that Vale had been warned about the fragile state of the structure yet did nothing. It came just over three years after a similar disaster in the nearby Mariana village, which killed 19 and caused Brazil’s biggest environmental catastrophe.

Samarco, the operator of the mine and dam near Mariana, was a joint venture of Vale with BHP Billiton.

“I have no doubt someone will go to jail,” says Jose Sampaio, a federal prosecutor in the state capital of Belo Horizonte who is spearheading the investigation into Vale.

Several of its other dams in the region are considered at imminent risk of rupture. On May 16, the company sparked alarm after announcing it had “identified a move” at the Gongo Soco mine in Minas Gerais. “This is not news that will make any regulator in Brazil sleep easier at night,” says Paul Gait, a mining analyst at Bernstein Research.

Some institutional investors have begun to demand major changes in the way the group uses potentially treacherous tailings dams, which store industrial waste from mining.

“My sense is that Brumadinho is going to be a key moment for the sector. We simply should not be having disasters such as this,” says Adam

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Matthews, director of ethics and engagement at the Church of England Pensions Board, which sold its Vale shares after the disaster.

Ms Rodrigues puts it more starkly: “Mariana killed dozens, Brumadinho hundreds. The next dam disaster will kill thousands.”

On the narrow road into Brumadinho sits a makeshift memorial of wooden crosses and muddied clothes rescued from the wreckage.

The town sits amid the rolling hills of Minas Gerais, a vast southeastern state that was once one of Brazil’s richest because of its abundant natural resources, which include plentiful minerals and lush agricultural lands.

Today, the state is bankrupt after years of economic mismanagement, falling commodity prices and the impact of systemic graft that continues to haunt the broader economy of Latin America’s largest country.

More than 11 per cent of the state’s denizens are unemployed. Even before the rupture of the dam, which released enough liquefied industrial waste to fill almost 5,000 Olympic-sized swimming pools, Brumadinho was struggling.

For the most part, it was reliant on mining as well as a modest but steady stream of revenue from tourists looking to escape from Brazil’s big cities.

The day-trippers have now vanished. Local government tax revenues earned from Vale operations have also plunged after court-mandated closures of several other dams in the region, which the authorities deemed at risk of collapse.

“People still live in panic because nobody knows what could happen next,” says Carolina de Moura, an environmentalist and activist Vale shareholder who lives on the outskirts of Brumadinho. She says rivers 100km away have been polluted by the rupture.

Since the disaster Vale has adopted a stance of contrition. “I am committed to leading Vale through the most challenging moment in its history. We will never forget Brumadinho and we will spare no effort in alleviating the suffering and repairing the losses of the affected communities,” says Eduardo Bartolomeo, who in April replaced Fabio Schvartsman as chief executive.

His comments chime with broader company pledges to “focus on repair and providing assistance to all those affected”. To date, Vale says more than 50,000 residents have received emergency payments, including $25,000 donations to 275 families of the victims.

For many residents of Brumadinho, however, such words ring hollow.

They say Vale’s penny-pinching has left the community vulnerable and @Businessdayng

desperate.

Standing outside his home, a breeze block shell with a corrugated iron roof, Heleno Rocha says the company promised to relocate his family after parts of his neighbourhood, including a tract of his land, were inundated with mud. Vale then retracted the promise because “my house was not directly hit by the mud so I had no right to compensation”, says the security guard and father of three.

Like many in the area, Mr Rocha says he is traumatised and has trouble sleeping. His next door neighbour recently attempted suicide.

More than the angst, however, the prevailing sentiment is outrage. After the disaster, prosecutors alleged that Vale knew the dam had problems and yet failed to halt operations.

Executives from Tüv Süd, a German safety compliance group, in March claimed Vale pressured them to sign off on the safety of the dam, after other independent auditors refused.

Vale slammed the claims, firing back: “Tüv Süd’s allegations that they were ‘pressured’ lead us to believe that Tüv Süd’s own staff would have engaged in extremely serious wrongdoing, violating their duty and function as independent auditors.” Tüv Süd was banned in mid-May from certifying further dams in Brazil by a judge in Minas Gerais.

Mr Sampaio says federal prosecutors are still analysing what charges to bring and that his team was trawling through two terabytes of documents taken from the company. “We have robust evidence,” he says. Adding that the big question now is whether the incident is one of culpable homicide.

“We expect to have a clearer picture in the next 60 days.”

He says prosecutors are looking closely into how much information senior executives had about the safety risks. Charges would be brought against senior executives “if we can prove they had information [about the risk of collapse] and did nothing”, he says.

