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news you can trust I ** tuesDAY 28 july 2020 I vol. 19, no 615
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Ahmed expects Nigeria to exit recession Q1 2021 with 0.5% GDP contraction T N
Third Mainland Bridge closure: Helicopter shuttle services not sustainable – experts IFEOMA OKEKE & ENDURANCE OKAFOR
PATRICK ATUANYA iger ia’s finance minister, Zainab Ahmed, says she expects Nigeria to exit a shallow recession sparked by the coronavirus (COVID-19) pandemic by the first quarter (Q1) of next year, if a N2.3 trillion Economic Sustainability Plan (ESP) approved by the Federal Government is strictly implemented. “The National Bureau of Statistics (NBS) has already done an initial assessment that the economy could go into recession to as much as 4.2 percent by 2020 Continues on page 31
he business model of operators of new helicopter ‘shuttle’ services launched in Lagos in a bid to cushion the effect of partial closure of the Third Mainland Bridge on motorists has been faulted by industry experts. They argue that Nigerians who do not currently have the disposable income to pay an exorbitant amount for helicopter shuttle services will have to Continues on page 31
Inside L-R: Bashir Ibrahim Hassan, general manager, business development, North, and Patrick Atuanya, editor, BusinessDay Media Limited, with Zainab Ahmed, minister of finance, budget and national planning, during an exclusive interview with BusinessDay at her Abuja office.
FMDQ Holdings holds 8th annual general meeting P. 30
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MAX.ng gives traders parasols to protect against weather BUNMI BAILEY
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s part of its efforts to contribute positively to communities around it, MAX.ng, Nigeria’s frontline bike hailing and delivery logistics service provider, is giving out parasols to traders in Ibadan, the Oyo State capital, to protect themselves and their wares against the harsh weather conditions currently being experienced around the country. This is in line with the company’s commitment towards fulfilling its social responsibilities and positively impacting lives in its operational cities. MAX.ng, currently operational in the cities of Ibadan, Akure and Kano and offering delivery services to businesses and individuals in Lagos, visited various markets around Ibadan to distribute the parasols to traders dealing in commodities ranging from fresh produce to household items. Speaking at Dugbe Market, MAX.ng representative, Olumayowa Olusa, said, “We at MAX.ng are cognizant that this rainy season will be hard on a lot of people, especially the traders who have to go out to ply their trade come rain or sun in order to make ends
meet. That is why we decided to play our part in ensuring the protection of our people and their merchandises.” One of the traders, Lawan Tawa, expressed gratitude to the MAX.ng team and said the parasols would come in handy for her and her people, saying, “The rain has been affecting our sales because once it starts raining, we have to pack up and take shelter and wait for the rain to stop, with this umbrella we will be able to stay out more no matter the weather and make more sales.” While shedding more light on how MAX.ng is making positive impacts in its communities, Olusa said the company has also devised a scheme for the traders to earn additional income by referring trustworthy individuals to take part in its vehicle financing scheme. He said, “These traders are part and parcel of the community and know individuals who can benefit by being on the MAX.ng platform to sustain themselves and their families. They can refer these people to us and if the person passes all our necessary background checks, and then we provide them with our vehicles which will eventually become theirs through our financing option.”
Lagos Island residents to spend more on basic items on back of Third Mainland Bridge closure - Survey BUNMI BAILEY
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rices of food and other essential items might trend higher in near term on the Lagos Island as traders may leverage the partial closure of the Third Mainland Bridge for quick gains, a recent report from Lagos-based investment advisory firm, Financial Derivatives Company (FDC) revealed. Findings from a survey conducted by FDC on Sura Market, a major market on the island, revealed there is every possibility that traders might take advantage of the partial closure of the bridge to further increase prices of their products, with the implications being weaker purchasing power for residents in the area.
“Price discrimination, as you may know, is not Nigeria-specific but a universal phenomenon. It is a natural function of higher logistics costs, demand elasticity, market segmentation and income inequality. The partial closure of the Third Mainland Bridge will further disrupt the commodity supply chain and widen the price differential between markets,” FDC stated. Earlier this month, the Federal Government announced that from July 24, 2020, the Bridge would be partially closed for maintenance. The closure is expected to last for six months till January 24, 2021. Rosemary Enemuo, a senior analyst at SBM intelligence concurred with the findings. ‘The closure could spike inflation
due to restriction on mobility. Markets on the island like Sura market can only take advantage of the situation,’ Enemuo stated. Ayorinde Akinloye, consumer analyst at Lagos-based CSL Stockbrokers, maintained that the cost expended on transporting goods to the market will escalate, and traders will transfer the cost to the final consumers via higher prices. Before the closure of the bridge, Sura, a popular market on the Lagos Island, has been charging a premium of at least 20 percent food commodities compared to other popular markets in the Lagos Mainland, such as Iddo, Oyingbo markets. For example, a big basket of tomatoes goes for N40,000 at Iddo and N35,000 at Oyingbo but at Sura, it costs N43,000
and a bunch of plantain cost N2,500 and N2,000 at Iddo and Oyingbo respectively, while it costs N3,000 at Sura. Also, a big bag of onion bulb goes for N35,000 at Iddo and N30,000 at Oyingbo but costs N37,000 at Sura. “Traders are rational economic agents and are also very smart. They are also aware that their customers are more likely to be elites, living in expensive flats in Ikoyi or Victoria Island and more than anything else have ‘deep pockets’. They size you up very quickly and then proceed to charge you a price based on their assessment,” FDC explained. Markets located in the mainland are unlikely to experience a further increase in food prices, according to analysts.
Eatrich Farms activates GAP initiative to drive investment for SMEs post Covid-19 KELECHI EWUZIE & iniobong iwok
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etermined to create the right investment opportunities for Nigerians small-medium enterprises post Covid-19, Eatrich Farms has introduced the Green Africa Project (GAP). Green Africa Project (GAP) is a new investment initiative for Nigerians aimed at maximising investment and minimising risk, with the end goal of improving socio-economic situations through agriculture. The initiative is one of the many projects handled by Eatrich Farms to further its goal of feeding the future with freshness. Sam Afolabi, chief executive officer, Eatrich Farms says the new investment platform was
initiated as a response to the yearning of many Nigerians seeking investment opportunities. According to Afolabi, the company bridges the gap between serious but busy investors/partners and their desired investment in agro space, adding that the project has compartmentalised the GAP city into three different phases based on its well worked-out plan for each year. “The phase one focuses on fish farm, phase two on chicken and turkey farm (livestock), and phase three on pig farm. Other investment channels with the company are the maize farm and the sold-out commercial-scale feed mill, among others. But the fish farm is currently active and open to investors/partners,” he said.
CIBN inaugurates 14 committees to strengthen operations HOPE MOSES-ASHIKE
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he Chartered Institute of Bankers of Nigeria (CIBN) has inaugurated 14 committees of its governing council to strengthen its operations and drive its activities. The inauguration of the committees comprising three statutory, nine standing and two ad-hoc was consistent with the governance of the institute which has served it well in the over five decades of its existence. Speaking at the inauguration, Bayo Olugbemi, president/chairman of council,
said the committees would be required to articulate new initiatives, ideas and strategies toward the actualisation of the strategic vision of the institute. He charged the members to deploy their expertise and wealth of experience to ensure the realisation of the terms of reference of their various committees for the next two years. The CIBN president expressed his gratitude to the one hundred and eighty members who participated at the first virtual CIBN committee Inauguration programme for accepting to sacrifice their time and resources to serve the institute. www.businessday.ng
L-R: Olusesan Ogunyooye, head marketing and corporate communications, Alpha Mead Group; Morenike Azeez, executive secretary, Lagos State Vocational and Technical Education Board (LASVEB), and Olumide Orojimi, head corporate communications, The Nigerian Stock Exchange (NSE), during the presentation of face masks donated by Alpha Mead Group to LASVEB, under the ‘Masks for All Nigerians’ initiative of the NSE in Lagos.
Okowa empowers STEP beneficiaries with starter-packs Mercy Enoch, Asaba
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overnor of Delta State, Ifeanyi Okowa has given starter-packs to some Deltans in keeping to his promise of empowering beneficiaries of the state’s job and wealth creation programme- Skill Training Enterpreneurship Programme (STEP). This development has elicited reactions from the beneficiaries and their families, as they expressed joy and commenended the state government. One of the beneficiaries, Favour Oseoghene Dennis, from Isoko South local govetnment area of the state, said the empowerment pack would enable her start her fashion and textile design enterprise. Just like her colleagues, she received the following as starter pack: one industrial sewing machine, one industrial weaving machine, a generator, a cutting table, one electric iron and 96,000.00 micro credit to enable her pay for her shop in Ughelli, her choice location for the business. As the items were presented
to her in Asaba, her mother, Oletu Ewoma, threw caution to the wind as she danced round joyously in appreciation of what the state government has done and for the opportunity given to her daughter. “I am dancing because I did not expect this kind of starterpack for my daughter. I did not have money to train her in school. I would not have been able to buy all these for her. God has used Governor Okowa to establish her. As her mother, I will guide her to ensure that she applies the knowledge acquired and these items to improve herself and that of our family,” she enthused. Another beneficiary, Kelvin Athora from Udu local government, trained in audiovisual and photography under the Green STEP, expressed gratitude to the state government for the opportunity, affirming that the starter-pack would help him to earn a living and to train other youths. Akpduado Glor y, from Ughelli South, trained in fashion and textile design said she worked as a sales girl because
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her parents had no money to establish her in the fashion business after her training. She exclaimed she was relieved of her worry when she got engaged in the programme and resumed training January this year as a Brown STEP trainee.
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On and on the commendations rolled as all the 107 STEP graduates received their starter-packs, bringing to 219, the total number of STEPreneurs so far established in the 2019/2020 programme cycle of job and wealth creation programme.
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Obasanjo missing as Buhari names railway stations after prominent Nigerians MIKE OCHONMA
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n what seems a move coated with political undertones, President Muhammadu Buhari on Monday approved the naming of some railway stations along the Lagos-Ibadan corridor and others on the Itakpe /Ajaokuta /AladjaWarri after some ‘deserving’ Nigerian citizens with the name of former President Olusegun Obasanjo not included. In a statement on Monday by Eric Ojiekwe, director of press in the federal ministry of transportation on behalf of Rotimi Amaechi, minister of transportation, the deserving citizens have contributed to the progress and development of their respective communities and the nation at large. The president had earlier approved that, the name of the railway station in Agbor, Delta State be changed to Goodluck Jonathan Railway Station and Complex. Amaechi disclosed this while inspecting the WarriItakpe rail line on Saturday, July 18, 2020. With Monday’s presi-
dential directives, and for the Lagos-Ibadan with extension to the Lagos Port Complex at Apapa railway station, the beneficiaries, including the living and the dead are Bola Ahmed Tinubu (Apapa station), Mobolaji Johnson (Ebute Metta Station), Babatunde Raji Fashola ( Agege station), Lateef Jakande( Agbado station) and Nigeria’s current vice president; Yemi Osinbajo (Kajola station). Others are Funmilayo Ransom Kuti (Papalanto station), Wole Soyinka (Abeokuta station), Segun Osoba (Olodo station), Ladoka Akintola (Omio-Adio station) Obafemi Awolowo (Ibadan station) and Alex Ekwueme (Operation Control Centre). For Itakpe-Ajaokuta/ Aladja-Warri Railway, the names are Adamu Attah (Itakpe station), Olushola Sarak (Ajaokuta station), Augustus Aikhomu (Itogbo station), George Innih (Agenebode station), Anthony Eromosele Enahoro (Uromi station), Tom Ikimi (Ekehen station) and Samuel Osaigbovo Ogbemudia (rtd), (Igbanke station).
Shareholders laud NASCON over prompt dividend payment …urge company to target more markets
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hareholders of NASCON Allied Industries Plc, a subsidiary of Dangote Industries Limited have expressed satisfaction at the performance of the company but tasked the food seasoning company to expand its market share so as to increase revenue. Speaking at the NASCON’s 2019 annual general meeting (AGM) in Lagos on Monday, the shareholders commended the company’s prompt payment of dividends just as the management assured that the performance for the first half of this year holds assurance for a bumper harvest at the end of the year despite the coronavirus pandemic. A shareholder, Bisi Bakare speaking on behalf of others who attended virtually, stated
that the company was known for taking good care of shareholders through consistent payment of dividends. He observed that despite the harsh operating environment, the company still paid a dividend of 40 kobo per share, translating to a 57 percent dividend pay out ratio. She expressed satisfaction that NASCON board and management grew revenue from N25.77 billion to N27.49 billion in the year under review. Adding his voice to the commendation, Sunny Nwosu, lauded the board and management of NASCON for their ability to pay dividends despite the harsh operating environment which resulted from the Apapa Wharf gridlock and the downturn in national economy.
He observed that while other companies were cutting down on production, NASCON was paying dividend. He urged the company to more market share in the food sector especially in the Southeast and Southwest regions through carefully selected strategies. He said that if the company was able to increase its market share in these regions, its revenue would increase and the company would expand and offer more opportunities. “The management should expand our customer base to attract more revenue. Develop strategies to penetrate the Southeast and Southwest markets. The plants are close to these markets,” he said. M a n a g i n g d i r e c t o r,
NASCON, Paul Farrer said the company has developed plans and strategies to capture share in the stated markets and would gradually deploy them in the coming months. Farrer explained that NASCON has proved resilient in the challenging environment of 2019 and was strongly focused on capacity growth and increased market penetration. He further disclosed that the company would be leveraging on a number of synergies, including improved output in terms of quality, quantity and business efficiency to deliver value for all stakeholders. A peep into NASCON’s annual report for 2019 indicated that operating profit stood at N2.9 billion, net profit at N1.85 billion, total assets at N38.67 billion.
Respite for over 1.5m WASSCE candidates as FG picks August 4 for school reopening Kelechi Ewuzie, Lagos & Godsgift Onyedinefu, Abuja
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igerian parents and students can now heave a sigh of relief as the Federal Government on Monday directed secondary schools in the country to reopen as from August 4, 2020 for exit classes only. The news couldn’t have come at a better time for 1,549, 463 candidates who registered for the 2020 West African Senior Secondary Certificate Examinations (WASSCE). This recent directive by the Federal Government implies that students have just two weeks to prepare for the West African examination due to start on the 17th of August, 2020. These were the unanimous decisions reached at a virtual consultative meeting involving the federal ministry of education, commissioners of education of the 36 states, Nigerian Union of Teachers (NUT), proprietors of private schools, and chief executives of examination bodies. Ben Bem Goong, director, press and public relations at the ministry of education in a statement said the meeting also resolved that a passionate appeal be made to the Federal Government through the Presidential Task Force on Covid-19 and public-spirited Nigerians for assistance to schools across the country to enable them fast-track preparations for safe reopening, as agreed. Goong announced that another meeting would be convened Tuesday between the federal ministry and chief executives of examination bodies namely, National Examination Council Nigeria (NECO), Na-
tional Business and Technical Examinations Board (NABTEB) and National Board for Arabic and Islamic Studies (NBAIS) to harmonise their examination dates, which would be conveyed to stakeholders expeditiously by the federal ministry of education. BusinessDay had earlier reported that the management of the West African Examinations Council (WAEC) has announced August 3 to September 5 as the commencement date for the conduct of the much-awaited West African Senior Secondary Certificate Examination for School Candidates, 2020. Patrick Areghan, head of Nigeria National Office of WAEC stated that there was a novel development in this arrangement for this year’s examination in the sense that the examination would be held from Monday through Saturday, in order to be able to achieve the five-week span. He further noted that the choice of the period (August 3rd to September 5‘“, 2020) for the conduct of the examination was not arbitrarily set, adding that WAEC consulted extensively with the governments of all the five-member countries before arriving at the period a duration of the examination. According to him, in deference to the Federal Government of Nigeria, the five-week arrangement was arrived at in order to make room for the other examining bodies to equally conduct their examinations in good time. The shortening of the period is also of advantage in terms of reducing the period of mass social interaction with its attendant consequences. www.businessday.ng
L-R: Olayiwole Onasanya, permanent secretary, ministry of agriculture; Gbolahan Yishawu, member, Lagos State House of Assembly, representing Eti-Osa 02; Gbolabo Olaniwun, senior special assistant to Lagos State governor on agriculture, and Abisola Olusanya, acting commissioner for agriculture, Lagos State, during the official flag off of Eko City Farmers Market, Ileya edition at Ikoyi Falomo in Lagos.
NIPC to replicate reforms gained through state investment promotion agencies GBEMI FAMINU
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eads of state Investment Promotion Agencies (IPAs) in Nigeria recently attended a webinar with Yewande Sadiku, executive secretary/CEO, Nigerian Investment Promotion Commission (NIPC), to share insights garnered from the recently released half-year report on investment announcements and NIPC’s work to deepen state-level investment support in-line with its sub-national objectives and strategies. The closed session was attended by IPA heads from 30 states, including heads of NIPC five zonal offices. In her opening remarks, Sadiku extols the efforts state IPAs are making in attracting investments to their respective states and advocated for healthy competition among states, saying, “In reality, the battle for capital is fierce; the biggest attractors of capital globally are countries that already seem like they have a lot of
capital inflow. “Africa only represents 3% of capital flows across the world, albeit the continent accounts for 17% of the world’s population. I would like a future where competition for capital is between states in Nigeria, rather than Nigeria and other countries.” Patience Okala, the legal adviser and technical lead for Nigeria’s International Investment Agreement (IIA) reforms, educated participants on the work recorded at the federal level and the disproportionate gap between the quality of agreements signed and quality of the investment flows. “We looked at the quality of investments we have in Nigeria and they did not match the multiple treaties or international agreements the country was party to. To fix this issue, we developed a new model treaty that will enable the country to achieve Responsible, Inclusive, Balanced investments and Sustainable – investments that key into the sustainable development goals,” she said.
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Commercial activities return to Benin airport Idris Umar Momoh & Churchill Okoro, Benin
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ommercial activities on Monday returned to the Benin Airport, after three months of closure by the Federal Government as part of measures to check the spread of coronavirus disease (Covid-19) in the country. Minister of aviation, Hadi Sirika at the weekend announced approval for resumption of normal flight operations at the Benin airport and others across the country. The minister had earlier scheduled July 15, 2020 for the commencement date of flight operations in the airport, but suspended it due to noncertification of the airport by the Nigerian Civil Aviation Authority (NCAA) for resumption of operations. A visit to the airport showed that necessary guidelines have been put in place, particularly the Covid-19 protocols which are floor markings to observe physical distancing, temperature @Businessdayng
check with infrared thermometer as well as disinfection of baggage and hands in the airport. Speaking to BusinessDay, Odion Igbinowen, a cab driver with Avis Nigeria said the resumption of flight operations in the airport has brought a sigh of relief to those in the car hire service. “The airport has been closed for three months. Today we are happy the airport has opened. “Before we have many flights but we are expecting just one and we pray there is improvement. Another airport business owner, Omon Esther said “we are happy that we are resuming today. We are happy to see the passengers. We are expecting more passengers in the coming days. On his part, Joe Aligbe, one of the passengers en route to Abuja, expressed delight over the reopening of flights. Aligbe, who is the national vice president of the Association of Senior Civil Servants of Nigeria, noted that traveling by air is now the only best option in the country due to bad state of roads and insecurity on the highways.
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Nigeria: Escaping the health-poverty trap
Obinnia Abajue
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was recently forced to acknowledge again that people believe what they are told repeatedly especially when that is all that they hear. Narratives are powerful tools to condition a society. This is relevant to our healthcare journey as a country. Often, the narrative is on how the government is not doing enough and is spending so little of the GDP on healthcare, how citizens of other countries get free healthcare and how much is spent on medical tourism etc. Then there is the talk of brain drain with our doctors and other medical personnel leaving Nigeria to get better paid elsewhere. Finally, you have the talk about fake drugs. So, the first issue is that most of the talk on healthcare is about problems. This needs to change – not that there are no issues, but they cannot be the focus of our narratives. You pitch opportunities and not problems. Even when there is a more technical conversation, it is often about the supply side i.e. the provision of health services with topics like hospital capacity, medical personnel needs, the cost of equipment and access to finance. There is almost no discussion about the demand side i.e. the payment for purchase of health services. The only time the demand side is discussed is when the government is accused of not spending enough or when health insurers (HMOs) are in the spotlight for one thing or another. Sadly, this is the equivalent of the proverbial “attempting to clap with one hand”. This may seem easier, but the resultant culture is one of learned helplessness and our people continue to wait to be saved by
someone AKA government. So, the second issue is that to build a sustainable healthcare system, we must be committed to supporting the provision of the service as well as the purchase of the service. When demand and supply occur naturally, the government can play the role of regulator more effectively with the added benefits of greater potential tax revenues and investments in the sector. We have seen it happen in the banking, telecoms, technology, and entertainment industries; and it is happening slowly too in agriculture. In contrast, the industries where the government maintains intervention, for example oil and gas, power and of course healthcare remain in shambles and are underdeveloped. Not everything is bad – but the parts of these sectors that have worked are also those where the operators addressed the issues themselves and focused on developing their market with sustainable principles. The point is simple: we have to ensure that medical service businesses can offer their services profitably and people can afford to access medical services as they need it. Unfortunately, it is easier to discuss offering the service and much harder to focus on paying for it. It is even harder when everyone thinks the government should pay for it. This is why it is so important to focus on the demand side. The demand side is the side that discusses our responsibilities and rights as individuals and the opportunity to create a sustainable market for healthcare in Nigeria. This is the sure road to arriving at Universal Healthcare for Nigerians. Today, the biggest purchasers of healthcare are the federal government on behalf of its staff through the National Health Insurance Scheme (NHIS) in particular, and corporate organisations through the private plans they buy for their staff. The impact of the State Governments and private individuals are still negligible. So, the real problem is that we have a very small predictable consumer market for health care. Healthcare is not a hustle. It takes about 16 years to train a consultant physician (perhaps more, depending
on the specialty) and you can only train a minimum qualified nurse in about 3 years. It can take 5-10 years to develop a medicine to cure a specific illness so drug companies often get patents of up to 20 years for their inventions before they can be produced as generic drugs. So, this is the third issue - everything takes time in healthcare so we should not imagine that there is an over the counter or instant solution that we can just buy or that all problems can be resolved magically by having enough money to pay for it. COVID-19 has shown us how sometimes money is useless to you in healthcare when the service is not even available to be bought. A carefully calibrated demand cycle is what determines the sustainability of the health system in any society. In some countries, the government acts as the proxy for the demand side, while in others, the private sector is allowed to curate the demand in the market. In Nigeria today, the private sector is better at allocating resources and from our experience, mission critical assignments will only thrive if privatised. This is not a matter of good or bad or of right or wrong – it simply is what appears to work for us. So, we must leverage our entrepreneurial strengths and create an appropriate environment to harness the power of private capital to create what we need. This is not to say that the government can be excluded from healthcare – No way! Unlike other sectors that are not a matter of life and death, we cannot do without the government in healthcare both for rules and for responsible intervention when the private market is unable to assure an equitable allocation of the resources. For example, on the supply side, it may make sense for the government to handover primary and secondary healthcare services to the private sector and focus on tertiary care. Similarly, for the demand side, it makes sense for individuals to buy health insurance for access to primary and secondary care while the government pays for tertiary care as a residual since this may often be catastrophic and the cost of insurance may be beyond the private market. To illustrate, if Isa has a cold or a fever, it may make more sense for him to go to a
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The point is simple: we have to ensure that medical service businesses can offer their services profitably and people can afford to access medical services as they need it. Unfortunately, it is easier to discuss offering the service and much harder to focus on paying for it
nearby private medical facility to get care. This care will be paid for by his health insurer to whom he has paid an annual premium. The healthcare provider will not worry about getting paid first or whether Isa can afford the care because they know the insurer will pay for it. If Isa however develops brain cancer, the cost of his care will likely be prohibitive for the private market today and this is where the government’s tertiary care centres can come in. We desperately need to adopt a system of buying healthcare that enables the development of a bankable operating model for healthcare businesses to sustainably access finance. This is the main reason why health insurance represents Nigeria’s most viable route out of health poverty. Simply put, every Nigerian must have access to health insurance as their primary way to pay for health care expenses. Everyone that employs another person should ensure that the employee is covered for health insurance. Parents should cover their wards, and each of us should become our brother’s keeper and support those around us to be covered. We should stop looking to the government for free care and should rather purchase health insurance in the same way our communities developed the Esusu or Ajo systems to pool their resources (& risks!) for their benefit. And in the same way these systems empowered their members financially, so also the financial burden of health care will be reduced for every insurance subscriber. There are other details required for this to be entirely successful including regulatory intervention on pricing (supply and demand) as well as some consumer-centricity supported by the Federal Competition and Consumer Protection Commission, FCCPC (formerly Consumer Protection Council). But the message is really simple - Buy a health insurance plan today - for yourself, your relatives and your neighbour. You are only as healthy as the sickliest person in your network. Abajue is the CEO of Hygeia HMO Limited, the leading private health insurer in Nigeria.
Protracted G7 contraction – or multiyear global depression
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lobal growth prospects are deteriorating. Instead of a V-shaped recovery in the 2nd quarter, advanced economies will face historical carnage and a prolonged contraction. But there’s still worse ahead. Current estimates for major advanced economies remain too optimistic, due to the mismanagement of the COVID-19, belated responses and premature exits, which have now caused far-earlier-than-expected secondary virus waves. As a result, the hoped-for V-shaped recovery will not happen in the 2nd quarter. The Trump administration’s catastrophic COVID-19 failures, along with premature exits to reopen the economy and leave the WHO will virtually ensure still new virus waves and longer contraction. In turn, US tariff wars are undermining the promise of the Asian Century. 2nd quarter carnage: Projections and realities In early February, as new coronavirus cases began to decelerate in China but accelerate outside China, I predicted that China would rebound in the 2nd quarter but major advanced economies could rebound in the 3rd quarter only if they’d manage to contain the pandemic. At the time, this view was seen as too optimistic for China and too pessimistic for advanced economies. When the deceleration of new cases in China continued in March, but dramatically accelerated in major advanced economies, I projected
that China’s rebound in the 2nd quarter would be stronger than expected. And that major advanced economies, particularly the US, would face a contraction that would be at par with or worse than the Great Depression. At the time, this view was seen as too optimistic for China and too pessimistic for advanced economies. In late January, President Trump congratulated President Xi Jinping for China’s success in the virus containment. In March I predicted that Trump would reverse his words. Due to plunging ratings and re-election challenges, I projected that Trump and his administration would blame China for COVID-19, particularly in early summer ahead of the 2nd quarter results in the US. Today, we know that Chinese economy became the first to rebound in the 2nd quarter, by growth of 3.2 percent. In contrast, major advanced economies are heading toward a historical plunge in the 2nd quarter. And as projected, Trump’s attacks against China intensified in June and have accelerated into a kind of hybrid war. And there’s worse ahead. Economic erosion in G7, rebound in China Until recently, many international observers expected the US to benefit from a strong rebound that would start in late spring and strengthen in the 3rd quarter. New virus waves were seen as a possible threat but later in the fall. The Trump administration’s pandemic
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mismanagement and premature exits have undermined those hopes and resulted in a huge virus resurgence in the US; months earlier than anticipated. While consensus models expected US coronavirus cases to be around 3 million by now, they will exceed 4 million soon. So, the 2rd quarter contraction, which was expected to amount to -33 percent, is likely to soar to -53 percent, according to the Atlanta Fed. Annualised growth will take a deeper hit, accordingly. In the UK, Boris Johnson’s government followed in the US footprints until realities proved overwhelming. While the government has taken a different stance since late spring, it has been too little too late. Coronavirus cases are about to exceed 300,000. In the 2nd quarter, British economy could plunge by -20 percent to -25 percent. Although Italy was the first major economy in the Euro area to suffer from the pandemic, its stringent quarantine measures reduced the damage in the spring. Nonetheless, the virus cases amount to almost 245,000 and the 2rd quarter is expected to translate to a plunge of -9 percent to -10 percent. As the Euro area’s strongest economy, Germany is no longer immune to contraction either. As German cases are about to exceed 200,000, the country could experience a plunge of -8 percent to -10 percent in the 2nd quarter. France is following in Germany’s footprints. Officially, the cases are about to exceed 175,000.
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Dan Steinbock Yet, the 2nd quarter will prove dire with a plunge of -17 percent. While COVID-19 has recently surged in Japan, official cases average at about 25,000, while annualised growth is likely to plunge to -5 percent. But official virus data cannot be taken at face value because of minimal testing. Until recently, the country’s testing capacity, as adjusted to population, has been significantly behind that of Uganda, half of that in the Philippines and less than 2.5 percent relative to the UK.
Note: the rest of this article continues in the online edition of Business Day @https://businessday.ng Dr. Steinbock is an internationally recognised strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https:// www.differencegroup.net/ Based on Dr Steinbock’s global briefing on July 17, 2020
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A prosperous Nigeria is possible……but why unmake your country? (1)
Leadership crisis, predatory behaviours, and weak institutions STRATEGY & POLICY
MA JOHNSON
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hen Boss Mustapha, Chairman Presidential Task Force on COVID-19, and Secretary to the Government of the Federation (SGF), disclosed that the Federal Government (FG) has partnered with Nigerian Interreligious Council to declare a season of prayer and fasting in the country, I didn’t give the call any attention. Why? Nigerians have been praying to the Creator before the sad entry of COVID-19 into the world. Is it prayer that will provide standard health and educational facilities now? Is it prayer that will provide testing kits and personal protective equipment for our medical personnel? Moreover, the SGF did not tell the public the scope and terms of reference of the prayer. But one thing is certain: The world will continue to pray to the Creator during and after the pandemic. As I watched on media the yapping and tackling that took place in the last few days at the National Assembly (NASS) between lawmakers and some President Buhari’s cabinet ministers, I agreed with the SGF that we must pray for Nigeria. Yes, Nigeria needs prayer! But prayer without works is dead, says the Bible. When we pray, we must pray together, and be prepared to act together on our prayer. Some cannot be praying while others are neck deep into predatory behaviours and what one of my professors called “acts of extreme financial recklessness” of public funds. But before Boss Mustapha, there was Paul the Apostle whose original
name was Saul of Tarsus. Apostle Paul told the Romans in the Great Book: “Do not be conformed to this world but be transformed by the renewing of your mind. Then you will be able to discern what is the good, pleasing and perfect will of God.” Analysing Apostle Paul’s philosophy, some theologians say that, “We are all in the world, but not of the world.” There are many things in this world that have become acceptable and many people are so blinded by what is called right in the world when really it is wrong. In the world, theologians further argue that we want to accept everything, everyone, and everybody’s behaviour. Most of us are so afraid to call crazy, crazy, or stupid, stupid. And for anyone who musters the confidence and courage to call a wrong out for being wrong, then all of a sudden people, sometimes paid agents who have been procured by authorities, are intolerant. The psalmist tells us in the Great Book that those who love and pray for the peace of Jerusalem will prosper. Nigeria is our own Jerusalem whether we like it or not. Can anything good come out from Nigeria? Affirmative, Nigeria can be a prosperous nation. But we must all work towards achieving prosperity and greatness. Prosperity of a nation is not served on a platter of gold, it is earned. Those individuals irrespective of tribe, religion and political connection who sincerely love Nigeria from the bottom of their hearts will prosper. Why are a few people bent on pulling the country down? We all know that Nigeria is currently going through a sobering moment. We must collectively work towards changing the narrative for good. Since medieval times, each generation looks for competent leaders, statesmen, and stateswomen who will do what is right and just, and who will bring improvement into the country. Effective leaders take responsibilities for their own actions, repairing and improving the social, economic and political environment of the people. Drawing inspiration from the in-
ternationally acclaimed writer, Chinua Achebe in his book The Trouble with Nigeria, “The trouble with Nigeria is simply and squarely a failure of leadership.” It is not easy to find visionary leaders in the society. Visionary leaders are very scarce. And no nation can win the war against poverty without committed and visionary leaders. It is true that societies get the leaders they deserve, but the quality of some of those parading themselves as “leaders” in our society leaves much to be desired. How can a group of leaders emerge either through intrigues or mischief from a given region of Nigeria only to be carrying out activities that are not conterminous to the development of their region? This beats my imagination. I am yet to come to terms with how sons and daughters of a region will choose to leave their own kin and kith in penury, only to pursue a selfish interest. At times, the attitude of some of our leaders’ mirror the extent to which those of us who claimed to have elected or appointed them into office have made a blunder. Some of us have graduated from weeping for the country to laughing at the country. What we see and hear in the media is just laughable. But we make sure we pray for Nigeria. For many years, Nigeria’s leadership crisis has been legendary. However, Nigeria is blessed by men and women who have influenced and are still influencing the country and the world positively using their skills and leadership abilities. We are by no means saying that they were or are not without faults, but they simply epitomise the essence of leadership qualities we need to remember at this time of our nationhood. With over 200 million people in a country rated as the poverty capital of the world, Nigeria is looking for answers, for hope, and for change. At a time when the world is combating a pandemic, we cannot afford to be citizens of a nation with a poor rule of shame. Initially, it was Hushpuppy- a young man who was alleged to have duped almost 1.9 million people across the globe. Yet, he was referred to as a “celebrity” by some people in our society.
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How can a group of leaders emerge either through intrigues or mischief from a given region of Nigeria only to be carrying out activities that are not conterminous to the development of their region? This beats my imagination
What? In Nigeria, a thief is called “celebrity?” Most of us celebrate crooks. Where did we get it wrong? Nigeria used to be a country of high standards and values. But we have almost lost our values. What a pity! Granted, our value system is an integral part of the larger society, any critical assessment is not an attack on the society we all belong to. It is to remind us that the nation is drifting seriously. We are steering course made good, not course to steer. The ship of the nation is heading ashore. Those in authority need to take urgent actions to avoid going aground. Development economists know that there is a relationship between the value system or culture of a nation and economic development. So, when we do not guard our value system jealousy, we should not blame others for our backwardness as a nation. It is difficult understanding why a scammer is referred to as a “star” in Nigeria. It is because we lost our values along the line. A thicker plot. The case of Process and Industrial Development (P&ID) Limited versus Nigeria in which the latter is liable to pay a fine of $6.6 billion as ruled by an independent London tribunal since 2017 is a disgrace. Reports show that the fine has risen to $9.9 billion because of accrued interest and foot dragging on the part of some people who are saddled with the responsibility of protecting Nigeria’s national interest. The amount in question according to a financial expert, is over 20 percent of both the country’s reserve and the value of its annual exports. The judgement has caused commotion in Nigeria. Public affairs analysts are asking questions: “How did Nigeria find itself on the receiving end of one of the largest ever judgements against a sovereign state. Who are the Nigerians involved in this scam? It takes a generation of committed leaders to build a nation. Thank you! (To continue) Johnson is an author and a retired naval engineer who has passion for African development and good governance
Recession: Using a concessionaire to mitigate the consequences of Nigeria’s ballooning Chinese debt
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here is no gainsaying that China is one of Africa’s biggest creditors and Nigeria is one of its largest customers. China is said to be Africa’s largest bilateral creditor, as she has disbursed the continent loan worth $152 billion in 18 years - between 2000 and 2018. It is reported that Nigeria has obtained 17 Chinese loans to fund different categories of capital projects, and Nigeria will still be servicing the Chinese loans till around 2038, which is the maturity date for the latest loans obtained in 2018. More recently, the Minister of Finance, Zainab Ahmed, disclosed that the Federal Government had decided to obtain $17 billion loan, 70 percent of the total loan of $29.96 billion, from China as the World Bank and the African Development Bank’s (AfDB) failed to show much interest in Nigeria during the recession. She further disclosed that the loan from the Chinese bank was meant to make funds available to our own development institutions, so that they can give out loans because access to finance has been difficult for the Small and Medium Enterprise (SMEs). She added that the loan is also to fund critical infrastructures across the country. The good thing about Chinese lending is that it focuses on individual projects that contribute to structural transformation and economic de-
velopment. Examples of these revenue making projects which are government owned include; air and sea ports, mining projects, infrastructural projects, national grid and so on. However, these projects may also double as traps from the Chinese (lender) to their African borrowers, because these same projects get used as collateral and consequently are at risk of being forfeited upon default of repayment. For instance, because $7.4 billion of Zambia’s total $8.7 billion foreign debt is owed to China, it was reported in late 2018 that the Zambian Government was in talks with China that might result in the total take-over of the country’s national electricity company, ZESCO, by the Chinese due to the inability of Zambia to meet its loan repayment obligations. This was not surprising as China was already in control of the country’s broadcasting company, ZNBC, having acquired 60 percent of its ownership. There were also strong fears the main airport in Lusaka, Kenneth Kaunda International Airport, could be the next target. More recently, Chinese firms were seeking control of Zambian mining assets as collateral for potential loan default. In 2018, it was reported that Kenya was at risk of losing its largest and most lucrative port, Port of Mombasa, to its creditor (China) after she defaulted in the loan repayment. It is not only with the African continent www.businessday.ng
that China strikes loan deals in this kind of way, however it is common with frontier and emerging markets. In Asia for example, after the Sri Lankan government failed to show commitment in the payment of billions of dollars in loans, the government lost its Hambantota port to China as it was leased to the Chinese state-owned China Merchants Port Holdings Company Limited on a 99-year lease in December 2017. In Europe, going by the magnitude of what the officials saw after the 2008 financial crisis; where Chinese buyers took controlling stakes in strategic infrastructure and mining companies in European countries (including Portugal, Spain, and Greece) that were particularly hardhit by the 2008 financial crash which occasioned the euro-debt crisis. What the Chinese are now known for during recession, though this in particular is induced by the spread of the novel coronavirus and fallen oil prices, is the takeover and acquisition of their assets by Chinese companies. However, there is a difference in the strategy to their ownership as takeover is common with Africa, whilst acquisition is common with Europe and Asia which has caused their officials to restrict many of their asset purchases by Chinese companies. Thus, it is quite obvious why the IMF/World Bank, in 2019, were cautioning the heavy Chi-
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Adeyemi Adebiyi
nese borrowers, particular Africa, enjoining them to consider the terms and covenants of the loans as very important to ensure favourability for themselves should there be any need to restructure their debt sometimes or anytime in the future. In May 2020, perhaps given the fears that our country is in or entering into recession, the House of Representatives gave a thought to the advice of the IMF/World Bank as it mandated some of its committees to investigate all ChinaNigeria loan agreements from 2000 to date. Their intentions were to ascertain the viability of the facilities, then regularise and renegotiate them, especially when the news was out that china may be ready for loan deferment.
Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Email:adebiyiadeyemi@outlook.com
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What is the purpose of knowledge? (1)
Rafiq Raji
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nsurprisingly, the Madagascar COVID-19 “magic” potion turned out to be a faux cure, it has been found. Yes, the potion does cure something, malaria, no less, but it is not a cure for COVID-19. I happened on the news while reading Michael Hunter’s 2020 book “The decline of magic: Britain in the enlightenment”. One could not help being amused by the uncanny parallels. Such is the nature of conjuring tricks. They are usually clothed in known or verifiable truths. To the undiscerning, they look “true” on face value, and unless you dig deeper, you would drink the kool aid and probably belch with satisfaction at your fallacious “wisdom” afterwards. Conjurors only thrive with the ignorant. Make informed choices. Focus on your goals and leave conjurors to their magic tricks. That is the advocacy and perhaps also the purpose of knowledge. Appearances can be deceptive The groundnut pyramids in the northern Nigerian city of Kano used to be a thing of wonder. A symbol of the old city’s wealth and progress. Then suddenly, they disappeared. To this day, there is a perception that the diminution of those towering heights
was due to some failure or mismanagement. However, not many Nigerians know that their disappearances were actually due to progress and not misfortune. And there would not be many as ignorant if care was taken to check the data. In fact, the quantity of groundnuts produced in Nigeria more than doubled to 3.6 million tonnes in 2016 from 1.6 million in 1961. The groundnut pyramids disappeared. But production continued and increased in fact. True, there was a significant lull in output to about half a million tonnes in the late 1970s and early 1980s. But by 1988, production was back to at least a million tonnes per year. Conjuring tricks are like that. The disappearance of the “pyramids” created the perception of a failed industry when in fact they were simply casualties of innovation and progress. Knowledge is the key As we are very superstitious people, we fall victim to conjurors too easily. Why don’t we ever ask the selfacclaimed rainmaker to conjure up rain during the dry season or when there is a drought. Our fatalistic beliefs do not help either. It is astonishing how many still go up and about on our streets with careless disregard for recommended covid-19 precautions. In a few interactions, the refrain has typically been that “It is God that protects.” And that if one is destined to contract covid-19, there is not much one could do. Really? Yes, we should believe in God. But surely, we wouldn’t or shouldn’t go into the rain without an umbrella nor stand in front of a hungry lion or a speeding car just because we supposedly “have anointing”. True, some deliberate foolishness has manageable consequences. But surely, not these. If you are a medical doctor that enjoys a nice cigar but ends
up with damaged lungs or someone with the knowledge of his or her lactose intolerance but indulges in the sweet delight of milk & dairy and farts on end, surely you could not blame anyone for the consequences of your pleasures. Still, you may very well live a long and comfortable life in spite of your foolishness. But with covid-19? Certainly not. Not until a vaccine is found, at least. With the coronavirus evolving, even as a viable vaccine is being sought for what it was thought to be just months before, a successful vaccine would probably take at least two years to develop. And there is no such thing as it is a “rich man’s disease” or that Africans are immune from the virus. Because even as we are very diverse, we share a lot of commonalities. Your race is not a consideration when you need a new kidney or liver. The foods we eat, whether pounded yam, pap, starch, eba, rice, or pasta, varied as they are, can all be classified based on the nutrients they provide the body and based on these are all the same. A knowledgeable person could not have been fooled by the Madagascar potion. But to the extent that the possibility of its utility was widely entertained speaks to the human inclination for easy solutions. In his 2010 book “A New History of Western Philosophy”, English philosopher Sir Anthony Kenny wonders in the chapter about knowledge and its limits, the field of philosophy called epistemology, what the mark of genuine knowledge is and how it differs from mere belief. “Is there a reliable way to acquire knowledge of the truth and to eliminate false beliefs that are mere seemings?”, he ponders. These are questions that have occupied the thoughts of thinkers from antiquity. A proper delineation of epistemo-
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With the coronavirus evolving, even as a viable vaccine is being sought for what it was thought to be just months before, a successful vaccine would probably take at least two years to develop
“Dr Raji is chief economist at Macroafricaintel. He was previously an Africa Economist at Standard Chartered Bank, London, UK. (Twitter: @ DrRafiqRaji)”
Top 5 sectors that will drive future African job growth
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he next two decades will represent a new golden age of mass employment opportunities for Africans across the continent. The reason behind this forecast is both complex and simple. Africa’s population will grow to over two billion people by 2040 (most of whom will be working age youth), Internet penetration will cover the entire continent by 2030 (bringing with it the Internet revolution that transformed Western economies), and new technologies are emerging each year that will enable Africans to lead ever more modern lifestyles. But on a more fundamental level, the reason behind this future mass employment forecast is that, frankly, there is so much that needs to be built and grown across our continent. With this thought in mind, the following are five sectors that will represent the bulk of future employment growth in Africa. Agriculture Without a doubt, the agricultural industry will remain the biggest and most important future job creator within Africa. It already employs over 60 percent of Africans, and with the population boom projected over the coming two decades, employment will remain strong within this field throughout the 2020s. However, status quo agriculture will not be able to feed Africa’s growing population; too much of our agricultural system and practices are outdated and wasteful. Thankfully, between 2025 to 2035, Africa will experience a new Green Revolution, similar to the one experienced in the 1960s. This time, new technologies like drones, farming apps, and augmented reality, modern farming practices like no-till farming and vertical farming, and new bioscience offerings like novel GMO plants that are more nutritious and climate and pest resistant—these
innovations and more will enable future African farmers to become more efficient, less wasteful, and more productive. Of course, just like in developed nations, once these agricultural advances take hold by the mid-2030s, it will lead to a decline in farming jobs since more efficient farms need fewer workers. This leads us to the next sector. Infrastructure development and renewal The next big job creator throughout the 2020s and 2030s will be infrastructure development. To give you a sense of how much work needs to get done in this sector, the African Development Bank states that to reach their full economic potential, African nations must collectively invest $170 billion every year in infrastructure development. Roads, bridges, dams, water/sewage pipes, an electrical network, government and community buildings of all kinds—these types of infrastructure and more are all staples of a modern, functioning society and all of it needs to be built, rebuilt or expanded. These projects mean tens of millions of new, direct and indirect, construction-related jobs that are well paid, high-skilled, and cannot be outsourced. Even better, the future African tradespeople who do this work will share in the pride of directly contributing to building African nations—perfect for young people. Another point to note is that this future construction work will also enable African nations to leapfrog Western nations not just in our opportunity to build entirely new and modern infrastructure, but also to build climate changeresistant infrastructure. Within the African context, we will need to build infrastructure that can protect society from the increasingly sweltering summers, excessive flooding, and rising sea levels that different parts of Africa will experience
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over the coming two to three decades. Mass housing Related to infrastructure development is the need to build millions of new residential buildings across African nations that will house the extra 700 million people who will call Africa home by 2040. Housing that population growth will be a massive undertaking and cannot be underestimated. There are a variety of options to address this future housing deficit: from promoting the development of high-rise buildings, encouraging shared living arrangements, modernising building codes and approval processes, and embracing new construction technologies. But regardless of what solutions are used, the fact remains that residential housing development will represent tens of millions more direct and indirect, construction-related jobs. Next generation energy Rationing, rolling shortages, blackouts, the current lack of consistent electricity supply has been a continuous strain on African economic growth—this deficit makes it harder for businesses to operate, for school children to learn, and possibly even dangerous for hospitals to conduct complex surgeries. For these reasons and many more, the fourth significant source of future employment will be the construction of next-generation electricity networks across the African continent. Fortunately, Africa has bountiful natural resources that it can exploit to satisfy our energy needs. Our northern and southern deserts receive a significant amount of sun energy/ radiation compared to other parts of the world that countries like Morocco, Tunisia, Algeria, and Egypt are already utilising to build massive, world-class solar energy installations. Meanwhile, the central east and west African
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logical questions and varied answers over the years by philosophers in the field is broad and deep and would thus be diversionary for our purpose. But let us take an instance or two from Kenny’s highlights from one of Plato’s dialogues “Theaetetus” on the question of “What is knowledge?” to bring home the complexity of the subject. “There are cases where people have true thoughts, and form true opinions, without having actual knowledge.” For instance, “if a jury is persuaded by a clever attorney to bring in a certain verdict, then if the verdict accords with the facts, the jurors will have formed a true opinion. But do their true thoughts amount to knowledge?” Socrates, who Plato was purportedly writing about had an answer to the question. But it is not of interest here. The goal here is to highlight how what may be deemed to be knowledge or truth may in fact be something else or simply just falsehood. An excerpt from Sir Kenny’s exposition is simple enough to get some grasp of what knowledge could be. “Knowledge can only be of what is true; knowledge is only knowledge if it can appeal implicitly or explicitly to some kind of support, whether from experience, reasoning, or some other source; and one who claims knowledge must be resolute, excluding the possibility of being rightly converted, at a later stage, to a different view.” After numerous deaths, Madagascar has asked for help to deal with COVID-19. “If we know something…we know that we know it, and know that we know that we know it (Kenny, 2010).”
Ronald Chagoury Jr nations have a wealth of water resources that can be converted to renewable hydroelectric power installations, such as Nigeria’s Mambilla hydroelectric power project, the Grand Ethiopian Renaissance Dam, and the DRC’s Grand Inga Dam. Local services Future technologies that will fully automate the manufacture of physical products will centralise among developed nations with an existing manufacturing advantage—countries like Germany and China. This trend means African nations cannot depend on the manufacturing sector to employ the continent’s future youth. For this reason, African nations cannot follow the development path used by Asian nations to stimulate economic development. Instead, African nations must leapfrog past manufacturing and instead employ tomorrow’s African youth through a vibrant and growing service sector. African service sector jobs will blossom in number alongside the expansion of the Internet. These are jobs that, like construction-related jobs, can be highly skilled, well paying, and cannot be outsourced or easily automated. Taken together, these five sectors collectively represent hundreds of millions of new well-paying jobs that—with the support of the government and private sector funding—are just waiting to be created and have the potential to transform Africa for the better. Chagoury is the Vice Chairman of Eko Atlantic City. Ronald covers topics relating to the current and future of Africa as he is a big believer in the untapped potential of the continent. You can learn more about Eko Atlantic at www. ekoatlantic.com.
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Tuesday 28 July 2020
BUSINESS DAY
EDITORIAL Publisher/Editor-in-chief
For economic recovery consumption and investment must take-the-wheel
Frank Aigbogun editor Patrick Atuanya
DEPUTY EDITORS John Osadolor, Abuja Tayo Fagbule NEWS EDITOR Osa Victor Obayagbona NEWS EDITOR (Online) Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)
Bashir Ibrahim Hassan
GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan
Govt’s share of economy small, must take the back seat
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n order not to waste the COVID-19 crisis, an economic plan to stimulate the Nigerian economy and quickly exit the slump it is in must go beyond more government-led expenditure. To attain a V-shaped recovery, that is shorten the length of the recession, Nigeria needs an economic plan that gives private consumption and capital investment more space. Both accounted for 73.48 percent and 26.20 percent of GDP respectively in 2019. Both are fundamental to economic growth in Nigeria. In contrast, since 2014, average government expenditure as a percentage of total output has been 11.85 percent. A deeper look at available data further revealed that after reaching an all-time high of 81.5 percent of GDP in 2016, private consumption as a percentage of GDP has declined consistently, falling to its lowest level in 5 years in 2019. Although the share of capital investment peaked in the last two years, foreign direct investment has remained very low at 0.4 percent of GDP as of
December 2019. It increased in Q1’20, but may slow due to COVID-19 pandemic. In a country where the owner’s corner is a serious matter, the government should take the back seat and let the private consumption and capital investment drive the economy. If the aim is to turn the current economic challenges into an opportunity for Nigerians, especially the “common man”, this is a fact the Economic Sustainable Committee, headed by Vice President Yemi Osinbajo, can’t afford to ignore. It is important in shaping a sustainable plan which President Buhari has asked for. Beyond the health crisis the COVID-19 pandemic has brought upon countries across the world, it has also caused disruption in supply chains, depressing global and domestic demand for commodities. Nigeria has not been spared. Crude oil prices have plummeted, oil production cut and it costs more to produce a barrel of oil than to sell it. It has unleashed a fiscal crisis. However, among the more devastating effects of the pandemic
is the economic hardship brought upon businesses and households. The survival of businesses especially in the informal sector is severely threatened while those in the formal sector have been forced to cut cost resulting to many employees losing their jobs, while some others have seen salaries cuts between 30 to 50 percent; further lowering households’ disposable income and purchasing power. To this end, the Nigerian federal government will be making a grave mistake if its plan for spurring economic growth and development across 2023 is focused on federal government expenditure. Basic macroeconomics explains a country’s GDP expenditure decomposition to include private consumption (C), investment (I), government expenditure (G), net export (X-M). The outlook for 2020 is bleak. The decline in household consumption is expected to slow economic growth. The question therefore should be how do we put money in the hands of consumers and how do we stimulate foreign direct investment. This should form the crux of the economy sustainability
committee’s plan for growth. Policies, reforms and actions that induce job creation across sectors, boost productivity, improve competition and attract patient foreign capital are strategies to attain desired sustainability goal. Shifting focus from these fundamentals will yield a plan dead on arrival like previous plans we have had over the years which have stifled rather than stimulate economic growth. More importantly, there must be political will to act. A plan remains a mere plan except effectively executed. Over the years we have had plans and intended reforms in different forms which remained a mirage or worse still made to look like rocket science because of the absence of political will to act. This is a call to the federal government not to waste current crisis by focusing resources and energy on less important things. One way to ensure this is by consulting far and wide and beyond government officials – the private sector has a stake in the economy too. A plan, take Vision 2010, is as good as the quality of experiences and ideas that contribute to it.
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Softcom, NBS chart course for use of data to drive inclusive policy, revenue generation and improved governance Jumoke Akiyode Lawanson
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ccess to quality data and use of innovative technology have been identified as the fulcrum of proper government planning and economic development in any society. During a webinar hosted by Softcom Limited, an indigenous and innovative technology company, in partnership with the Nigeria Bureau of Statistics (NBS), on 23, July 2020, government officials, finance and technology experts came together to discuss leveraging data to drive inclusive policy, revenue generation and improved governance. The webinar had as keynote speakers; Zainab Ahmed, Nigeria’s minister of finance, budget and national planning and Yemi Kale, the statistician general and CEO of National Bureau of Statistics (NBS). Also in attendance as panellists were; Sarah Alade, special adviser to the president on finance and economy and former deputy governor of the Central Bank of Nigeria, Shubham Chaudhuri, country director at the World Bank, Ben Akabueze, director general at the budget office of the federation, Sidney Onyeagu, president of the Nigerian Statistical Association, and Seindemi Olobayo, chief operating officer, Softcom. The event which had in attendance over 650 virtual participants explored the evolution of data as a tool utilised by mathematicians
and statisticians to become a mainstream pillar of decision-making. This has resulted in increased revenue generation, improved governance and enhanced inclusivity. Concurrently, the mainstream use of data has resulted in increased availability and accessibility of data, sophisticated analytical tools and proliferated data sources. Despite these benefits, a plethora of industries and governments still do not capitalise on data. Yemi Kale, statistician-general of the federation, emphasized the significance of data: “Data aids the decision-making process by enabling us to establish numerical benchmarks and monitor and evaluate the
progress of policies or programmes, thus ensuring that our policy interventions are well designed, meeting initial aims and identifying any areas which require improvement. Without data, we cannot make well-informed decisions that will catalyse our socio-economic development and transform the future of generations.” Zainab Ahmed buttressed this during her keynote speech by saying: “Data helps us remove unnecessary emotion from the debate, facilitates decision making in the face of uncertainty, provides a basis for comparing the consequences of alternative policy choices and allows us to monitor and evalu-
ate our performance relative to our planned targets. Apart from behavioural changes at the macro level, a data-driven approach also drives changes at the micro level, within our institutions.” In addition, she stated that: “By leveraging the opportunities provided by technology, strengthening collaborative partnerships between institutions, increasing demand for policy-relevant data and supporting our statistical departments and agencies, data will continue to positively shape our policy choices and behaviours, bringing the benefits of inclusive growth and good governance to the Nigerian people.” During the panel session, Sarah
Alade said that after several years of relying on oil, it is important for Nigeria to diversify by making data driven decisions. “Government will need adequate data to look at different sectors to identify their potentials through evidence-based research. Government must also be able to assist businesses with open and free data,” she said. Some of the points Alade highlighted were the fact that data is an indispensable tool for economic development and that Nigeria needs to digitize most of its public service to promote efficiency and transparency. “We need to use data to coordinate between the three tiers of government. We act as if we have 36 different countries instead of 36 states in this country, because of lack of harmonisation of data,” she said. On how technology is being leveraged for planning and drawing up budget, Ben Akabueze, director general at the budget office of the federation said that although there have been challenges, some progress has been made in terms of technology. “By linking the Federal Inland Revenue Service (FIRS) data to the Government Integrated Financial Management Information System (GIFMIS), we have been able to block leakages from tax evading companies, and government does not underestimate the need for data,” he said.
Oracle, Wificombat, train 2oo teachers across Nigeria in first online coding sessions Jumoke Akiyode Lawanson
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rue to her vision to advance computing education globally, the Oracle Academy, in partnership with WiFiCombat Academy in Lagos, Nigeria, organised a two-week computer science training themed “Oracle Codeweek (Nigeria) Summer Boot Camp,” for computer science teachers in Nigeria. The first Online Oracle Codeweek Nigeria Workshop was a success, and had 200 teachers who registered across the country. Lagos State had the majority par-
ticipants with 60 percent; followed by Abuja 23.3 percent. Other participants joined from Akwa-Ibom State, Makurdi, Port-Harcourt, Nasarawa State, Kaduna, Anambra State, Enugu State, Calabar, Ondo State, Ekiti State and Ogun State. The virtual training event was earlier scheduled for April but had to be rescheduled to a later date as a result of the COVID-19 pandemic. This year, the training which ended on 17, July 2020 was focused on the development of Android applications using Java language and was a follow up on the training of previous years
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which focused on the use of Greenfoot, Alice or Oracle SQL software for creating animations, databases and presentations. Each week started off with a preparatory webinar to assist participants in the download and installation of required components (Java Development kit, SDK and Android Studio ID) and over the course of each week, participants were led through a thoroughly detailed training by the facilitators who proved to be more than resourceful. Dele Tejuoso, founder of the WifiCombat Academy said that the training
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was an investment against all odds and an indication of their commitment to the progressive education of computer science educators in Nigeria. Tejuoso who also represented Sefunmi Durojaye, programmes manager, Sub Saharan Africa, Oracle Academy, said; “In the course of the training, we made the necessary adjustment to accommodate more participation from teachers as we are not insensitive to the possible challenges of inconsistent power supply, poor internet connection and unavailability due to other engagements.” The team of facilitators led by
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Kolade Balogun, took participants through familiarisation with the working environments, troubleshooting and solving all impending challenges of installation that might hinder full participation, explaining that the functionality of the Android studio has many dependencies as the app is frequently updated for optimisation. Balogun delved into what he themed “Introduction to the Development of Android Applications using Java” through a series of PowerPoint slides shared on Zoom (while other facilitators attended to questions from participants in the chat section).