Mr Sampaio says police conducted a search earlier this month at the house of Mr Schvartsman, the former chief executive, and were also examining the role of Peter Poppinga, who also left the company in March. Mr Poppinga was also in a leadership role as head of ferrous metals at Vale during the 2015 Mariana disaster.

Legal representatives for both men did not respond to requests for comment. But both are likely to take solace in the slow pace of Brazil’s judicial system. In high-profile trials involving several levels of appeal, it is not uncommon for years, if not decades, to pass before sentences are ever handed down.

BD Money

Monday 27 May 2019

BUSINESS DAY

INVESTING

INVESTING

Cover Story

COMMODITES

Understanding the opportunity cost associated investing

Leveraging savings, investment instruments in financial market

Work 8-4? These are hustles you can cash in on

Individual, investors and corporates apply the concept of opportunity cost in their day-to-day activities.Also known as true cost, it is the benefit missed or given up when an individual chooses one alternative over another.

There are lots of savings and investment instruments in the Nigerian financial market that can enable prospective investors to fulfil their wealth creation and developmental goals.

Side hustles are trending all over social media. From the intrusive broadcast messages and group invites on mobilemessaging app, Whatsapp, to enticing pictures on Instagram cajoling buyers and the “Hi, I sell shoes, bags and affordable wrist watches.

Steady import level fails to impress investors in local wheat production

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Nigeria is one of the African countries that will not make significant contribution to the forecast of an all-time high of 49.3 million tons in total wheat imports to Africa between 2019 and 2020, yet this will not translate to increased demand for investors in local wheat production.

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Monday 27 May 2019

BUSINESS DAY

Investing

Understanding the opportunity cost associated investing Israel Odubola

I

ndividual, investors and corporates apply the concept of opportunity cost in their day-to-day activities. Also known as true cost, it is the benefit missed or given up when an individual chooses one alternative over another.

Using Steven as an example, he loves hanging out with friends every Saturday.

He is so euphoric during those moments that he expends N50, 000, a quarter of his pay, on drinks. Steven does not save, not to talk of investing to earn passive income.

This is the extreme case of opportunity cost, when an individual trades his future financial stability for current gains.

Understanding how opportunity cost works helps you as an investor to make

‘

The reality of investments is, however, more complicated because the risk element every investment carries makes it pretty difficult to ascertain the actual return on any investment

intelligent investment decisions.

An investor whose objective is to maximize returns, every investment decisions must be carefully calculated, noting the possible investment opportunities forgone.

Making investment decisions based on emotions, chance or impulse, without meticulously considering alternatives is not a way to go.

To ascertain the opportunity of an investment decision, the return on bestforgone alternative should be deducted from return on the selected investment option. If the value is positive, it implies that investor has made the best decision, and vice-versa.

Going back to Steven’s decision to expend a quarter of his pay, to catch fun

with friends ahead investing, and assuming he invested in 364-treasury bills that would yield 12.54 percent at the last primary market auction, his opportunity cost is 12.54 percent return he misses on the security.

Thus, he could have invested the N50, 000, to get N6, 245 extra, the opportunity cost of his decision is worse as he couldn’t even produce the capital, (N50, 000).

If Steven was an investor, and he decided to keep the sum in a term account with Bank XYZ, that will yield five percent for 12 months, his opportunity cost being 7.54 percent or N3, 745.

That is 12.49 percent on 364-treasury bills, which is the best alternative forgone less 5 percent, the return of the se-

lected investment decision, making his opportunity cost 7.54 percent.

The reality of investments is, however, more complicated because the risk element every investment carries makes it pretty difficult to ascertain the actual return on any investment.

This is more applicable in equity investment, in which the volatility involved makes it difficult to study. What investors can do is to compare the returns realized at the end of a given period with returns on other asset classes.

According to Lawrette Egba, a personal finance expert, the best thing for you as an investor is to know your most favourable investment strategy that fits your investment objectives and apply it till the end.

About BD Money: This finance supplement is targeted at investors and other readers keen to make their money work harder.

Team Members: Lolade Akinmurele (Lead); Hope Moses Ashike; Segun Adams; Oluwasegun Olakoyenikan; Temitayo Ayetoto; Israel Odubola; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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Monday 27 May 2019

BUSINESS DAY

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Investing

Leveraging savings, investment instruments in financial market HOPE MOSES-ASHIKE

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here are lots of savings and investment instruments in the Nigerian financial market that can enable prospective investors to fulfil their wealth creation and developmental goals.

The investment products include the Federal Government of Nigeria Bond (FGN Bond), FGN Savings Bond (FGNSB), Nigerian Treasury Bills (NTBs), Commercial Papers (CPs), Mutual Funds, Real Estate Investment Trusts and Stocks.