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Tuesday 28 July 2020
BUSINESS DAY
COMPANIES&MARKETS Lafarge sees Record Growth in Positive Half-year For Cement Makers SEGUN ADAMS
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afarge Africa, the Sub-Saharan Afr ica subsidiar y of global cement maker LafargeHolcim, has reported its best profit after tax for the first six months of any year since 2015, adding to the show of resilience seen among cement makers including industry leader Dangote cement despite the coronavirus pandemic. Half-year profit after tax from continuing operations hit N23.3 billion in the period, over 150% of what the cement maker made as at mid-2019. Lafarge said its outlook in the medium to long-term remains positive. “Q2 results remained resilient with net sales of -5.1% and recurring EBIT +29.7%, compared to the prior-year period, despite the impact
of the COVID-19 pandemic,” said Khaled El Dokani, Country CEO of Lafarge Africa. “The implementation of our HEALTH, COST and CASH (HCC) initiatives have delivered a considerable improvement in our performance.” With the gradual easing of the lockdown by the Federal Government, Lafarge Africa says it would continue to focus on its business resilience to maintain a healthy balance sheet while prioritising the health and wellbeing of its people, communities and other stakeholders. Net sales in the second quarter of the year fell by 5% to N56.85 billion from last year, as lockdowns in key Nigerian states to slow the spread of COVID-19 disrupted demand for cement and construction works. Nonetheless, cement sales for Lafarge in the half-year grew 2.3% to N120.5 billion.
In the face of slowing revenue, Lafarge Africa showed efficiency in managing its costs leading to a N42 gross profit realization from every N100 second-quarter sales compared to N36.5 seen last year. In the six-month period gross profit grew 5.7% to N41.71 billion as direct cost remained flattish. Notably selling and marketing expenses were lower year-on-year and administrative expenses saw a big decline which offset the drop in other income and supported operating income growth. Recurring Earnings Before Interest and Tax jumped 29.7% to N21.17 billion in the second and 17.8% percent to N32.81 billion in the halfyear. EBIT as a percentage of sales rose from 23.6% the last half-year to 27.2% in 2020. Finance income of nearly a billion last year more-than-
halved to N377 million, but was balanced out by a huge decline in finance cost to N4.4 billion from N13.3 billion last year. This had positive impacts on bottom-line. Profit before tax rose to N28.76 billion from N15.84 billion while tax expense stood at N5.43 billion compared to a tax credit of N386 million enjoyed last year. Earnings per share of Lafarge Africa stood at 145 kobo compared to 56 kobo last year. On its balance sheet, total assets declined by N1.36 billion to N495.79 billion due to a decline in plants, properties and equipment and intangibles assets as well as lower deferred tax assets. Total liabilities rose from N84.4 billion to N119 billion especially from increased loans and borrowings and higher current tax liabilities. Shareholders equity grew by 2% to N352.14 billion.
INSURANCE
Anchor Insurance boosts Akwa Ibom State Government’s efforts in the fight against Covid-19 MODESTUS ANAESORONYE
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nchor Insurance Company Limited has donated 150 cartons of facemask, 30 cartons of hand gloves and 45 cartons of hand sanitisers to the Akwa Ibom State Government, in support of the fight against COVID-19 pandemic in the state. Elijah Akpan, chairman, Board of Directors of the Company who led the company’s delegation presented the items to the State Government at Government House, Uyo, Akpan lauded Governor Udom Emmanuel for the huge investment in the health sector and also praised the efforts of COVID-19 Management Committee headed by the Secretary to the State Government, Emmanuel Ekuwem, in curtailing the spread of the deadly virus in Akwa Ibom. Akpan, who is also the Chairman of Akwa Ibom
Investment Corporation (AKICORP), said the donation was one of the company’s ways of reciprocating the benevolence of the state government to the company. According to him, “Anchor Insurance Company is 60 per cent owned by the Akwa Ibom State Government with over 70 per cent of its workforce being indigenes of the state. Receiving the items on behalf of the state government, Ekuwem described Akwa Ibom State Government as one of the primary promoters of Anchor Insurance, and thanked the company for the kind gesture. He noted that, the donation was a demonstration of the respect and values the company attached to human lives. Ekuwem assured the company that the donation would go a long way in complementing Government’s efforts in containing the spread of the dreaded virus in Akwa Ibom State.
FirstBank honours 28 successful graduands at maiden management programme MICHAEL ANI
F L- R: Abigail Okala, brand manager, Seven-Up Bottling Company(SBC) Limited; DJ Famzy, winner, Pepsi Upcoming DJ competition on Turn Up Friday With Pepsi; Segun Ogunleye, national marketing manager, SBC and DJ Obi, Pepsi DJ ambassador at the grand finale of the competition in
irst Bank, one of Nigeria’s biggest lenders has completed its first-ever management program, celebrating 28 successful candidates. Known as the FirstBank Management Associates Programme (FMAP), the program is part of the Bank’s way of showing its commitment towards promoting human capital development by training and retraining staff to deliver customer-centric services that will position the firm on the path of higher growth. Speaking at the graduation
ceremony which happened virtually, Adesola Adeduntan, CEO of the bank, said the programme was born out of the bank’s quest to groom young Nigerians, hungry for knowledge, that will take on the bank’s succession plan. For him, the programme was intended to consciously integrate leadership into the bank’s culture and build a pipeline of highly resourceful and talented individuals. “As an institution, we have a lot of things undone and the only way for us to achieve that is to continue to do things two to three times better than our competitors,” he said.
FINANCIAL SERVICES
Africa Prudential’s bottom-line maintains positive growth despite virus-ridden second quarter SEGUN ADAMS
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frica Prudential, listed Digital Technology, Business Support Solutions and Share Registration service provider grew its halfyear profit by 5% to N1.08 billion as it slightly improved on its previous year’s performance during the challenging business period. Despite a decline in revenue, Africa Prudential was able to beat its 2019 half-year profit growth of 4% thanks to zero finance cost during the period. This performance
has helped the firm maintain its billion-naira profit mark. “At Africa Prudential, we are driven by the desire to continuously leverage technology to redefine value creation and provide exceptional experience to clients across our various touchpoints, while generating superior value for our investors,” said Obong Idiong, MD/CEO Africa Prudential. Idiong said through the structure Africa Prudential put in place in the first quarter of the year to maximize Nigeria’s current business cycle, it was able to achieve
impressive quarter-onquarter results, increasing gross earnings by 52% and PAT by 144%. “We were also able to deliver an improved result year-on-year, growing interest income and PAT by 12% and 5% respectively,” he said. Africa Prudential revenue from contracts with customers contracted by 32.12% year-on-year to N59o million as COVID-19 hit hard and caused a 100% drop in retainership fee in the first half of the year. However, the company
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was able to increase fees from corporate actions by 34.87%, register maintenance by 32.81% and digital consultancy by 94.33% yearon-year. Africa Prudential also grew its interest income by 12.45% year-on-year to N1.28 billion helped by a double-digit rise in interest income on loans and advances, and a triple-digit surge in interest income on bonds which compensated for the drop in interest income from treasury bills and in interest on short-term deposits due to the poor yield
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environment. Africa Prudential’s total assets during the period under review appreciated 22.78% year to date to N22.89 billion and Total liabilities grew 44.47% to N14.97 billion. While its shareholders’ wealth declined by 4.37% to N7.92 billion due to payment of N1.4 Billion dividends during the year. Returns on Equity rose to 13.67% from 12.41% in both half-year periods of 2020 and 2019 respectively. This was not due to improved ROA suggesting higher financial leverage. @Businessdayng
Asset turnover was at 0.08X in the current year compared to 0.11X last year. Earnings per share rose to 54.14 kobo from 51.4 kobo and profit margin rose to 57.82% from 51.145 over the period of analysis indicating greater profitability. Africa Prudential Plc is a leading share registration firm, investor and business support services provider in Nigeria; and the only registrar firm listed on the NSE; specializing in customerfocused, technologically driven service for corporations.
Tuesday 28 July 2020
BUSINESS DAY
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property&lifestyle Nigerians to pay higher rents as FIRS demands 6% stamp duty from landlords, agents ... as Act permits 0.87% for 1-7yrs lease ENDURANCE OKAFOR
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enants in Nigeria may have to brace for an increase in rent payment as the Federal Inland Revenue Service (FIRS) has instructed landlords and property agents to charge six percent stamp duty on all tenancy and lease agreements. FIRS made this known in a statement by Abdullahi Ahmad, Director, Communications and Liaison Department on Wednesday, July 22 2020. While the tenants making payment for a property shall have the obligation to account for the applicable stamp duties, landlords and property agents, according to Ahmad, are to remit such collections to FIRS “so that they do not run foul of the Stamp Duty Act. ”It will make it more expensive to let houses as most landlords will pass this new tax to tenants. It will increase litigation of Landlord & Tenant,” Chudi Ubosi, an estate surveyor and valuer said, adding that it may also create a black market where landlords will collect some rent in cash
& reflect only a little on the lease agreement. The six percent stamp duty represents an additional cost for tenants who are already saddled with agency fee that is almost 50 percent of the actual cost of rent or lease in a city like Lagos as well as the agreement fee demanded by landlords and agents. “It will increase renting cost as tenants are to bear the responsibility of paying the stamp duty,” Ayo Ibaru, the chief operating officer and director of Research at Northcourt said, adding that the government is looking at ways to generate revenue as crude oil has become unreliable. According to Ibaru, Nigerians wouldn’t have issues paying taxes if they are sure the funds are going into infrastructure development. “I pay tax on my salary. I pay stamp duty on inflows above N10,000. They now want us to be paying 6 percent stamp duty on rents. Yet the roads they provide us with, will still spoil our cars, and till date, we generate our power,” a Lagos-based consultant said on .condition of anonymity.
A tenant whose rent, for example, was N20 million before the enactment of the stamp duty will incur an additional cost of N1.2 million due to the six percent that is expected to be remitted to FIRS. “Property-related transactions like tenancy or lease agreement fall under the Ad Valorem category of the stamp duty which attracts six percent duty payable in percentage of the total value or sum of the
tenancy or lease,” Ahmad said. Meanwhile, the stamp duties payment is enabled by the Stamp Duties Act (SDA) 1939, as amended by numerous Acts and resolutions contained in the Laws of the Federation of Nigeria. On what the rent agreement and stamp duty Act of Nigeria says about the decision by FIRS, Taiwo Oyedele, the Fiscal Policy Partner and West Africa Tax Leader,
PwC said it is not right that every landlord would remit six percent stamp duty on rent because it’s not what the law says. “If your lease is less than 1 year, you don’t pay any stamp duty, if it’s one to seven years you pay 0.78peecent and if it’s between seven to 21 years you will pay 6 percent,” Oyedele explained, adding that FIRS needs to do better in terms of communication and sen-
L-R: Ewenla Mustapha, Honourary Publicity Secretary; Makinde Saheed, Honourary National Publicity Secretary; ‘Dotun Bamigbola, Chairman, NIESV Lagos Branch; Emma Wike, National President; Folarin Babatunde, member; and Bidemi Ojo, member, all of Nigerian Institution of Estate Surveyors and Valuers (NIESV); during a visit of the president to the national NIESV Liaison Office in Alausa, Lagos recently.
sitization. Going by Oyedele’s explanation of the Act, majority of tenants in Nigeria, particularly in Lagos, where the maximum lease period is mostly 7 years, might be paying less than the six percent demanded by FIRS. On whether or not the decision by FIRS to implement the stamp duty on rent during this COVID-19 era was the best, Oyedele said, it is difficult to just blame FIRS because they did not enact the law. “The law has always been there, many people didn’t comply and the law was not enforced. It is a failure on the part of the government not to have implemented the law when the economy was stable not now when there is crisis,” he said, adding that the government and regulatory agencies can use this period to create awareness and educate the public while proposing a future date when it will commence enforcement of the provisions of the law. If Nigerians do not want the enforcement of the law, Oyedele said “they can speak to their lawmakers to review the law.
Opportunity opens for home buyers as Lakeside Court enters property market Housing deficit: FG still unconvinced, sets up … Apartments with mortgage facilities on offer CHUKA UROKO
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or first time home buyers looking for affordable luxury with comfort, convenience, and flexibility of movement, Lakeview Court offers the opportunity as a new market destination. As a new a housing development consisting of 12 threebedroom flats arranged in two blocks of six 3-bedroom with all the rooms en-suite, Lakeside Court is a gated estate of quality finishing. The estate is owned by Pertrust Property & Investment Company Limited. The estate is located in Amuwo-Odofin, a middle class Lagos suburb suitably located by Oshodi–Apapa Expressway—Mile 2 intersection of the Lagos–Badagry Expressway still under reconstruction. Mile 2 is planned to be a Main Sta-
tion of the Lagos Light Rail Service which is under construction. For ease of movement, Lakeside Court is well located for transportation around Lagos metropolis and for all the shopping and recreational amenities of Amuwo-Odofin/Festac Town. The estate is about 30 minutes drive to Lagos Island, Victoria Island and Muritala Mohammed International Airport. Amuwo-Odofin is fast developing into a fashionable middle-class suburb. It boasts of a 4-Star Golden Tulip Hotel, The Festival Mall which houses Shoprite and many other known quality shopping brands, and the prestigious Conference Centre of The Institute of Chartered Accountants of Nigeria. As a modern estate, Lakeside Court boasts top-notch facilities which, according
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to ‘Kunle Owuye, Pertrust’s Chairman/CEO, are provided for the comfort and enjoyment of the residents of the estate. He listed those facilities as good sewage system, quality estate lightings, ample parking space, generator bay to supply the two blocks, potable water supply, gated estate with good security arrangement, exotic landscape and neighbourhood shopping and recreational amenities. For home seekers interested in the estate, Owuye said the introductory selling price is set at N21 million, explaining that “this represents a fair market price taking into account the location and the amenities provided. There is an excellent potential for growth in investment value or capital appreciation in the short-term.” He explained further that mortgage financing option was also available through their partner-mortgage finance institutions, adding that there was popular demand for the flats. “The title deed is good. A Deed of Assignment, deriving from a registered title deed on the estate, granted by the Lagos State government, will be issued to buyers. The deed is available for inspection,” he assured.
survey committee to verify figures CHUKA UROKO
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ndications that the federal government does not still believe Nigeria has housing deficit was brought to the fore at the just concluded Abuja International Housing Show (AIHS) when the minister of state for works and housing, Abubakar Aliyu, disclosed that government has constituted a special survey committee to verify figures that have been put out as the size of the deficit in the country. Aliyu whose views were contained in his goodwill message to the organizers of the housing show with the theme, ‘Housing Finance and Liveable Cities: Innovation for 2020 and Beyond’, said his ministry was concerned about the several figures on the housing deficit, ranging from 17 – 22 million units. Babatu n d e Fa s h o la, the minister for works and housing had said he was at a loss where housing deficit figures which, according to him, were un-clarified, unverified and unproven, was coming from. “The last time Nigeria held its census was 2006. Since then, we have not held another. Then, where
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did we get this figure? Where did we get the 17 million housing deficit?” Fashola wondered, adding, “some people say it is from the World Bank. I have asked the World Bank and they have disowned that figure, saying it did not come from them,” said the minister, who spoke at a media programme, Continuing, he said, “my understanding of housing deficit is that it is largely an urban problem—people migrating to the cities. If you go to the rural areas, you will see houses owned by people living in the cities. These houses are locked up. We cannot be talking about housing shortage when we have many houses that are empty.” Aliyu, however, impliedly admitted that there was a deficit when he revealed that the ministry was mitigating the deficit by way of providing more houses under the Phase 2 of the National Housing Programme (NHP) to ensure that Nigerians wherever they reside have access to affordable, conducive and decent housing. According to him, government has also completed over 1,000 housing units across the country through the Phase 1 of the NHP and over 1,000 housing units at @Businessdayng
various levels of completion under the Phase 2 of the NHP. “In addition, the Federal Mortgage Bank of Nigeria (FMBN) and the Federal Housing Authority (FHA) are also increasing housing stock for Nigerians through several programmes designed to achieve the 200,000 housing units per annum target of government,” he said. The minister informed that the multi-faceted approach to housing delivery encompasses rent-to-own, mortgage finance ownership, site and serviced schemes, urban renewal and slum upgrade programmes, Public Private Partnership estate developments, and so on. He pointed out that the need for Nigerians to look beyond the public budgetary provisions in the delivery of affordable houses to the teeming Nigerian populace was quite imperative since government alone could not provide all the funds required to meet the set deliverables. “Accordingly, the ministry is willing to partner with credible private sector developers towards actualizing government’s aspirations in housing development in the country,” he said.
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Tuesday 28 July 2020
BUSINESS DAY
Tuesday 28 July 2020
BUSINESS DAY
Insight
17
Insight
Six key considerations for the new workplace Introduction Top line growth for some businesses has been negatively impacted. A knee jerk reaction from employers may be to lay off employees or renegotiate vendor contracts to reduce costs. The most plausible move will depend on several factors such as the long-term growth plans and business continuity during and beyond the pandemic. Employers who can navigate these times through proactive and innovative thinking will be ahead of the curve and may very well come out at the end of the tunnel with the greatest asset; an agile workforce.
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igeria recorded its index case of the pandemic on 27 February 2020 and deployed various strategies to contain the spread-these included issuing lockdown orders and closing the borders. Some businesses have struggled with the seemingly new model of remote working. Top line growth has been negatively impacted, with some sectors (such as the hospitality and airline industries) badly hit. A knee jerk reaction from employers may be to layoff employees or renegotiate vendor contracts to reduce costs. The most plausible move will depend on several factors such as the long-term growth plans and business continuity during and beyond the pandemic. Employers who can navigate these times through proactive and innovative thinking will be ahead of the curve and may very well come out at the end of the tunnel with the greatest asset; an agile workforce. This article focuses on considerations for managing employee costs. It also considers the legal and tax implications of changing your workforce and key considerations for the ‘new workplace’ as the lockdown eases. 1. Re-assess your longterm strategy With lower productivity levels, it is a good time to reassess the growth strategy of the company. There may be need to revisit the ‘core/live wire’
employment, as distinguished from permanent severance”. Where the employee will resume duties later, the suspended contract should be clearly documented so it does not become acrimonious. If an employer wishes to make routine ‘gracious’ payments as a palliative for the crisis, the payments may be regarded as gifts or benefits in kind. There is a thin line of distinction that would be outweighed in the light of documentation. Benefits are subject to tax under the Personal Income Tax Act (PITA) while gifts are not. It would be useful for employers to seek clarification before embarking on such payments.
of the business, diversify to new income streams, improve efficiencies on existing business lines or even carve out distressed or non-core assets. What happens to the workforce associated with such assets? How do you keep staff motivated in the absence of physical interface? Does your reward and compensation structure align with a work from home (WFH) policy? Does your performance strategy adequately appraise staff working from home? Are your flexi policies sufficient to attract and retain the right talent? The answers to these questions will not come easy especially for family businesses where loyalty is a key factor for retaining employees. Broadly,employers would need to: a)assess current and future business needs b)identify skill gaps and mismatches c)build a future proof skill strategy. This will include re-evaluating the reward and performance strategies d) develop and implement reskilling/upskilling of workforce e) evaluate return on investment. 2. Review existing relationships One key consideration in the assessment will be reviewing contractual obligations on existing relationships. Some relationships have the semblance of an employer/employee relationship but are not. Employers must review relationships to determine whether a ‘staff ’ is an employee, or an independent contractor before embarking on varying arrangements. The costs of engaging a contractor differ from the employee so this will be critical in determining whether to continue, end or convert. For example, an independent contractor is only entitled to the agreed contract fee/ payment; as opposed to the employer/employee relationship where an employee may be entitled to other payments (statutory contributions) in addition to his/her wages/ salaries. For the purpose of reviewing an employment relationship, the primary legislation and documents to review would include the Labour Act, the employee’s contract (usually this would incorporate
V. Termination
the Employment Handbook which contains additional terms of the employment contract) and any Collective Agreement (relevant in a unionised workplace). 3. To Continue or to End? For as long as an employment contract subsists, the employer will be under an obligation to fulfill its statutory and contractual obligations. Employers seeking to stay afloat, would need to be innovative to reduce employment related disputes. The parties can agree to vary the terms of the contract (variation could include pay cuts, furlough leave and flexible working); suspend the employment contract or outrightly terminate the contract. I. Outsourcing Remote working comes with a huge element of trust that the employee is working as agreed contractually. The employer must believe things are working as expected but can put processes in place to measure deliverables and results. A 2019 survey from job search site FlexJobs found that 80
percent of respondents said they would be more loyal to their employers if they had flexible work options (up from 75 percent in 2018).65 percent of respondents also think they would be more productive working from home (WFH) than working in a traditional office environment due, in large part, to fewer distractions. Where an employer still feels otherwise about WFH, one option may be to convert employee relationships to contractor relationships or outsource services to an independent third party provider. An employer taking this route should consider issues such as confidentiality, ownership of intellectual property, quality control and how to enforce these. The tax implications also differ. Rather than withholding Pay As You Earn (PAYE) taxes at an average of about 20%, withholding tax at 5% to 10% will apply on the fees charged by the independent contractor. VAT will be an added cost especially with the changes under the Finance Act 2019 to self charge. The corollary is that social security costs may
no longer apply where a conversion is done but an initial charge on termination benefits may apply to deserving employees who now become consultants to the companies. II. Paid and unpaid Leave Where employees need to work from a physical office, the employer can manage the size of the workforce by requesting employees whose services are not required in the short term to utilise their statutory holidays or go on unpaid leave where leave is exhausted. An employer is not discharged from its obligations to pay salaries and account for PAYE taxes or social security contributions because an employee is on leave. With unpaid leave, some of these obligations do not arise but documentation is key to forestall any challenge from the regulators. III. Variation of contracts Contractual obligations can be varied or waived by mutual agreement between employer and employee. For example working less hours to align with demand and varying allowances as a result. An employee who works remotely may no longer
require a travel allowance but may need internet services to be effective. Employment contracts can be varied orally, but it is prudent to document them. Where an employment relationship is governed by the Labour Act, any variation must be brought to the notice of the employee within one month. With a variation, contractual and social security concerns may change e.g. standard pay components underlying pension contributions. IV. Suspension of Employment Contract The Courts have defined suspension as “the act of temporarily delaying, interrupting, or terminating something, such as suspension of business operation. It could also mean the temporary withdrawal from
Where termination is the best option, the employer must ensure it does not end up in lawsuits. Termination must be done in accordance with the terms and conditions of the employment or any relevant collective agreement that has been incorporated in the employment contract. In an employment with statutory flavour where the procedure for termination is expressly spelt out in the relevant statute, the employer must comply strictly with the provisions of the statute. Any termination that is inconsistent with the statute is null and void. An employer is allowed to terminate without giving reasons but it is prudent for the employer to consider the defences that may be available if the termination is contested. It is uncertain whether the defence of force majeure or frustration will be sustained by the Courts to discharge the employer from damages. What is certain is that the Courts must take judicial notice (facts which a court mandatorily takes as proved by the operation of law and not requiring further proof ) of the crisis and evaluate its impact on an employment relationship on a case by case basis. Generally, redundanc y payments are made up of ele-
ments of terminal pay and/ or termination benefits. A termination pay/benefit is a redundancy lump sum paid to employees on the premature termination of employment (usually discretionary) while terminal pay/benefits are retirement /resignation/end of employment payments usually based on predefined terms and satisfactory performance of employment duties. Termination benefits (usually capital in nature) will qualify for tax exemption under PITA, to the extent that the amount paid to the employee is not ‘pre-agreed’. These payments will however, be liable to Capital Gains Tax (CGT) at 10% subject to qualifying exempt limits. Terminal benefits on the other hand are subject to Personal Income Tax. Consideration must also be given to pension benefits that can be accessed when an employee is disengaged and whether these are taxable. 4. How high has the bar been set for safety at work? One of the duties of the employer is to ensure safety at work. Some of the questions that have arisen are: (i) whether the employee’s home can be designated a ‘workplace’ for the purpose of imputing liability for work related hazards. (ii) can an employer make claims under the Employee Compensation Scheme for remote workers or even pandemic related matters? (iii) or should the employer cease contributions where it adopts a WFH policy? As the lockdown eases, employees may need to return to the workplace. How much safety can an employer put in place to ensure that transmission of the virus is limited to the barest minimum? What would be the test for determining whether the employer has sufficiently discharged the duty to provide a safe workplace? These questions may not have a straightforward answer. What is sure is
that employers must adhere to all the directives issued by the government. It would be prudent to document health and safety measures that have been put in place as a response to the pandemic. 5. Are the costs associated with running a home office deductible? Section 20 of PITA spells out the test for determining deductibility of expenses incurred to generate taxable income under the Act. For an expense to be deductible, it must have been incurred wholly, exclusively, necessarily and reasonably for the purpose of earning relevant income (in this case salary/ wage). Can costs incurred while working from home be deducted for tax or are these private expenses which are not allowed? Employees would do well to keep separate and robust documentation of the expenses associated with running their home offices. For evidential proof, an employee who can show the hike in expenses (for example electricity bills, cost of running the generator and providing internet service) is more likely to succeed than one without documents. 6. Business continuity How detailed is your business continuity plan? Does it capture working from home procedures, cyber security, alternative working location, document storage etc. If, for example a team member gets infected, the chances are that all the other team members who came in contact may be quarantined. If an office building becomes compromised and inaccessible to the workforce, it may also become impossible for the organisation to conduct its business. These and many more would pose a big challenge to business continuity. To ensure minimal disruption on account of the pandemic, organisations must review and update their business
continuity plans to include workforce planning /arrangement, policies for employees working remotely, employee communication, leave management etc. How detailed is your business continuity plan? Does it capture working from home procedures, cyber security, alternative working location, document storage etc. If, for example a team member gets infected, the chances are that all the other team members who came in contact may be quarantined. If an office building becomes compromised and inaccessible to the workforce, it may also become impossible for the organisation to conduct its business. These and many more would pose a big challenge to business continuity. To ensure minimal disruption on account of the pandemic, organisations must review and update their business continuity plans to include workforce planning /arrangement, policies for employees working remotely, employee communication, leave management etc. Conclusion This crisis has affected individuals and businesses in ways that were not anticipated. While some businesses would not survive the crisis, those who survive must reassess their business models, performance strategy and compensation structure. Businesses would have to review their workforce to eliminate wasteroutine tasks that need to be automated. This is not to say, people will not be required but the skillset required to take businesses to the next level in the new world will be different. All these actions have legal and tax implications for the workforce, employer and other stakeholders. Above all, organisations will do right to strategise for an agile workforce amidst the uncertain business environment. Taiwo Oyedele, PwC | Fiscal Policy Partner and West Africa Tax Leader ................ Esiri Agbeyi, PwC | Tax Partner ............... Oluwatoyin David, PwC | Tax Manager, People & Organisation ............... Ochuko Odekuma, PwC | Manager, Regulatory Compliance & Advisory
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Tuesday 28 July 2020
BUSINESS DAY
EDUCATION Weekly insight on current and future trends in education
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Human Capital
COVID-19: Interswitch put off 2020 National Science Competition indefinitely • Halts ongoing registration of students •Urges organisers to start preparing for 2021 edition MARK MAYAH
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he Integrated Digital Payments and Commerce Company, Interswitch, has announced the cancellation of 2020 edition of the InterswitchSPAK National Science Competition till further notice. The cancellation was made known in a statement by the Group Chief Marketing and Communication Officer, Cherry Eromosele, who stated that the cancellation was to avoid the spread of the COVID-19 virus during the competition, which features a national qualifying examination, Masterclass, quiz and innovations competition. According to her, “We have
Mitchell Elegbe, MD/CEO Interswitch
no doubt that the appropriate course to take as a socially responsible organisation, is to
defer this year’s edition of interswitchSPAK until the dangers to public health posed by
Oyo SUBEB To Partner US-Based Agency on Basic Education REMI FEYISIPO, Ibadan.
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n its bid at ensuring quality and quantitative education, Oyo State Universal Basic Education Board, SUBEB is patnering a US based organisation, Windsor Educational Services. Speaking at a presentation with the officials of foreign agency and members of the management of SUBEB in attendance, Nureni Adeniran, Chairman, said SUBEB is always ready to partner and collaborate with reputable educational organisations to bring quality and quantitative education in the primary sector. During a presentation on Basic Education Mitigation and Recovery Strategy for Oyo State, which was held in Ibadan, he said the board was ready to partner and collaborate with education organisations, bodies agencies towards ensuring quality and quantitative education that will promote the basic education policy of Governor Seyi Makinde-led administration. “The board is ready to partner and cooperate with education organisations, bodies and agencies for quality and quantitative education that will promote a better basic education system in Oyo State.” Adeniran added that the
present administration in the State recognised the importance of education, hence the allocation of 22.37% of the 2020 budget to education. “It is the realisation of the importance this government accords education that Governor Seyi Makinde, allocated a big chunk of 22.37% of this year’s budget to education alone, this is the first time in the history of Oyo State that such will be given to the sector.” Earlier in her address, the Chief Transformative Officer, Windsor Educational Services, a U.S based Educational organisation, Toyin Awoderu, noted the credible achievements of the government in
basic education. She affirmed that much has been achieved in basic education of the state through free education for all primary school students, construction of infrastructures, completion of abandoned projects and renovation as well as making the sector to have human face. “I want to commend the Oyo State Government for the notable achievements recorded in the primary education sector especially in the areas of free education for all primary school students, construction of infrastructures, completion of abandoned projects and renovation as well as making the sector to have a human face,’’ he added.
Nureni Adeniran, chairman Oyo SUBEB www.businessday.ng
the pandemic are sufficiently mitigated. “To this effect, we have formally ceased ongoing registration of candidates by schools across Nigeria and Kenya for the current year, following engagement with relevant concerned educational authorities and stakeholders in both countries. Eromosele said the organisers realised that a virtual version would be impracticable presently and chose to put off till when physical contact of the participants would be possible. “Based on due considerations for the health, safety and general well-being of thousands of young students and other categories of stakeholders involved in the national qualifying examinations, Masterclasses and na-
tional science competitions across Nigeria and Kenya annually, Interswitch Group has taken the difficult, howbest, necessary and pragmatic decision to move the activities planned for 2020 edition of interswitchSPAK national science competition.” According to the statement, the global concern regarding the Coronavirus outbreak and its outlook which remains unclear, including travel and social gathering concerns among other considerations, make it extremely challenging to proceed with the implementation of the 2020 edition as earlier planned. “Having explored the options open to them including logistics of staging a fully virtual implementation of the competition, the organisers have come the resolution that
the most optimal course of action would be to defer the season.” Eromosele added that the organisation had commenced constructive engagement with various stakeholders and partners who work annually on this initiative and will continue to work with them in unison as they plan towards the subsequent season of the project. The interswitchSPAK National Science competition is a High School Science television contest show, that started in Nigeria in 2017 as SPAK, an acronym for Speedy, Perseverance, Accuracy and Knowledge. It’s an annual Public/ Private secondary school students’search in Nigeria and Kenya, reserved for second grade (Grade11)for students within the ages of 14 and 17.
500 level Unilorin student invents automated hand-washing machine SIKIRAT SHEHU, Ilorin
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kunlola Emmanuel Olarewaju, a 500 level student of the Department of Computer Engineering, University of Ilorin, has demonstrated the high quality of teaching, learning and research as well as community service obtainable at the University with his recent invention of an automated hand-washing machine that can assist in the fight against the spread of the dreaded COVID-19 pandemic. This development was disclosed by Olarewaju while talking to journalists through his technological breakthrough on Thursday at the University’s Central Workshop. The young inventor, who is an indigene of Ilora in the Afijio Local Government Area of Oyo State, said that he was motivated to come up with the invention as his own contribution towards improving the “collective war” being waged against the Coronavirus pandemic, pointing out that the machine was designed and produced to automatically bring out water and liquid soap into the hand of the user with ease so as to encourage the much-advised personal hygiene needed to combat the disease. Olarewaju noted that his instinct for research endeavour
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was raised to action “when I saw other machines produced elsewhere which require the operator to use his leg on a pedal before either water or liquid soap could come out. “ I remembered and was encouraged by the exultations of our lecturers who often advised us to always deploy our knowledge to bring out innovations for mankind”. Olarewaju added that he was encouraged to fabricate the machine because he felt he had the skill to produce something better than those he had seen and used. He says though his primary field of studies; Computer Engineering, his exposure to other aspects of Engineering through different courses he took from other Departments, particularly Fluid Mechanics, which deals with “embedded systems and robotics”, propelled him to attain the feat. Speaking on the cost of producing a unit of the Machine, Olarewaju informed that if it is produced in large number it would cost N180, 000 only. O la rewaju, how e ver, thanked all his lecturers and technologists at the Faculty of Engineering and Technology, University of Ilorin, for always emphasising practical applications of knowledge and skills imparted in him and his colleagues over the years. He also said that it was their efforts that stimulated his tech@Businessdayng
nological thoughts and knack for research, which eventuated in the fabrication of the machine. In his reaction, a Lecturer at the Department of Chemical Engineering, University of Ilorin, Olawale Ajala (Dr), said that the achievement of the inventor is worthy of being celebrated, particularly at this point-in-time when all hands should be on deck to ensure the banishment of the Coronavirus disease. The don said that he was impressed that the inventor had succeeded in putting to practice some of the things he learnt in the classroom and laboratory, explaining that with that achievement, it is clear that the Nigerian University system, and particularly the University of Ilorin, is not producing unemployable graduates. Ajala added that efforts are being made to secure patent for the innovation so as to protect the copyright of the inventor. He acknowledged the fatherly support of the ViceChancellor of the University of Ilorin, Sulyman Age Abdulkareem (Prof), at all times and particularly since the information on the invention got to him, as he advised other students to emulate the industry and diligence of Olarewaju by deploying their times and thinking faculties to solving societal problems for them to have a great future.
Tuesday 28 July 2020
BUSINESS DAY
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EDUCATION Why skills growth may suffer in Africa with continuous closure of tertiary institutions - AFDB
Post COVID-19: Public varsities may struggle to transit online -Experts Kelechi Ewuzie
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roduction of skilled manpower needed in Nigeria and indeed other countries in the Sub-Saharan region to compact the effect of Coronavirus pandemic may suffer with the closures of universities in Africa. A report by African Development Bank (AfDB) has revealed. The report estimates inflation triggered by the pandemic will lead to a loss of 10 percent of a standard deviation on educational outcomes, adding that even a relatively short period of missed school has consequences for skills growth. According to the report’s outlook on how countries in West Africa will cope with challenges for building higher education and labour skills in the foreseeable future, inflationary effects of COVID-19 are expected to decrease the number of students transitioning to tertiary education, with outcomes in science, technology, engineering and mathematics The AfDB’s report on West Africa Economic Outlook: Coping with the COVID-19 pandemic, indicates that most countries in the region have less than 20 percent of ter-
Adamu Adamu, education minister
tiary graduates in Science Technology Engineering and Mathematics (STEM) fields. “So far, there are indications that a severe skills mismatch and low human capital development in the region are likely to be worsened by the effects of the COVID-19 pandemic. At tertiary education level, only five out 13 countries Benin, Cape Verde, Ghana, Togo and Senegal have enrolment rates higher than the regional average of 12.6 percent, which is critically low by international standards” the report notes.
Furthermore, the reports have faulted universities in Nigeria and other West African countries for failing in the past to balance the academic and professional qualifications of graduates with the needs of the economy, with particular attention paid to graduate output in STEM fields. “Priorities are given to legal training, marketing, project management, accounting, entrepreneurship, purchasing, and product management, all areas that are not of key concern to the industry,”
the report states. AfDB’s report indicates that although the demand for technology-based skills in West Africa is emerging, tertiary education in those areas is minimal. Subsequently, the potential new jobs that would emerge from skills in artificial intelligence, robotics, automation, digitisation and other fourth industrial revolution technological trends are missing in West African countries. “What has emerged from the two studies is that most of the West African labour force suffers from massive undereducation, as compared to other countries in the continent. West African countries in general have lower incidences of over-education in comparison to their counterparts. Under-skilling is more pervasive than over-skilling, an aspect that reflects the low quality of university education”, the report states. While acknowledging that higher education in Nigeria and other West African countries are grossly underfunded, AfDB called on stakeholders during this time of COVID-19 to think about new strategies for provision of higher education. The pandemic could be used as a best test for the education technology interventions to improve on skills that are required in the
Governor Zulum approves over N200m to offset outstanding corps members allowances • Awaiting security clearance to unveil new orientation camp MARK MAYAH
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orno state governor, Babagana Zulum has approved the payment of N202.6 million to offset monthly allowances of various batches of serving and former corps members in the state. The desk officer of the National Youth Service Corps (NYSC) in the state, Christopher Godwin-Akaba made this known in a statement in Maiduguri, the Borno state capital. Godwin-Akaba said that corps members received a monthly stipend of N10,000 each, while the medical corps members and paramedics received N100,000 and N50,000 respectively. He stated that a sum of N75.4 million was released by
the governor within the last one year to pay allowances of 454 medical doctors and paramedics’ corps members serving in the state. “While N127.2 million was released to offset allowances of other categories of no fewer than 3,233 corps members in the state,” he said. The desk officer said stated that the provision of good welfare packages to the serving corps members in the state was part of the state government’s drive in motivating them to contribute their quotas to the development of the state. He also disclosed that the government had provided befitting and secured accommodation to all categories of corps members as incentives to ease their stay in the state. He explained that due to challenges occasioned by the insecurity in parts of the state, no corps members was posted www.businessday.ng
to serve in volatile areas. According to him, the government has been collaborating with security agencies with a view to ensuring the safety and security of lives and properties of corps members. Godwin-Akaba said that arrangement had reached advanced stage to resume orientation exercise at the new orientation camp with state
of the art facilities by the state government in Maiduguri. “This came in line with governor zulum’s request when the director general of the scheme, Shuaibu Ibrahim (Brig-gen) paid him a visit in 2029. “ The camp has been completed and we are ready for the take-off of the exercise if necessary security clearance is received,” he said.