Despite the growth in the savings and investment products in Nigeria, the country still records low savings and investments.

Akinwunmi Ayodele, head of research, FSDH Merchant Bank limited said low savings in the financial system means low amount of money will be available for lending purposes and the available funds will command high interest rate.

The ratio of Gross National Savings to the Gross Domestic Products (GDP) in Nigeria is one of the lowest among some selected countries including Nigeria, Kenya, South Afica, India, Malaysia, China, United Kingdom, and USA, according to FSDH Research.

Here is what you need to know about these savings and investment instruments.

FGN Savings Bond (FGNSB) – FGNSB targets retail investors and those who do not have the required minimum investment sum to invest in the FGN Bonds. The minimum amount to invest in FGNSB is N5,000 and the maximum is N50 million. FGNSB is of two tenors, 2 and 3 years. It is issued for 5 days starting from the first Monday of every month.

Government pays interest on the bond every three month and it is traded on the floors of The Nigerian Stock Exchange (NSE).

The Bond can be used as collateral to

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Despite the growth in the savings and investment products in Nigeria, the country still records low savings and investments obtain loan from any financial institution in Nigeria and the income from it is free from tax. Potential investors will need to speak with their investment managers and advisers.

Nigerian Treasury Bills (NTBs) – FGN borrows money from the public on a short-term basis (within one year) using www.businessday.ng

NTBs. NTBs are issued at a discount to the face value. This means that investors pay an amount that is lower than the face value and while the government will pay the investors the full face value at maturity. NTB in Nigeria has three tenors which are 91, 182 and 364 days and is issued twice a month. NBTs can be used as collateral to obtain loan from any financial institution in Nigeria and the income from it is free from tax. Potential investors will need to speak with their investment managers and advisors.

Corporate Bonds – Companies in good credit and financial standing borrow money from the financial market on a long term basis by issuing Corporate Bonds. Corporate Bond share certain similar features with the FGN Bonds in

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terms of payment of coupon, tenor and qualification for tax exception. However, it carries higher investment risks than the FGN Bond. Companies fix the minimum investment sum to invest in their Bonds. Potential investors will need to speak with their investment managers and advisers.

Commercial Papers (CPs) – Companies in the private sector issue CPs to raise short-term finance to fund their business operations. CPs is issued in tenors ranging between a minimum of 15 days and a maximum of 270 days. CPs is also sold to investors at a discount to the face value. Usually, the minimum investment in a CP is N5million. The income on it is free from tax. Potential investors will need to speak with their investment managers and advisers.

Real Estate Investment Trusts (REIT) – REIT is a special kind of investment vehicle that pools resource together to invest in real estate, therefore allowing individual investors to partake in the benefits of the underlying properties. There is no minimum amount to invest in a REIT so it is suitable for all categories of investors. Potential investors will need to speak with their investment managers and advisers.

Stocks – When an investor buys a stock or share of a company he becomes a part owner of the company and he shares part of the profit of the company in a form of dividend, bonus and capital appreciation. Stock investment attracts significant amount of risks as investors can lose their entire investment if the company fails. Therefore, investors should always speak to investment professionals before investing in the equity market. It is also a long term investment.

Various stockbroking firms have different minimum amount to open a stockbroking account with them.

FSDH Research notes, however, that these investment instruments need more supports than are currently available to enable existing and potential investors to fulfil their wealth creation and developmental goals.

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Monday 27 May 2019

BUSINESS DAY

Monday 27 May 2019

BUSINESS DAY

Cover Story Work 8-4? These are hustles you can cash in on SEGUN ADAMS

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ide hustles are trending all over social media. From the intrusive broadcast messages and group invites on mobile-messaging app, Whatsapp, to enticing pictures on Instagram cajoling buyers and the “Hi, I sell shoes, bags and affordable wrist watches. Kindly Retweet, my customers may be on your TL” on Twitter, people are trying to reach more people, create value and make more money.

The trend is a true reflection of people’s need to make extra income given the rising cost of living today.

To join the team of those widening their avenue to make money, here are some of the side jobs you might want to consider based on what industry experts say and what research shows.

Programming (N500, 000-N1m monthly) You do not need to be a geek today to write codes. If you have the passion, the time and the creativity to solve problems, then this might be a rewarding side job for you.

“Programming is quite vast and is a growing space in Nigeria today,” Kehinde (not real name), a programmer with close to two years of experience told BusinessDay correspondent.

Web development, Web design, applications development and software programming are some of the aspects one could venture in.

“There are tons of languages out there to learn. Whether Python, Ruby, Php or Java, you could get tutorials online from Youtube, Udemy and the likes or pay for offline tutoring at tech centres,” he added.

The average monthly wage of programmers range between N500, 000 and N1million “if you know your stuff and are able to negotiate well” For starters, Kehinde advises you give free gigs and jobs to build a reputation and clients’ and gain referrals subsequently.

It takes four to six hours of daily practice for two months to garner marketable skills and the jobs might require collaborating with other programmers at times. A good laptop is essential.

Graphics (N50, 000-N250, 000 monthly) One interesting thing about graphic design is that it can afford one the opportuni-

ty to relieve oneself of work-related stress.

“Graphics can be classified alone the non-motion and the animations,” Tobi (not real name), a graphics artist in a major media house said.

Non-motion graphics or visuals involve the creation of posters, flyers and the likes while animation concerns creating interactive tools and cartoons.

Tobi says the skills can be self-taught and there are loads of tutorial videos and PDF materials online. “It takes two-three hours of daily practice to brush off the rough edges and social media is a good place to get referrals,” he said.

Softwares that are essential for graphics include Corel draw, Photoshop, Inkscape, Adobe Indesign, Cinema 4D, Graphics Image Manipulation Program (GIMP), Adobe Dreamweaver among others.

The average monthly wage of graphic artists range between “N50, 000-N200, 000 for non-motion graphic artists and N100,000-N250,000 for motion artists,” Tobi said. Remuneration can exceed top limits depending on the level of professionalism, software used, job requirement, the status of client and certain other factors.

Photography (N250, 000-N1m/ Month) Taking pictures can be more rewarding www.businessday.ng

than a hundred likes, retweet and comments on your online profile.

David, a professionally trained photographer with 6 years of experience, says the industry is currently booming as people now place a high value on quality pictures and video contents that can help them immortalise landmark events in their lives.

“Whether it is events coverage, photojournalism, model and fashion photography, studio works or any aspect, passion is key,” he said.

David says the best way to pick up photography skills might be to work with an established photographer or enrol for a professional course.

A professional camera costs an average of N250, 000 and it takes about 3-6 months to get past the basics of photography.

“Ability to use Photoshop is a complementary skill might be and the average monthly income can be around N250, 000 although really good guys can rake above N1 million,” he added.

Tutorials (depends on negotiation) Another great way to cash in on your skills is in providing knowledge. Whether online or offline you can make a lot of money from teaching language, hard or soft skills, or a subject like Economics or Mathematics.

Ruth, a tax consultant during the week teaches French to a high-school on Lagos Island. “I charge the parents N3000 per hour and I take the kid for six hours every weekend.”

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There are quite a number of online platforms to sell one’s tutorial videos and the pay is quite dependent on the number of subscribers who pay to access your content.

Makeovers (N100, 000 monthly) Although the makeover business is currently very competitive, the average makeover artiste grosses N100, 000 minimum per month especially if the artist is able to secure two wedding contracts in the month,” Blessing, a makeover artiste told BusinessDay. “It takes a lot of work to build a reputation but offering free makeovers to your circle of friends is a good form of advertisement- then leverage social media too,” she said.

The initial investment would require the procurement of standard make-up kits for which the cost varies, depending on the extent of purchase and brand.

“There are many ways to start. You could learn online, have a friend teach you or go for professional classes,” Blessing added.

Confectionaries and small chops (depends on variables) If your baking skill is top-notch and you need to show off whilst making money, confectioneries and small chops might be just what need as a side job.

Although Williams, a working professional and a baker points out that there might need to employ extra hands and the trend today is most bakers delve into other aspects of the business like selling baking materials to stay profitable.

“I cannot give you an estimate because it is hard to say for everyone else in the industry.

Maybe N100, 000, maybe less. If you are a big player it can be up to N1 million.” She said.

Variables that affect revenue include the location of business and type of clients, rate of sales, and the number of hands employed.

Taxi (not obtained) The rise of ride-hailing apps has seen the likes of Uber and Taxify replace yellow cabs.

Millennials-a rising demographic group with spending power-consider these new ways of moving about more conveniently and have enabled the industry to become buoyant.

If you own a vehicle and a driver’s license then you can apply to drive for any ride-hailing company although you would have to share revenue on an agreed upon basis with the ehailing platform.

Other side jobs worth researching about include: Dropshipping, Fitness instructor, Blogging, Events planning, SEO consulting and social media management-although is much longer.

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Steady import level fails to impress investors in local wheat production Temitayo Ayetoto

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igeria is one of the African countries that will not make significant contribution to the forecast of an all-time high of 49.3 million tons in total wheat imports to Africa between 2019 and 2020, yet this will not translate to increased demand for investors in local wheat production.