Babagana Zulum, Borno state governor https://www.facebook.com/businessdayng
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he Coronavirus pandemic has in more ways than one showed how unprepared public universities in Nigeria are to adapt to online learning. With poor funding, lack of adequate infrastructures, overcrowded classrooms, public citadel of learning in Africa’s largest economy is faced with a race for time to transit to the new normal, called online learning. Industry professionals in the education sector in view of this have urged governments at all levels to do more for education, especially provision of data, broadband access, good internet network and technology, adding that if these are not adequately invested in, it could hamper the transition to digital space and online lectures, post COVID-19. Panelists at a recent public lecture organised by the Lagos State University (LASU) acknowledged that with the global health crisis, academic processes have changed, disrupting the old normal and throwing a new normal. In their various submissions on the title; “Learning issues in education and COVID-19 Pandemic”, university dons recalled that before the
pandemic, academic structure were physical, students coming to the campus daily and receiving lectures. The public lecture was moderated by Ambrose Akinkuotu, Dean, Faculty of Education while Lanre Fagbonhun, Vice Chancellor was the Chief Host. Biodun Akinpelu, director, Centre for General Nigeria Studies (CGNS) Lagos State University, Ojo says the future of education was no longer face to face or physical learning, but it has moved to online learning. Akinpelu while contributing to the topic through his paper” COVID-19 pandemic: Emerging challenges and prospects for tertiary institutions” stated that the pandemic has affected the workplace, contract appointments terminated, international conferences put off, research work hampered, revenue of universities reduced and many other issues thrown up. “COVID19 has reduced the pattern of human interaction. There is no access or limited access to online lectures by students. Quality assurance cannot adequately monitor the process. The one size fits all platforms are not adequate. There is inalienable demand for digital space. Adaptation is key in migration to the online platform. There is planning to go online”, he lamented.
Why more classrooms be constructed in Kwara - ICPC SIKIRAT SHEHU, Ilorin
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erturbed by overcrowding of classrooms by pupils as a result of inadequate provision of classrooms remains a challenge in many schools under the Universal Basic Education (UBE) programme in Ilorin, Kwara State. This was revealed by managements of some schools visited in the town by Constituency and Executive Tracking Group of the Independent Corrupt Practices and Other Related Offences Commission (ICPC). In the schools visited in Ilorin, the team assessed the structure of a block of two classrooms which are the main component of the constituency projects and other components including the desks and chairs if they are in accordance with the specifications of the projects. However, in some of the schools the two classrooms serve as the only shelter for all the pupils while in some others for majority of the pupils. Though the pupils were not in schools owing to the closure of schools as a guard against spread of COVID-19 in the @Businessdayng
state, this unconducive learning atmosphere was explained to the team by managements of the schools. At the Alalubosa L.G.E.A School, Maraba in Ilorin East Local Government which is one of the affected schools, the management explained that the two classrooms were the only ones being used to accommodate pre-nursery and nursery schools and primary 1-6 at the same time. They said the only other building which comprises three classrooms and which is still under construction was being sponsored by members of the Alalubosa community. The Magaji Are L.G.E.A also in Ilorin East which suffers similar challenge has one of its classrooms filled with 127 pupils as the classroom accommodates pupils of primary 2 A-C arms at the same time. The management of this school however explained that the overcrowding was compounded because a block of two classrooms donated to the school by a philanthropist was being temporarily used by the Magaji Are Junior Secondary School pending when the secondary school would relocate to its permanent site.
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Tuesday 28 July 2020
BUSINESS DAY
Driving the industry effort to fight Covid-19 Veteran engineer Dick Elsy led the consortium that delivered 3,000 ventilators in a tight timeMichael Pooler
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efore they emerged as one of the most valuable tools for treating acute Covid-19 patients, Dick Elsy admits he knew “little or nothing” about mechanical ventilators. As coronavirus began to take hold, the 60-year-old engineering veteran was invited to a conference call on March 16, where senior UK government minister Michael Gove urged dozens of manufacturers, including luminaries such as Dyson, JCB and McLaren, to fill an expected shortage of the life-saving machines. “Gove right at the end said, ‘Well there’s a specification, over to you, industry’. And I thought to myself, a conversation like that, well-intentioned though it was . . . how on earth is that going to bring companies together to deliver this in the sort of timeframes involved?” recalls Mr Elsy, who is chief executive of the High Value Manufacturing Catapult, a network of independent UK research centres funded by the public and the private sectors. “So I made the commitment [to get involved] on the call, because there was a vacuum.” Within a few days, he had helped assemble some of the country’s biggest industrial groups — from carmakers and aircraft manufacturers to defence contractors — to plot how to produce the artificial breathing apparatus at scale. From his Warwickshire home where he guided the project as chair during lockdown, he recounts a pivotal moment. “It became quite clear early on that the quickest route to delivering the requirement was to get behind existing devices and not start from scratch,” says Mr Elsy. Perhaps not as swashbuckling as other teams, whose rush to invent brand new devices was privately dismissed as unrealistic by experts in the field, yet the approach was vindicated. In three months, the VentilatorChallengeUK consortium supplied 13,437 devices to the NHS: a collaborative enterprise redolent of the Spitfire aircraft
programme during the second world war. By contrast, none of the “clean-sheet” designs developed by other groups ultimately went into production. The consortium’s choice came after examining what was already being made domestically and whether it could be ramped up. It reflected a collegial, streamlined and swift decision-making process by a small executive group presided over by Mr Elsy. The former automotive industry executive says he was looked to as a “neutral chair” because of his day job at the HVMC, which works with companies to scale up and commercialise technology. Brimming with an engineer’s enthusiasm for problem-solving, Mr Elsy has experience of leading complex manufacturing programmes. His CV includes launching Land Rover’s first SUV, the Freelander, in the 1990s. As offers of help flooded in, one of the first tasks was to set ground rules. “[We wanted] people who were really committed, prepared to take a personal risk — because this can either be careerenhancing or quite career damaging — and who are prepared to take a corporate risk as well,” recalls Mr Elsy. “At that point we didn’t know if we were going to get paid.” The consortium quickly split into two streams. Project Penguin focused on boosting output of an ambulance ventilator made www.businessday.ng
by Smiths Medical in Luton. Project Oyster began after an introduction to Oxfordshire-based Penlon, whose anaesthesia machines normally found in operating theatres were “the clinicians’ choice” but needed repurposing. Mr Elsy then took responsibility for central functions such as communications and securing a government promise to underwrite costs. The race against the clock entailed a relentless workload. Emails started flying shortly after 4am each day and there was a daily video meeting for some 18 to 20 people from the core executive team, programme managers and specialists. Only after almost a month did the executive team members have a day off. “I could see people working really, really hard: not spending any time with their families, working 20 hours a day. So trying to get some balance into that was really tough. That burden of duty of care, I actually found quite difficult,” says Mr Elsy. Describing his role as a coach and co-ordinator charged with “maintaining the pace for everybody”, Mr Elsy talks down his own contribution and emphasises the collective effort. He speaks of a shared sense of purpose that knitted together all involved — some 5,000 people from 33 main companies — despite many of the senior decision makers never having met in person. Still, it was not without bumps. A microchip no longer in production “looked like a
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showstopper” at one point, while assembly workers had to be trained with augmented reality headsets because of lockdown restrictions. During clinical trials, doctors requested adjustments to the Penlon device to be able to drain a patient’s lungs while still ventilating. The engineers turned it around within 24 hours. A significant milestone was regulatory clearance, which normally takes months, achieved in just 21 days. With partners such as RollsRoyce, GKN, Ford, McLaren and Airbus lending factory space to set up new lines for making components and assembly, along with providing logistics and supply chain expertise, the consortium’s peak daily production of about 400 ventilators dwarfed Smiths’ and Penlon’s previous combined output of 50-60 units a week. Although the government significantly revised down the number of ventilators required, the hope is these stocks will provide a buffer for a potential second wave of coronavirus. As an ad hoc organisation, VentilatorChallengeUK lacked many of the standard corporate structures and strictures. In Mr Elsy’s view, the freedom and autonomy this granted the engineers was vital to success. “There was this whole concept of self-organising. It was not a command and control structure,” he remarks. “If something goes slightly wrong, they’re also @Businessdayng
fully empowered to do everything they can to fix it.” So what were the lessons? “Not second guessing people, not putting layers of oversight in place. Trust people they can get on and do the job,” he says. Three questions for Dick Elsy Who is your leadership hero? Ernest Shackleton, (pictured), because he brought his team with him and stopped at nothing to rescue them. If you were not a CEO/leader, what would you be? Retired pursuing a non-exec portfolio! (I’ve deferred my retirement to focus on this and the Covid recovery). What was the first leadership lesson you learnt? The importance of bringing people with you (hence the link to Shackleton). Ministers have, however, faced criticism over their ventilator strategy. Overall, the government is spending more than £500m on procuring the machines, including purchases from existing suppliers, imports and the abortive attempts at novel devices. Penlon has received £123.2m in public funds and Smiths £18.5m, according to the Cabinet Office. So has the consortium delivered value for taxpayer money? With a hint of defensiveness, Mr Elsy insists that its supporting members participated “for the national interest”. “All they’re looking to do is to recover their costs”, which were assessed and validated by an independent auditor in “real-time”, he adds. Penlon made only a “modest” margin on production while Smiths did not profit, adds VentilatorChallengeUK. As shortages of personal protective equipment during the UK’s coronavirus outbreak have fuelled a debate about reshoring essential production, Mr Elsy hopes that VentilatorChallengeUK can serve as a template for industrial collaboration in other endeavours of national importance, such as decarbonising the economy. “Often companies put all sorts of controls and processes and management and authority levels that can get in the way of people doing the right thing,” he says.
Tuesday 28 July 2020
BUSINESS DAY
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Pandemic drives business schools to overhaul curricula Institutions are rushing to stay relevant as they adapt to meet the demand for new skills and insights in a post-Covid world Andrew Jack
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ndrea Galeotti, a professor at London Business School, did not realise what he had started when he began preparing a talk on coronavirus for his students this spring in response to growing interest in the pandemic. “There was a lot of confusion,” he recalls. “It was a mess in Italy, and the UK was not even talking about lockdown. I started to pull together information so people could make sense of it. I couldn’t stop, it was so interesting to learn about, and soon I had 40 slides. I was very surprised to see the reaction.” His presentation with his colleague Paolo Surico evolved into Leading Through a Pandemic, a range of free online materials which have been widely shared. They sparked discussions with governments to shift policy towards the use of real-time data to guide a more rapid economic recovery, and helped inspire an overhaul of the curriculum for the school’s autumn intake of students, including a course on the economics of the pandemic. Such efforts are not isolated. At Wharton business school, Mauro Guillén launched a course for academic credit in March on the impact on business of coronavirus, structured around interviews with nearly 50 alumni in senior positions. It was attended by a record 2,400 students from across the entire University of Pennsylvania and its partner institutions. It now offers a collection of resources online. Academics disagree on the extent to which the current crisis marks a radical turning point for capitalism, but business schools are rushing to adapt their research and overhaul their curricula to meet the demand for new skills and insights that the post-Covid world requires. Many are offering free advice to those beyond their own campuses, such as Harvard’s Resources to Lead Effectively Amid Covid-19. Geoff Garrett, the outgoing dean of Wharton who has just taken over as dean of the Marshall School of Business at the University of Southern California, says: “The best description of our age even before Covid was uncertainty. Now is a great time for business schools to demonstrate their relevance.” In the coming academic
Many institutions are offering advice on the coronavirus crisis. ‘Now is a great time for business schools to demonstrate their relevance’ © In Pictures/Getty
year, Prof Guillén, a specialist in international strategy, will teach a course on how different companies are adapting to the pandemic. “Students always want the most up-to-date material. They are expecting us to have material that’s relevant for what’s going on now,” he says. “We cannot teach the same stuff or we would be obsolete.” His case studies include Spotify, which he says has “taken advantage of the crisis to pivot its business model” by developing its own podcasts to boost revenues as the lockdown shifted existing patterns of use. Other professors cite fresh interest in economic sectors that coronavirus has brought to the fore, such as life sciences and healthcare management. Prashant Yadav at Insead, which has launched a series on navigating the turbulence of Covid-19, says: “I observe a much greater curiosity among students to learn about how vaccines are developed, how diagnosis works, how disease transmission occurs — the same sort of excitement as in the past for financial derivatives.” His own expertise is supply chains, where he sees the need for fresh discussion on “short” chains to reduce the risk of disruption. He has observed rising demand for case studies about drug supply scarcity, as well as www.businessday.ng
research on blending market mechanisms with public and philanthropic funding to support pandemic-related production and distribution. Jean-François Manzoni, president of IMD, whose Leading in Turbulent Times hub offers articles and webinars, also stresses the importance of supply chains in his school’s revised courses. “This crisis highlights that we need an equilibrium between efficiency and resilience,” he says. “The crisis in US slaughterhouses has shown the dependence on a very small number of high performance suppliers. We need to diversify sourcing.” A widespread theme among business schools is how to enhance management and leadership in the Covid era, including guidance on risk management. “What this crisis has highlighted is the importance of leaders and how they need to manage themselves,” says Prof Manzoni. “During a crisis, you realise that you are necessary and you have got to be at your best.” Coping with the adjustment to online working — and the broader applications and implications of technology — is another important theme, says Prof Guillén, while adding that teaching can draw on much existing knowledge. “There is the question of how
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you motivate employees doing remote work. People are very happy to stay at home at first but there is a lot of burnout,” he says. “We have 30 years of experience of virtual teams in multinational companies — about working apart, forming teams, and pulling together talent from different parts of the world.” A re-examination of teaching “hard skills” such as finance post-coronavirus is also taking place. Marwa Hammam, executive director of the Master in Finance programme at Cambridge’s Judge Business School, which offers free Covid-19 insights and opinions resources, says she has been integrating topical examples and stressing expertise in credit, distressed debt, financial restructuring and alternative finance in her courses. A final focus is the question of wider societal demands on business, reflected in specialist courses such as marketing and consumer behaviour, and more broadly in schools’ strategic approach. Dezsö Horváth, who is stepping down as dean after three decades as head of the Schulich School of Business in York, Canada, has overseen free webinars entitled Shaping the Post-Pandemic World. He argues that many of the issues raised by Covid-19 reflect a fundamental structural shift already under way since @Businessdayng
the 2008 financial crisis: a move away from a primary focus on shareholder returns towards broader responsibilities including climate change and diversity. “We’re going to have a very different world which is much more focused on tolerance and on life, not just work and money,” he says. Prof Surico at London Business School agrees. “We will move to a new economic model in which business and society are more open to trade-offs between efficiency and resilience,” he argues. “Businesses will have a formidable challenge in changing their model to understand consumer demand and the new role of government with a bit less capitalism and a bit more state economy.” Many academics remain cautious about whether Covid-19 will permanently change the world, but few doubt it is already forcing them to change their curricula. As Prof Guillén at Wharton argues, this crisis primarily represents an acceleration of existing trends. “It has put the restructuring of supply chains, remote work and ecommerce on steroids,” he says. “I don’t agree the world will be 100 per cent different but we will have to run much faster because those trends will be so accelerated.”
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Tuesday 28 July 2020
BUSINESS DAY
Media business Nigeria’s first tech PR forum calls for enabling environment to enhance tech adoption Daniel Obi
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he success of the first Tech PR conference organized recently by Phyllion and Partners underscored the statement that the future of technology transformation in Africa is hinged on key pillars of the tech ecosystem and communications sector. The objective of the virtual conference which had of 100 attendees was to ensure that the impact story of technology transformation is cascaded from top to bottom as it happens. The speakers called for enabling environment faster tech adoption. For an average of four hours, diversity of ideas, enlightening and insightful presentations and discussion set the pace for the marriage of technology and communication in enabling transformation in Africa. In his keynote address, Yomi Badejo-Okusanya, the Group Managing Director of CMC Connect Limited, and President, Africa Public Relations Association (APRA), affirmed that the relevance of technology has called for
Dufil Group brands clinch prizes at Pitcher Awards 2020
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HINI Africa, Cannes Lions official festival representative in Nigeria and organisers of the Pitcher Awards have named Indomie Instant noodles and Power Oil from Dufil Prima Foods Plc, as the 2020 winners of the prestigious Pitcher Awards Advertiser of the Year and the Public Relations and Reputation Management categories respectively. The 2020 edition of the festi-
val received entries from countries across Africa including Nigeria, Ghana, Senegal, South Africa, Kenya, Cape Verde, Tanzania, and Uganda. The Pitcher Awards was presented to the brand during an online ceremony held recently. The Awards ceremony was part of a series of events called “Pitcher Festival of Creativity,” including seminars, exhibitions and academy programmes designed to celebrate and promote creativity in Africa.
TopExec enters into partnership with Superlife to deepen marketing an enabling environment, to enhance the much-needed development envisaged in the private and public sector of Africa’s economies. In achieving this, he pointed out that all stakeholders must be actively engaged. He said, “Embracing technological transformation in our business goes beyond tools creating social media campaigns or keeping our software updated. It is following tech trends or embedding digital solutions in our business affairs. It is about perceiving what the future holds and being positioned digitally to be at the forefront of innovation.” Adrian Clews, the Chief Executive Officer of Hinckley Group, expressed delight with
the organizers of the conference, stating that technological transformation has been rapid on the African continent with various initiatives that have helped in boosting business productivity and human advancement. Harping on the role communication has to play in cascading the impact story of tech in Africa, Founder, Phyllion & Partners Temi Ophylia stated, “Technology enthusiasts need to begin to see PR as a vehicle.” She moved on to admonish key decision-makers to embrace future-based thinking and human-centered design in developing technology solutions for Africa. During the panel discussion, the six speakers, touched
on important points that offered insights into smart industry trends, had conversations around tech impact and growth areas within social & interpersonal relations, education, communication and business, and technology changes to expect from the new era and the immediate future. One of the speakers during the panel session, Ayeni Adekunle, CEO Black House Media Group, had said, “We need to use technology to transform the media in Nigeria.” Ayeni also called the older generation to action in his closing statement, “We owe the new generation an obligation to set the Agenda for what the African dream should be.”