Nearly all of the projected increase in Africa’s import will be concentrated in two countries facing reduced production prospects this year – Algeria and Morocco, the Food and Agricultural Organisation’s Biannual Report on Global Food Market says.

Nigeria’s wheat imports within 2018 and 2019 marketing year were forecast at 5.4 million metric tons, up four percent from the import figure of 5.2 million metric tons. In the same year, wheat accounted for N362.4 billion, marking 42.5 percent of the N852 billion agricultural goods imported into Nigeria.

Demand for Wheat in Nigeria is 4.7 million metric tons but local produc-

tion drags at 60,000 metric tons, leaving a deficit of 4.64 million metric tons.

Imports by Algeria are forecast to rise by 10 percent to 7.7 million tons while Morocco’s imports could surge by as much as 42 percent to reach 4.7 million tons based on an anticipated 25 percent drop in domestic production.

“Wheat shipments to most other major destinations in Africa are likely to remain steady at around the 2018/19 levels,” FAO said but stakeholders in wheat production consider it inconsequential as a combination of uncompetitive pricing, poor production conditions and quality variation constitute setback.

Analysts believe current times are not the best to invest in local wheat production because the local market hardly benefited from huge industrial demand. Producers have had to rely on open markets to recoup their investments.

“Until it is reduced, nothing will come out of a steady level of import.

We want it reduced drastically before the year 2030,” Salim Saleh, president Wheat Farmers Association of Nigeria told BusinessDay. www.businessday.ng

“

Agriculture needs a thorough team that can drive it. if we don’t have this team and we just allow the ministry to be under the leadership of a minister alone can determine the fate of over 200 million people

“Agriculture needs a thorough team that can drive it. if we don’t have this team and we just allow the ministry to be under the leadership of a minister alone can determine the fate of over 200 million people.”

Wheat is an important commodity that is essential in flour which is used in processing bread, biscuit and other food items that is generally consumed.

Nigeria’s wheat production yield has been

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a struggle between 2.1 and 2.5 tonnes per hectare.

A generally upward movement in international prices of wheat in 2018 has given way to a declining trend since March 2019. At the start of this year, wheat prices were affected by less than ideal weather during harvesting in Argentina and Australia. Wheat woes were further compounded by reports of historically low winter wheat seeding in the United States of America and rising concerns over tightening exportable supplies in the Russian Federation.

These conditions combined to push February prices up to their highest level since October 2018.

But in March wheat prices started to drift lower, influenced primarily by continued large sales from the Russia and a favourable outlook for crops to be harvested this year, especially among the major exporters. The benchmark United States of America wheat, Hard Red Winter, averaged $213 per ton in April, over 10 percent below its level at the start of the current year and also the same period last year, FAO says.

The forecast for global wheat production in 2019 is pegged at 767 million tons, nearly 37 million tons above last year’s output and, if confirmed, it would set a new record.

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Monday 27 May 2019

BUSINESS DAY

Investing Here are some tips to note before making investment decision on a company’s stock DAVID IBIDAPO

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n average Nigerian is scared when the word “stock market” is mentioned because of the believe that it is a risky venture, which is true compared to other investment options like treasury bills and bonds.

Individuals therefore tend to believe the worst about the market instead of looking beyond the fears and consider the enormous opportunity to growing substantial wealth when perfectly understood.

You can beat the market!

The phrase “beating the market” (earning an investment return that exceeds the performance the general market) is a reality in the world of investment in any asset class provided an investor understands how to.

Due to the volatility inherent in the equities/stock market, the possibility for an investor to see both his gains and investments eroded is a reality. A lot of investors have gotten their hands burnt as

they lack the knowledge on those things to consider when making investment decisions.

While some are influenced by investment decisions of friends, some by the popularity of the company, some by how high or low the prices of the stocks are, some by religious believe etc, others have made good returns by understanding the dynamics of the market such as Warren Buffet, the most successful investor in the world.

Some empirical analysis on the Nigerian stock market have proven the inefficiency of the market as it is driven more by investor’s sentiment rather than driven by available information and fundamentals, hence giving investors the opportunity to beat the market almost all the time.

An efficient market is one which market prices reflect all available, relevant information. If markets are efficient, then all information is already incorporated into prices, and so there is no way to “beat” the market because there are no under or overvalued securities available.

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“

Due to the volatility inherent in the equities/ stock market, the possibility for an investor to see both his gains and investments eroded is a reality. A lot of investors have gotten their hands burnt as they lack the knowledge on those things to consider when making investment decisions

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However, you don’t beat the market by guessing or by sentiments but by adequate knowledge of how the stock market works and how to make value creating decisions irrespective of the state of the economy, industry or company.