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opExec Platform, a group of top Executives has formally launched into the business of Multilevel Marketing by its partnership with a dominant player in the industry; Superlife, BusinessDay has gathered. According to the Brand Ambassador of TopExec Platform, Curtis Adekunle, the group
whose philosophy is aimed at pushing quality brands beyond borders, opted for the partnership because Superlife offers in Nigeria the very best quality of Stem Cells therapy and TopExec Platform is poised to by its depth of professional expertise, network to work with the brand which has more prospects and converts across the globe.
APCON introduces new syllabus for professional examinations
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dvertising Practitioners Council of Nigeria, APCON says it has introduced a new syllabus for the Professional Diploma in Advertising (PDA) The syllabus which takes effect in December 2020, replaces
the one that has been in usesince2010. Accordingly, part 1 of the PDA examinations for the November/December 2020 diet will be based on the new syllabus, a statement signed by the APCON registrar Ijedi Iyoha said.
Foundation seeks N150m for reproductive intervention for 40 childless Nigerian couples Ibidunni Ighodalo Foundation, IIF recently launched Project 40by40, an initiative to grant 40 couples re-productive interventions through in vitro fertilisation. This is the wish of IIF founder, Ibidunni Ighodalo before she transited on 14th June, 2019. In this interview, the chairman of the foundation, Pastor Ituah Ighodalo, said the board is determined to ensure that Ibidunni’s last wish is fulfilled to put smiles in some families. He appealed to corporates and individuals for financial support to assist down-trodden childless couples who are going through emotional and psychological trauma. An IVF treatment costs about N3m –N4m. Excerpts What is Project 40by40 all about? his was the last wish of my wife and founder of Ibidunni Ighodalo Foundation to use her 40th birthday which supposed to come on July 19, 2020 to support 40 couples to have their own children through in vitro fertilisation process. The board is continuing with her wish. In 2016 she established IIF to support couples after she encountered other women who faced this procedure, the pain, the challenges and the emotions of sometimes failed procedures and the financial burden. She encouraged adoption but those who did not want to adopt are encouraged to go through the procedures. In 2016, the foundation took 12 couples with 40% success. My wife’s desire through this foundation was to ensure that she brought happiness and joy to many couples.
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What is the selection process for applications on the 40by40 project? Application is online from any part of the country. We don’t need to know anybody to apply for this grant. We are also going to use the online process to weed out those who are not qualified. Our criteria are well spelt out. The applicant must be legally married for at least 5 years with evidence of childlessness. The grant is for those who cannot afford the cost. This will be determined by the combined income of the couple. The couple must have the resources to look after the in-coming child. The couple must be responsible citizens. The wife must be below 50 years of age for medical and psychological reasons. After computer selection of those who are physically fit for the treatment, there may be ballot from the lot to choose the 40 couples. 36 couples will represent 36 states of Nigeria, one www.businessday.ng
Pastor Ituah Ighodalo
from FCT and three couples representing the three regions of Nigeria. This is to bring together parts of Nigeria, bring fruitfulness to Nigeria, and ensure united Nigeria. How do you want to raise the about N160 million for this project?
When she passed on, friends and associates decided to carry her wish out with intention to put smiles on faces of some families. This is therefore a call for support to members of the society to carry out this wish. Some have responded already. Class-
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mates and friends have supported. Each procedure costs about N3m –N4m. We believe God that this is achievable with support from Nigerians. What makes the foundation stand out from other foundations? I don’t know of other foundation that focuses on invitro fertilisation. I know some foundations do motherless babies home, mother and child counselling, scholarships but I am not aware of any that focuses on assisted re-production. The thinking is that assisted reproduction is for the rich, but my wife who had passion, love for the people and down-trodden decided that nobody should be denied the opportunity of good health facility just because they cannot afford it. For this initiative to be done in Nigeria by Nigerian is extremely a good development. As chairman of the board, what has been your level of @Businessdayng
involvement before now? I was playing advisory role and support and making my contact base available. My wife did most of the thinking and strategy but I helped to tick the boxes and to raise some needed money. But now she is no more, my involvement has to be much more until the foundation can stabilise. How would you describe the kind of person your wife was? People said my wife was an angel. Really, we can look back and describe her as an angel. I was told that her father actually called her an angel when she was born. An angel is a bringer of good news, helper of men, and communicator with God. An angel is a comforter and that is what my wife was. She had her fault but was quick to correct herself and she was extremely humble. My wife went out of her way to help people.
Tuesday 28 July 2020
BUSINESS DAY
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INTERVIEW All our discretionary portfolios have consistently outperformed their respective benchmarks - Head, Coronation Asset Management The Head of Research at Coronation Asset Management Limited, Guy Czartoryski, in this interview says the fund has grown its Assets under Management (AUM) to N57bn in 4 years which can be attributed to the value it delivers to clients. He also sees a recession developing in the economy at the moment. Bala Augie present the excepts. The coronavirus pandemic disrupted business activities across the country as government imposed lockdown measures. How did your firm cope during the period of confinement? nterestingly, we had envisaged four (4) possible scenarios for the Nigerian economy during our strategic planning session last year. One of the scenarios was titled “Macro-Economic Shock (Exceptional Case)”. We documented the possible impacts of the scenarios on our business. We also documented our strategic response to the scenarios. This built in agility and resilience into our business and operating model. Thus, when Covid-19 disruption occurred, we swiftly activated our Business Continuity Plan to ensure our services remained available and uninterrupted during the lockdown period. We ensured that our clients enjoyed the same level of customer experience prior to the lockdown period, notwithstanding the elimination of physical interactions. Kindly share with us some of the achievements of Coronation Asset Management Limited since it was established in 2015? We have won a couple of awards and recognition over the four (4) years of our business operations: We obtained our Asset Management licence from the Securities and Exchange Commission (SEC) in November 2016. Recently, we won the fastest growing fund management company in Nigeria award from Global Banking and Finance Review, 2020. We have grown our Assets under Management (AUM) to N57bn in 4 years which can be attributed to the value we deliver to our clients. As a result, our existing clients have increased the volumes of their investments with us. Also, our clients’ recommendations and referrals have been helpful in complementing our sales and marketing efforts. Another major achievement in the last 4 years is the development of our investment and portfolio management function. This is reflected in the performance of our funds and portfolios. We were recognized as the Best Fund Manager in Nigeria at International Finance Awards in 2018. Also, our Fixed Income Fund and Balanced Fund were ranked as 2nd highest yield/return in 2019. Moreover, despite the challenging macroeconomic and low interest rate environment in 2020, our funds and portfolios have performed relatively well. All our discretionary portfolios have consistently outperformed their respective benchmarks with some of the portfolios exceeding the benchmarks by over 11%. These results can be attributed to the implementation of International Best Practices in our investment management processes as well as the skills and experience of our portfolio managers who are supported by Cardano Netherlands (Cardano are risk and investment specialists
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Guy Czartoryski
and market leader in the provision of risk and investment services to private-sector and collective pension schemes in the United Kingdom and the Netherlands). In addition, we’ve been able to develop a Best-In-Class Research function. We combine our market-leading research and investment management expertise to create personalised multiasset portfolios and fund solutions for our clients. Our Research team is led by Guy Czartoryski who has over 25 years’ research experience in emerging markets, fixed income and equities with HSBC, UBS, Deutsche, etc. Our research publications have been commended by our clients, market analysts and the public. For example, one of our reports in 2019, titled “Power to the Price Point” had 20,000+ YouTube and 20,000+ Twitter views. Also, our recently published report on Nigerian Investments, titled “Navigating the Capital Market: The Investors’ Dilemma” has been much-admired by our clients and Analysts. Lastly, we have a dedicated team of expert wealth and institutional sales managers, with deep understanding of the local and global markets, supported by client care representatives and agile technology team to provide innovative solutions tailored to meet clients’ needs and aspirations. Do you agree with the international Monetary Fund and The World Bank that the COVID-19 crisis will tip Nigeria into a recession this? – Guy The International Monetary Fund and the World Bank have made quite accurate forecasts of the Nigerian economy in the past, in particular they both predicted growth at around 2.00% per annum after the recession of 2016, and they were proven right. This time they are working with a larger number of unpredictable factors, such www.businessday.ng
as the depth and the duration of the slump in oil prices and the recovery of global trade and capital flows. We think that they are essentially right to forecast a recession, for two reasons. The first is the dislocation to Nigerian economic activity caused during the first half of the year by the disruption to international trade routes and by the lockdown in Nigeria itself; the second is the slump in oil prices and the knock-on effect on foreign currency flows into Nigeria. Shortages of foreign currency flows cause multiple problems across different sectors. Do you see a U-shape economic recovery in 2020? - Guy We see a recession developing in the economy at the moment, and it is likely to be quite a deep recession. The last recession, four years ago, actually lasted for five successive quarters. So, if the Nigerian economy commences negative development in the second quarter of 2020, then it may not be over until early in 2021. The most likely shape to emerge is indeed a U-shape. That said, the authorities are doing everything in their power to soften the impact of recession, and the effects of these policies are likely to ameliorate the downturn. Which sectors of the economy will be hardest hit from the COVID-19 crisis? - Guy The COVID-19 crisis has some immediate effects, such as the disruption to international supply routes and the lock-down in Nigeria. However, the fall in oil prices is associated with the COVID-19 pandemic, because of the fall in global demand, and this is having further significant effects on the Nigerian economy. As well as the oil & gas sector, the trade sector is suffering from both trade disruptions and from lack of foreign exchange flows. And
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the manufacturing sector is producing as well below capacity for the similar reasons including shortages of certain raw materials. Those three sectors account for 35% of the Nigerian economy and they will be hardest hit, in our view. The rift between the Saudi Arabia and Russia contributed to the precipitous drop in crude oil price. Will risk premium be elated due to this systemic risk? – Guy The rift between Saudi Arabia and Russia showed that, when two of the largest oil producers begin to compete with each other, the results are spectacularly bad. However, their differences were essentially resolved in April, and since then there have been global production cuts. So, it is important to see the similarities between Russia and Saudi Arabia. Both want to regain market share lost to US shale producers and we believe that they are searching for a price at which Russian and Saudi Arabian output makes a meaningful contribution to their respective budgets but at least some US shale output is uneconomic. Where is that level? Russia and Saudi Arabia will only find out by testing the market. Some recent data from the US suggests that two million barrels per day of shale production has been lost, which implies a pick-up in Russian and Saudi Arabian market share. If you reference the Brent crude price then the critical price level might be somewhere between US$45.00 and US$55.00 per barrel. From Nigeria’s point of view, we would like the price to settle towards the upper end of that range because Nigeria’s public finances work well when oil is over US$50.00 per barrel. So, until prices reach these levels, it makes sense to talk of a risk premium. Will a unification of various exchange rates spur transparency and help bolster Foreign Direct Investment (FDI)? - Guy It is a remarkable thing that we have seen a high degree of exchange rate unification in under a year. The difference between the official purchase rate and the rate prevailing in the Nigerian Autonomous Foreign Exchange (NAFEX) market has almost disappeared. This is clearly appealing to our international counterparties such as the International Monetary Fund (IMF) and the World Bank (WB). At the same time, unification is not the same thing as convergence. So, we have seen the parallel market exchange rate move away from the NAFEX rate. This is a source of concern as it shows that a certain amount demand for US dollars is not satisfied in the NAFEX market. In other words, unification of the rates is good, but additional liquidity in the NAFEX market is required in order to prevent demand for US dollars reaching the parallel market. It is when we have both unification and strong foreign exchange liquidity that we are likely to see foreign direct investment returnin @Businessdayng
significant volume. Do you see more downward pressure on Treasury Bill (T-bill) and government bond rates as domestic funds rotate from high-yielding CBN OMO bills into government securities? -Guy The message we have been sending to our clients on rates, for months now, is ‘lower for longer’, precisely because of the redemption of OMO bills which is causing funds to flow into the Nigerian Treasury Bill market and into the bond market. As there are some significant OMO redemptions coming up, we would expect this trend to be sustained. Rates have come down a long way already and we see the pressure being sustained for a few more months. With yields on short term government securities crashing on the back of the new policy by the central bank, will Pension Fund Administrators (PFAs) increase their exposure to domestic ordinary shares? - Guy This is precisely the issue addressed in our recent publication ‘Navigating the Capital Market, the Investors’ Dilemma’. This report is a tenyear review of Nigerian investment returns and it shows that, for a long time, Pension Fund Administrators were able to get a positive inflationadjusted returns in the Treasury Bill and bond markets. So, they did not have to study risk-adjusted returns very much during this period. Now they do, and in our report we set out the benchmarks that they need to use. It is clear that not just Pension Fund Administrators, but all institutional fund managers, and individual investors, need to reacquaint themselves with risk management. There are many instruments they can use to enhance their yield and returns, among them credit solutions and equities. But guiding the optimum path through the equity markets is a difficult task, requiring experience and a very disciplined approach. We plan more publications on these topics over the coming weeks and months. The Monetary Policy Committee of the Central Bank of Nigeria (CBN) has kept interest rates unchanged. Will the apex bank continue with the hold policy throughout 2020? – Guy The Monetary Policy Committee historically has balanced three different factors: growth in the economy; targeting inflation; and targeting the exchange rate. Understandably, and given the impact of COVI-19 on the economy, the Monetary Policy Committee is principally concerned with growth during 2020. We do not see any reversal in this policy at least until the end of the fourth quarter of this year. At this point it is possible that it will return to its other two objectives, namely inflation and the exchange rate. But the development of policy partly depends on extraneous factors, notably global growth and commodity prices. So everyone will continue to monitor these factors closely.
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Tuesday 28 July 2020
BUSINESS DAY
Investments
ENERGY INTELLIGENCE
Market Insight Companies Commodity Tracker Policy
OIL
GAS
PETROCHEMICALS
POWER
Marginal field bidders get pre-qualification notices, value still uncertain ISAAC ANYAOGU
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he Department of Petroleum Resources (DPR) has issued invitation letters to companies that were successful in their application to be prequalified for the ongoing bid rounds on 57marginal fields in Nigeria, but it is uncertain if it will yield similar value as it did in 2003. “ You’re to note that payment of Application and Processing fees (per field) of two million naira (N2million) and Three Million naira (N3million) respectively is required to proceed in the MFBR process,” said the copy of the letter issued by the DPR to the successful bidders. “Upon confirmation of the minimum payment for one field (that is N5million) by DPR, your com-
pany will be granted access to the list of marginal fields on offer and the respective leaders (basic field information)” The letter also said, “Kindly be reminded of the additional qualifications for Data Prying, leasing and Competent Persons Report and Special Field Report as contained in the MFBR Guidelines.”
Three weeks ago, Auwalu Sarki, director of the DPR had said over 600 companies have applied to be pre-qualified for the bid rounds, the first in almost 20 years. It is not expected that they would all be successful. Sarki said Nigeria’s last bid round for the marginal fields was in 2003, and also revealed that the bidding
exercise has garnered a lot of interest due to the transparent process but it may not be as profitable the earlier one. The process is challenged by the Coronavirus that has caused the decline of oil demand and the consequent crash in prices. “The implication is that the government may not earn as much it wanted
but it seems it is better than nothing,” Ayodele Oni, energy lawyer and partner at Bloomfield Law firm had told BusinessDay. Even then local investors could face serious challenges raising funds due to low oil prices and the gradual shift from oil to other energy forms. “Unarguably, these are tough times in the global petroleum industry and that might cause funding apathy for Nigerian marginal fields,” Chijioke Mama, an energy analyst told BusinessDay. This could return the same result from previous marginal field bid r o u n d s w h e r e s e v e ral fields sold to investors were abandoned unless creative financing solutions are implemented said Mama. N i g e r i a ’s m a r g i n al fields account for less than five percent of total
output. An investor’s guide to Marginal Oil field acquisition prepared by the government says Nigeria has an estimated 2.3 billion barrels of crude oil reserves in over 183 fields classified as marginal however despite this potentials, marginal fields still contribute poorly to Nigeria’s total production. Data from the DPR indicates that only 9 marginal fields are currently producing from the 30 fields awarded during the last bid rounds. There is no telling if the new ones that would be awarded at this time will succeed. Marginal fields are discoveries made by oil majors that were undeveloped either because of distance from the existing production facility, low reserves (in view of the majors), or likely low production volumes as a result of flow assurance issues.
United Capital highlights five EXPLAINER: NNPC has aimed ethanol, how big is the market? issues shaping energy in H2 2020 L STEPHEN ONYEKWELU
DIPO OLADEHINDE
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or analysts at United Capital, issues such as ongoing marginal field bid round, long-awaited passage of the Petroleum Industry Bill, policy backflip in downstream sector, margins of major industry players and readiness of Dangote refinery are going to be major talking points in the second half of 2020. In its outlook for the second half of 2020,canalysts at the Lagos-based investment bank said although the current challenges in the oil market are significant, however they expect domestic players to bid with a forward-looking perspective, and position for production when the oil market fully recovers. Nigeria’s federal government launched its long-awaited marginal field bid round on June 1, with 57 fields said to be available for indigenous companies and investors, a welcome development but one that faces serious challenges. “Our concern remains how potential output from
these marginal fields will be accounted for, amid an expectation for sustained OPEC+ supply cuts beyond 2020,” United Capital said. Nigeria’s obligation to OPEC’s + quota has come under questioning in recent times as following an oil production of 1.59 million bpd instead of 1.41million bpd in the month of May. The country is required to compensate for the excess production, and future non-compliance will be followed by deeper supply cuts. As such, the Nigeria National Petroleum Corporation (NNPC) is expected to allocate different levels of cuts to partners (mostly JV), while some producers have already willingly shut down operations due to higher production costs. “We expect H2-2020 to be a period of achieving reduced costs, production efficiency and conserving cash in the upstream sector,” United Capital said. For the rest of the year, United Capital acknowledged that the global crude oil market is on a better balance of supply
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and demand; however the return to pre-pandemic profitability for Nigeria’s oil and gas players remains bleak. Another bone of contention going into H2-2020 is the long-awaited passage of the Petroleum Industry Bill or at least the Petroleum Industry Governance Bill, United Capital said the little or no traction seen on the passage of the PIGB means that 2020 might end with the current regulatory environment being maintained. For the downstream segment, despite the reactivation of the monthly market-based price regime, United Capital expressed concern around policy backflip which is quite common in Nigeria. “The possibility of the FG backtracking the market-based price regime once oil prices start tracking higher and pressure on consumer wallets begin to mount remains in the offing,” United Capital said. United Capital expects margins of major industry players such as TOTAL, ARDOVA and MOBIL to remain constrained, as the NNPC remains the sole importer of PMS in H2-2020.
ast Thursday, Mohammad Ka’oje, chairman of Kebbi State government committee on biofuels stated that the Nigerian National Petroleum Corporation (NNPC) has cultivated 2,675 hectares of cassava farm to be processed into bioethanol in the state. Ka’oje said the scheme is a partnership between Kebbi State and NNPC which was jointly financed to the tune of N500 million each, and 5,000 hectares of land was acquired for biofuel production. Ethanol is a biofuel processed from starchy crops such as maize and cassava. In 2017, NNPC signed a Memorandum of Understanding with Kebbi State to cultivate 20,000 hectares of cassava and sugarcane in the Kanya district of Zuru emirate of Kebbi for biofuel production. “So far, 2,675 hectares have been cultivated and fully established. This is to generate seedlings and raw material for a test run of the machinery,” Ka’oje said. Uses of bioethanol Ethanol is a flammable colourless liquid. When used as an alternative fuel, ethanol is referred to simply as bioethanol. Bioethanol is frequently used as motor fuel or as an additive in premium motor spirit (petrol) and is an option for more renewable energy. Exhaust gases of ethanol are much cleaner; it burns
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more cleanly (more complete combustion) Nigeria’s ethanol market The U.S. Grains Council recently conducted a market assessment mission to Nigeria and Ghana gauging the potential for U.S. ethanol exports to these countries. “The mission identified a need for higher ethanol volumes and engaged government and industry directly on enforceable biofuels policy as well as demonstrated the United States’ role as a costcompetitive supplier in the global market,” said Brian Healy, USGC manager of ethanol export market development, who was on the mission with Lucas Szabo, USGC manager of ethanol export programmes, and Jad Wakileh, USGC ethanol consultant. In 2018 Nigeria was the thirteenth largest market for U.S. ethanol exports, totalling 22.5 million gallons, that is, 85 million litres (67.3 metric tons in corn equivalent). Nigeria has had an ethanol policy on the books for a decade, but it is not currently in effect due to shortages in domestic production and sensitivities around certain feedstocks as staple crops. The European Union, like the Persian Gulf for East African markets, has emerged as an important trans-shipment point for U.S. ethanol to West African markets. Total EU purchases of U.S. ethanol in 2018 stood at 110 million gallons (329 metric tons in corn @Businessdayng
equivalent), up 266 percent over the previous marketing year. “There is a very huge demand for ethanol and it is being met by importation. Importation of ethanol from Britain and other countries in Europe, which are made from sugarcane and corns, is sometimes cheaper than locally produced one from cassava,” Rajavelu Rajasekar, a director of Allied-Atlantic Distilleries, near Agbara, Ogun State said in an interview last year. Opportunity costs of Nigeria’s ethanol imports Despite being the world’s largest producer of cassava, Nigeria is still unable to unlock opportunities in the ethanol and bioethanol markets. Local production of ethanol meets only 6 percent of local demand according to Rajasekar. T h e Ni g e r i a Ca s s av a Growers Association (NCGA) has estimated that cassava can generate N10 trillion and save Nigeria over N1.2 trillion from import of derivatives such as ethanol, starch and sweetener. Segun Adewunmi, president NCGA said in an interview that Nigeria uses about 400 million litres of ethanol sold at N400 per litre. This means in a year, the country imports ethanol worth N160 billion. The NNPC is probably at the verge of unlocking a mine of opportunities with its bioethanol ambition, since there is at least 90 percent of local demand gap for ethanol.