For effective understanding of market dynamism, we shall consider first the need for fundamental analysis in making investment decisions.

Fundamental Analysis Fundamental analysis is the examination of key forces that affect the wellbeing of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements.

Macro-economic environment It is important to understand developments around the macro space of the economy and how it translates into affecting the industry and ultimately companies within the industry. More often than not, shocks in the economy are regarded as systematic risk inherent to the entire market also known as “undiversifiable risk.” This type of risk is both unpredictable and impossible to completely avoid.

This is because events in the global economy can affect events in the domestic economy.

While some stocks are cyclical, others are noncyclical or defensive stocks. Cyclical stocks are stocks that move in the same direction as the economy. When the economy is in a recession the profits of a cyclical company tend to drop and so its share price. Also, when the economy is in a good shape (expansion), the share price tends to goes up with the profit growth.

Defensive stocks on the other hand see the revenues, the earnings and the cash flows of the company remain relatively stable and so the share price, no matter how the economy is doing.

It is therefore important to note stocks within the market that fall into the category of cyclical or defensive stocks so as to determine what stocks are less volatile depending on the current state of the economy.

In our next article, we shall consider industry based analysis and how it should influence your investment decisions.

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BUSINESS DAY

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Data

Federal government eurobon Yields on Eurobonds rose week on week by c.57bps from an average of 7 percent when the market closed last week to 7.05 percent as selling interest on sovereign Eurobonds continued from previous week.

Brent fell below $70 per barrel mark to touch $67.76 on Thursday as concerns that the on-going US-China trade war would worsen global growth. Brent however gained 0.75 percent as at 19:27 GMT+1 on Friday, pushing price to $68.27 per barrel.

Corporate eurobond Yields on corporate Eurobonds fell c.127bps across all tickers from last week with average yield declining from 7.77 percent on last week to 7.67 percent. During the week, Diamond’s 8.75% corporate bond matured. www.businessday.ng

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Monday 27 May 2019

BUSINESS DAY

Personal Finance Do you know your personal net worth? Here is how to calculate it OLUWASEGUN OLAKOYENIKAN

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ave you heard an individual worth a billion dollar and you wondered how much you are worth after several years of rendering your services in your chosen career? You could be a student or an employee with few years of experience but ponder for several hours over your actual net worth each time you come across a question demanding it, maybe while filling an application form for a scholarship.

If you are a financially conscious individual, you need to know your personal net worth at some point of your life, this would help you track your financial progress in life – or how well your worth is eroding as you grow older – after making any financial decision or achieving a very important life milestone.

Interestingly, you do not need to own a private jet before you know how much you are worth. It is important for everyone and simple to calculate. Just gather all you own and all you owe and you’re good.

There is certainly no gainsaying that a good financial decision, implemented appropriately would increase your net worth, this is provided all things being equal as the economists would say. However, an abysmal decision and any wrongly-executed plan relating to your finances would plunge your worth and most likely

make you less valuable.

Saving your money in a bank where the interest rate on savings is far lower than the national inflation rate would increase your chances of dampening your financial worth.

It does not even get better when you spend on regular items with no hope of financial gain.

Rather than these, you could buy a landed property somewhere with a high tendency to develop swiftly as that would mean allocation of cash to a fixed asset that would appreciate in value over time.

Besides this, one could deploy strategies to

Week Ahead Week Ahead(Monday, 27th May – Friday, 31st May, 2019)

reduce debts or other forms of financial burden to grow net worth, even with marginal increase or stagnancy in asset value.

Apparently, your financial worth often called net worth measures the true worth of individuals and businesses. As an individual, your net worth is your value in financial terms and creates a picture of your financial health. A high net worth is an indication of good financial strength, while a low or negative net worth will refer to weaker financial strength, thereby affecting the individual’s or the company’s ability to raise funds to run the business.

In simple terms, your net worth is the monetary value of everything you own called assets minus everything you owe called liabilities. So, to set up a personal net worth statement for yourself, you would need to list your assets and sum up estimates of the current value of each.

Do the same for liabilities and deduct the total from the value of the overall assets.

Assets are all financial and non-financial resources that can easily be converted to cash and they include cash, the amount in your bank or retirement accounts, the value of your investment which include all securities in your portfolio, the market value of your cars, fixed assets such as houses, buildings, land, equipment or machinery. Assets also include jewellery, art, furniture, cash value of any insurance policies and intangible assets.

However, liabilities are present financial obligations that deplete resources and must be settled over time either through cash payment, goods delivery, or services. Liabilities include mortgage and all forms of loans and interest payments, payables for goods supplied or services rendered, taxes, bills payable and other expenses.

Although the approach to calculating your personal net worth may look seamless by simply deducting liabilities from assets, classifying certain items into either assets or liabilities and estimating their current value could be challenging. These we may likely address in our subsequent articles.

Chart of the week

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

Event May & Baker Nigeria Plc will hold its Annual General Meeting on Thursday, May 30 at the Shell Hall, Muson Centre, Onikan, Lagos. The Board of Directors recommended for shareholders’ approval a final dividend of 20 kobo per 50 kobo ordinary share.

Data Release The National Bureau of Statistics to release Commodity & Terms of Trade Report for 2019’s first quarter, May 30. A snapshot of the previous quarter revealed that the all products term of trade index dip 2.8% due to falling prices of Products of chemical & allied industries, Mineral products, animal products and live animals.

Fixed Income 91-day Treasury bills offered for N24.3 billion at 10.9% on February 27, 2019, will mature on Wednesday, May 29.

Commercial paper worth N9.84 billion issued on November 30, 2018, by Mixta Real Estate Plc at 9.84% issue yield will mature on Thursday, May 30.

Currency The naira is expected to trade at current levels on various windows boosted by regular liquidity supply by Nigerian Apex Bank to the market. www.businessday.ng

The Nigerian economy expanded at a slower rate in the first quarter of 2019, compared to the fourth quarter (Q4), as a lack of broad-based reforms and election-related uncertainty crimped growth.

Gross Domestic Product (GDP) for Q1, 2019 expanded by 2.01 percent, compared to the 2.38 percent hit in Q4, 2019, the National Bureau of Statistics (NBS) said in a report Monday.

Meanwhile the Monetary Policy Committee voted to keep the Monetary Policy Rate (MPR) at 13.5 percent while the asymmetric corridor was retained at +200/-500 basis points, cash reserve ratio (CRR) at 22.5% and liquidity ratio at 30%.

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75

Company IN FOCUS

BUSINESS DAY Monday 27 May 2019 www.businessday.ng

The evolution of Nigeria’s biggest non-oil Foreign Direct Investment the Foreign Exchange Manual, 2006.”

The Telco giant however vigorously defended its position on the issue, describing the sanction as regrettable.

The ripple effect of the perceived negative regulatory actions against MTN Nigeria saw investors and their representatives question whether it was worthwhile to do business in Nigeria.

During the period, shares of MTN fell to a 5-year low after stock plunged 36.25 percent in just one week on the Johannesburg stock exchange market.

Afterwards, shares of MTN however maintained an 8,000 Zar level till March 2019 when share price appreciated 26.45 percent.

MTN eventually paid $53 million to settle the dispute without admitting guilt.

David Ibidapo & Olufikayo Owoeye

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he Global System for Mobile communication (GSM) was introduced into the Nigerian market in 2001 during the Olusegun Obasanjo administration after the deregulation of the telecom sector.

Its birth in the country brought to an abrupt end the moribund, problem-plagued and inefficient services of the Nigerian Telecommunications Limited (NITEL) that had maintained a monopoly over Nigeria’s telecommunications and data services.

From the word go, it was clear that the new wave of mobile communications held better promises for millions of Nigerians who were already enervated by complaints of poor services typical of Nigeria’s public utility, corruption and lack of functional modalities to reverse the situation.

The telecoms market in Nigeria has since grown to become the largest on the continent with 173 million voice and 115.9 million data subscribers as at March 2019. The market had a 10 year GDP compound annual growth rate of 11%, more than double the national GDP compound annual growth rate of 5%. Compared to peer countries, both the voice and data penetration rates are lower, pointing to underlying growth potential.

Company overview MTN Nigeria is part of the MTN Group and commenced operations in the country in 2001 after concluding a $285 million deal of securing one of the four GSM licenses offered by the Federal Government.

Shortly after MTN was issued its license by the Nigerian government, alongside other operators namely Econet (now Airtel), and MTEL, MTN kicked off its per minute billing system calls in Lagos and other major cities across the country. The per-minute billing system was short lived following the entry of another mobile operator, Globacom that introduced per seconds billing system.

MTN Nigeria is 78 percent owned by MTN Group through Mobile Telephone Network NIC B.V, 19.4 percent held by Nigerian shareholders and 1.8 percent owned by Public Investment Corporation SOC Limited.

The subscriber base of the teleco giant has grown from less than 30million subscribers in 2008 to 65.03 million equating to 37perecent market share. The company has also invested N1.6 trillion in capital expenditure amounting to N143billion annually, a feat unmatched by any Nigerian non-oil quoted company. It also recently completed the acquisition of Visafone, a Code Division Multiple Access Network in the telecoms industry.

The management team is composed of a mix of local and international expertise. Interestingly, the CEO, CFO, COO, CTO,CMO CEBO have a combined 83 years of experience at the MTN Group.

Pascal Dozie, an investment guru, is the chairman of MTN Nigeria since inception in 2001. He is the co-founder, partner at Africa Capital Alliance, founder Kunoch Limited and founder Diamond Bank (now Access Bank) where he serves as the CEO from 1991 to 2006.

PGD has also served as the president of the Nigerian Stock Exchange, chairman Board of Trustees Africa Development Foundation just to mention few.

In an exclusive interview with BusinessDay, PGD, as he is fondly called by associates, recalled how his relationship with MTN started on a sluggish note.

“So when they met me, we agreed to work together; I did not know anything about mobile telephoning and with my experience with NITEL; I felt it was not the right way to go,” he recalled.

Ferdi Moolman is the CEO MTN Nigeria; he joined the Nigerian subsidiary as a consultant in 2003. Prior to his appointment as CEO,

Sanctions by the Attorney General of Nigeria To add to its woes, the office of the Attorney General of the federation demanded that the telco giant pay the government $2 billion representing import duty, withholding tax and value added tax that should have been remitted to the purse of the Federal Government. MTN denies being in debt of the government or tax authorities.

The case currently lingers in the court as MTN states that the demand and actions of the Attorney General is illegal and unconstitutional.

According to Rob Shuter, MTN CEO, “Look, I think if you look at our history for complicated tax disputes they can take years because you end up going through this tribunal, that tribunal etc. Now, of course, what’s odd about the Nigeria situation is it’s not the Commissioner for Inland Revenue that we have the dispute with. It’s the Attorney General, who is really not mandated to collect tax.

“So the legal process is basically saying you’re playing a game that you’re not meant to be playing. And when we talk to the tax authorities they have no particular quarrel with where we are with our various assessments.

So either we get the thing chucked out early on and the issue is finished, or it is just one of these lingering things that roll around in the system for a while.”

Moolman was the Chief Operating Officer (COO) at MTN Iran cell but was later brought into the Nigerian unit of the firm as the Chief Financial Officer.

Other Non-Executive Directors include Gbenga Oyebode, a lawyer and chairman, management Board of Aluko & Oyebode, Mohammed Sani Bello, Babatunde Folawiyo and Victor Odili among others.

The telco giant offers products, services and solutions for a wide range of individual and business both corporates and SME clients.

This includes Voice and Messaging services, Braodband Data and internet services, MTN machine to machine solution, MTN Cloud services among others.

MTN crosses sanction hurdle Before the listing of MTN shares by introduction on the Nigeria stock exchange, MTN was sanctioned by the Central Bank of Nigeria at the third quarter of the year 2018.

The CBN had alleged that the telecoms giant illegally repatriated the sum of $8.13 billion (N2.5 trillion at N306.15 to $1), with the involvement of Standard Chartered Bank, Stanbic IBTC, Citibank and Diamond Bank between 2007 and 2015.

It the words of the apex bank, the transaction was a “flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 and

MTN boost NSE performance, returns gains to investors The recently concluded Nigeria 2019 general elections, coupled with lack of clear economic policy saw the Nigeria equities market dip by 10 percent year to date before the introduction of the shares of MTN on the NSE market.

This saw investors’ value erode despite the earnings season which should have spurred market recovery from its downward spree witnessed in 2018 on the back of preelection uncertainties which dominated the market.

However general excitement towards the listing of MTN’s shares on Thursday, 16th of May 2019 saw investors take position awaiting the arrival of the Telco giant’s shares.

During the period, the market witnessed asset rotations from some stocks especially most capitalised stocks listed on the NSE30 index which conformed to analysts’ expectation that fresh cash may not be introduced to purchase the shares of MTN. Since the listing of MTN shares till the end of trading on Thursday, 23rd of May 2019, the Nigerian all share index appreciated by 11.28 percent, returning gains and more that investors had lost due to the bearish trend of the market year to date pre-MTN shares on the NSE. The all share index gained N3 trillion in market value in just 2 weeks contributed by buy pressures of MTN shares.

Upon listing, MTN shares appreciated 65.5 percent from N90 to N149 as at the end of trading on Thursday, seeing shareholders’ value increase by N1.2 trillion in market cap.

However, prices began to reverse on Friday with MTN shares dipping -6.04 percent as at the end of trading on Friday, also pulling the ASI down by -1.89 percent.

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