Tuesday 28 July 2020
BUSINESS DAY
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Tuesday 28 July 2020
BUSINESS DAY
FT
FINANCIAL TIMES
World Business Newspaper
China’s economy shrinks for first time in four decades First-quarter GDP falls 6.8% year on year in wake of coronavirus outbreak Thomas Hale, Xinning Liu and Yuan Yang
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hina’s economy shrank at the start of the year for the first time in more than 40 years after the coronavirus pandemic ended an era of uninterrupted growth dating back to the 1970s. Gross domestic product in the first quarter plunged 6.8 per cent year on year, the National Bureau of Statistics said on Friday. The Chinese government only began reporting quarterly economic growth estimates in 1992 but the last time it officially acknowledged a yearon-year fall in output was for 1976. The contraction in China, the engine of global growth for the past two decades, is the starkest economic sign of the damage caused by the pandemic that started in Wuhan but has wreaked havoc around the world. The official data comes in the same week that the IMF warned of the worst global economic outlook since the Great Depression, with output losses this year expected to far exceed those that followed the financial crisis of 2008. Fixed asset investment in the first quarter fell 16 per cent compared to last year, while total retail sales of consumer goods fell by 16 per cent in March. Mao Shengyong, spokesperson at the statistics bureau, pointed to “short-term economic costs” but downplayed the long-term impact
Chinese officials have reopened factories and shops in cities including Wuhan, where the coronavirus outbreak started, in a bid to kick-start the economy © Getty Images
of coronavirus. Editor’s note The Financial Times is making key coronavirus coverage free to read to help everyone stay informed. Find the latest here. “We cannot say that the fundamentals of China’s long-term economic progress have changed because of a short-term shock,” he said, adding that average annual growth over the next two years was forecast to be about 5 per cent. Mr Mao added that the coun-
try had “basically achieved” its decades-long target of becoming “moderately prosperous” by 2020. But, he warned in a rare admission of falling short, “the biggest weakness is poverty alleviation”. Stocks across the Asia-Pacific region were up despite the negative economic data, with investors encouraged by signs that some countries were reopening. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks closed 1 per cent higher and Hong Kong’s Hang
Seng index finished up 1.6 per cent. China’s economy, the world’s second largest, was already under pressure before coronavirus hit. Last year, it expanded by 6.1 per cent, its lowest level in almost three decades. The data published on Friday indicate that growth for the full year is now expected to come in at a far lower level, jeopardising the government’s 2010 pledge that it would double the size of the economy by the end of this year. The decline was also worse than
analysts’ expectations, with a Reuters poll of economists forecasting that GDP would shrink by 6.5 per cent year on year. The GDP fall will put pressure on the country’s leadership to provide further stimulus to avoid a second quarter decline that would plunge China into a full-blown recession. The government has already taken measures to support companies by pumping liquidity into the banking system to boost lending to struggling businesses and by introducing tax breaks of Rmb1.6tn ($226bn). The urban unemployment rate had reached a record high of 6.2 per cent by late February, up from 5.3 per cent in January. The government typically sets an urban job creation target of at least 10m a year. “Despite the dim GDP numbers, economic activities have been on track for normalisation since early March,” said Chaoping Zhu, global market strategist at JPMorgan Asset Management. “China hasn’t seen such a deep contraction for a long, long time,” said Iris Pang, ING chief economist for Greater China, adding that for some economies “the damage will be even worse”. This month, the government eased travel restrictions on Wuhan. Key economic indicators, such as traffic levels in major cities and factory activity, have also shown signs of recovery as the country attempts to return to work.
Pandemic crisis: Global economic recovery tracker Alternative indicators give an early picture of whether the global economy is returning to pre-crisis levels FT reporters
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he world is slowly emerging from the coronavirus pandemic that has resulted in the most severe global economic contraction since at least the 1930s. Where lockdowns have eased and the virus is under control, economic activity is starting to recover — but because there is a lag of weeks to months between when official economic data is produced and the period of time it covers, it is out of date before it is published. The FT will be tracking the most relevant alternative indicators to provide a first snapshot of changes in activity as they happen across key sectors and countries. EMPLOYMENT Official unemployment figures suffer from a lack of international comparability. However, other information can help shed light on the impact of the crisis — which has caused millions to lose their jobs or rely on government furlough schemes — on the employment market. Job postings data from Indeed. com suggest that a labour market recovery has barely started. Countries, such as the US, which did not rely on furlough schemes to keep
employees attached to their former companies, have seen both more unemployment and a bigger uptick in job postings. CONSUMER SPENDING Household spending makes up the largest part of the economy in most countries, and the recovery largely depends on consumers regaining the confidence to increase spending from ultra-low levels. Google Mobility data — which tracks footfall traffic — from retail and entertainment hubs is considered a proxy for consumer spending. It shows that people have returned to spending venues, but with large variations between countries. www.businessday.ng
Retail footfall, which tracks the number of visits to shops, tells a different story. Consumers have been slower to return even as businesses have opened their doors. However, retail spending is a small share of total household spending, and during the Covid-19 pandemic some consumers have preferred to purchase goods, such as groceries, instead of services, such as restaurant meals. Therefore, even a full recovery in terms of overall spending will not indicate a return to regular retail spending patterns. Consumers around the world are slowly returning to cinemas, which, like a large part of the entertainment
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sector and other indoor venues, have been hard hit by the pandemic. POLLUTION The pandemic has disrupted factories, supply chains and demand for goods. The resulting hit to industrial production has been heavy. Pollution, a measure largely associated with industrial emissions, has dropped during the lockdowns but it is beginning to rise again as economies reopen. TRAVEL AND TOURISM Tourism was one of the sectors most impacted by the strict lockdowns and travel bans in March and April. Global arrivals are set to shrink by between 58 and 78 per cent year on year in 2020, according the UN World Trade Tourism Organization. The body estimates 100 million to 120 million direct tourism jobs are at risk. As lockdowns ease and borders begin to reopen across Asia and Europe, flight and hotel occupancy data shows that international mobility is slowly resuming, but levels remain largely depressed. Worldwide, reservations remain well below last year’s levels but some countries are starting to bounce back, especially in European Mediterranean countries. CHINA’S RECOVERY China’s economy was the first @Businessdayng
to experience severe disruption due to the coronavirus outbreak, which originated in Hubei province, and has been the first to begin to recover. As the world’s secondlargest economy with links to supply chains around the globe, the pace of recovery in China is enormously important for the global economy. The FT has constructed its own measure of the slowdown and recovery. Official figures lag behind activity, since they are mostly monthly, and China’s data is sometimes viewed as open to political manipulation. After showing steady improvement since the trough in February, the index indicates China’s recovery has fallen back in recent weeks. Using Wind’s financial database, the FT has compiled a weighted index of six daily, industry-based data series. The measures of the domestic economy include real-estate floor space sales, traffic congestion within cities and coal consumption in large power plants. Trade activity is represented by container freight. Two other indices, which have been given a lesser weighting, provide social and environmental context: box office numbers from Chinese cinemas — a good proxy for consumer activity — and air pollution in the 10 largest cities.
Tuesday 28 July 2020
BUSINESS DAY
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FINANCIAL TIMES
COMPANIES & MARKETS
@ FINANCIAL TIMES LIMITED
Dollar sinks to two-year low on concern over US virus toll
Euro jumps as investors doubt speedy recovery for the world’s largest economy Harry Dempsey, Bryce Elder, Colby Smith and Hudson
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he dollar weakened to a two-year low on Monday as sharp increases in US coronavirus cases and flare-ups around the world weighed on investor confidence. The dollar index, which measures the currency against a basket of peers, slipped 0.9 per cent to its lowest level since May 2018, as the continuing spread of Covid-19 in the US threatens to dampen the economic recovery. The poor performance of the US currency — on track for its worst month since April 2011, according to Refinitiv — has supported a rally in gold prices to an all-time high. The precious metal rose as much as 2.4 per cent to $1,945.16 per troy ounce. “The thing that’s changed in the last few days is that it’s not just gold that has gone up against the dollar, but almost everything,” said Kit Juckes, foreign exchange strategist at Société Générale. “That’s partly driven by a sense that the US is having a harder time controlling the virus than others, which will see the US economy underperform,” Mr Juckes added. The Japanese yen strengthened 0.8 per cent to a four-month high of ¥106.18 per dollar. The pound rose as much as 0.7 per cent to $1.2901 and the euro gained 0.9 per cent to $1.1781, breaking
A cyclist wearing a mask on Michigan Avenue in Chicago, Illinois. The continuing spread of Covid-19 in the country threatens to dampen the economic recovery © Olivia Obineme/Bloomberg
above $1.17 for the first time since September 2018. Equity indices held steady. The S&P 500 had edged higher by 0.2 per cent by lunchtime on Monday after falling in the previous two sessions, while the technologyheavy Nasdaq gained 0.5 per cent. The dollar’s weakness came ahead of Republicans unveiling their proposals for a new round of stimulus later on Monday. Existing benefits, passed at the start of the coronavirus crisis in March, are due to expire at the end of the month and economists fear the withdrawal or reduction of stimulus at
a fraught moment for the world’s biggest economy. Florida over the weekend joined California in overtaking New York, an early centre of the outbreak, in terms of numbers of Covid cases. Investors are also looking ahead to a meeting of the US Federal Reserve’s rate-setters on Wednesday. The central bank has committed to keeping interest rates at zero for the foreseeable future, but some in the market believe it could soon adopt more unconventional measures — including more explicit guidance on the future path of the federal funds rate, or yield curve
control, in which policymakers set targets for certain Treasury yields. Taken together, these additional measures would be likely to add further downward pressure on the dollar, strategists said. “The flare-up of the virus means more stimulus, lower interest rates for longer and therefore less demand for the dollar,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. Separately, tension between the US and China was heightened at the weekend by the arrest of a Chinese researcher who US authorities said had been hiding
in the country’s San Francisco consulate. Qi Gao, a currency strategist at Scotiabank, said tit-for-tat closures of consulates in Houston and Chengdu last week had stoked tension to the point that it had weighed on the US currency. “In the coming weeks you’ll see the dollar weakening further,” he added. Coronavirus business update How is coronavirus taking its toll on markets, business, and our everyday lives and workplaces? Stay briefed with our coronavirus newsletter. Sign up here European equity markets ended slightly lower on Monday, weighed down by significant losses for airlines after the UK warned on travel to Spain. The regional Stoxx 600 benchmark and London’s FTSE 100 both closed down 0.3 per cent. “This weekend we perhaps got a glimpse of how challenging life will be this winter without a vaccine,” said Deutsche Bank strategist Jim Reid. Spain has faced a sharp uptick in cases across three of its regions, and Germany also reported an increase. The situation has continued to deteriorate across Latin America while Hong Kong and the Australian state of Victoria have also had significant increases in infections. Asian equity markets were mixed. China’s CSI 300 index of Shanghai and Shenzhen-listed stocks added 0.5 per cent while Hong Kong’s Hang Seng slipped 0.4 per cent.
Gold price hits record high as investors’ Covid-19 fears escalate
Precious metal passes its nominal 2011 peak, helped by extraordinary monetary policy Neil Hume, Hudson Lockett and Harry Dempsey
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old raced to a record high on Monday as the US’s deepening Covid-19 crisis sent the US dollar tumbling further and encouraged anxious investors to choose the precious metal as the place to park their cash. The price of the metal, used by investors as a store of value in times of stress, climbed as much as 2.4 per cent in intraday trading on Monday to a record $1,945.16 a troy ounce, blasting past its previous nominal high of $1,921 set in September 2011. Gold has rallied by more than a quarter this year, making it one of the best-performing mainstream assets, as investors brace for the economic fallout of Covid-19 and seek to minimise the effects of sweeping central bank interventions on their portfolios. “I think it is the story of the year in financial markets,” said
Gold has rallied as doubts deepen over the prospects for a smooth economic recovery in the US © Bloomberg
Peter Grosskopf, chief executive officer at Sprott, a precious metals specialist with $12bn under management. “Gold has finally come on to Main Street as an asset people actually need to have.” Investors have stashed a net $7.4bn of cash into gold-backed exchange traded funds this month, according to data from the World Gold Council — addwww.businessday.ng
ing to the record $40bn they invested in the first half of the year. “There is no doubt that global demand from investors is currently the major force driving prices up,” said Hans-Günter Ritter, head of trading at Heraeus Precious Metals. Global policymakers have launched huge fiscal and monetary stimulus measures this
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year to dull the economic blow caused by coronavirus. That has driven down yields on safe government bonds — with some US Treasuries paying investors a negative return, once inflation expectations are taken into account — and flattered gold, which offers no income. Gold has marched relentlessly higher in recent sessions as doubts have grown over the global recovery from Covid-19. The pandemic continues to rip through the US, while flare-ups in Europe have caused some countries to reimpose travel restrictions. The dollar lost ground against a range of currencies on Monday, falling to its lowest level since June 2018. A weaker greenback makes buying gold cheaper for holders of other currencies. Joni Teves, precious metals analyst at UBS, said she expected the metal to push towards $2,000 per ounce in the next six to 12 months as investors try to protect their portfolios against further falls in real interest rates. @Businessdayng
However, she added, strong economic data could yet keep the rally in check over the next few months. The metal is some way off its inflation-adjusted peak, analysts pointed out. Fahad Kamal, chief market strategist at Kleinwort Hambros, said that “when you factor in inflation, the all-time high of gold is about $2,500 . . . when Soviet tanks rolled into Afghanistan in 1979.” Some analysts think a shortage of physical gold could push prices yet higher, as wealthy investors who have piled into gold futures opt to take delivery of the physical, rather than rolling contracts over. This could create problems for the swap dealers, which are the other side of the trade and are also big bullion banks. “If too many gold future holders decide to take delivery of physical gold at the same time . . . then it’s likely the swap dealers won’t be able to satisfy all those demands,” said Longview Economics, a research provider.
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Tuesday 28 July 2020
BUSINESS DAY
news
Indigenous firm targets 50,000 metric tons p/m production of bitumen in Ondo KORETIMI AKINTUNDE, Akure
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n indigenous firm, South West Bitumen Limited (SWB) has commenced modular exploitation of Africa’s largest bitumen deposits in the southern part of Ondo State The firm, which has secured a 25-year renewable operational mining license for the exploitation of the mineral deposit, has already deployed initial processing and mining equipment to the operational base which is located at Lamidifa in Irele local government area of the state. Taking reporters through the yard at the weekend, the representative of Southwest Bitumen, Adeiya Oluwatominiyi said earth moving equipment like bulldozers, excavator and wheel loaders have been brought for the mining of the bitumen. He described the process as a modular one likened to a pilot one. He disclosed that unlike exploitation of petroleum, the bitumen in the state is in Tar Sand which can be excavated from the top soil and taken to the yard for processing. Oluwatominiyi explained that the processing equipment is German-made and done with exact requirement for the exploitation of the particular type of bitumen in
the state. “We have brought the earth moving equipment like the bulldozer, excavator, and the wheel loaders. We use of bulldozer for the clearing of the identified outcrop after which we take the excavator to extract the tar sand and stockpile them in the yard for processing. “The type of bitumen we have is tar sand. After we must have deployed the bulldozer, the excavator will load the tipper and bring it here for processing. This is where we will be doing the processing. “This is a pilot case. It is modular exploitation. What we have in Nigeria is tar sand bitumen. Not like in petroleum when you are tapping from it to get bitumen. We are not getting it from the cracking of anything. What we need to do is to heat it with the required technology,” Oluwatominiyi said. The company according to its mining engineer, Wilfred Akinyeke, would gradually have its production capacity move from 20,000 metric tonnes to 50,000 metric tonnes monthly. Commissioner for information and orientation, Donald Ojogo said the Governor Rotimi Akeredolu-administration has been pursuing the exploitation of the bitumen and the establishment of the deep seaport.
GMYT announces scholarships to empower women, youths BUNMI BAILEY
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xecutive director of GMYT Fashion Academy/ CEO of GMYT Afr ican Humanitar ian Awards, Kelechi Oghene, has announced over a dozen scholarships into the prestigious fashion academy in a bid to empower women and youths. Kelechi who has trained over 500 women and youths to be fashion designers, announced the scholarships on the occasion of her birthday. “To celebrate my birthday, we are giving out 20 scholarships because now more than ever, we need to adopt the habit of giving back to the society so that the world we live in can become a better place.” T h e G M Y T Fa s h i o n Academy which would train the score of women and young Nigerians for free, metamorphos e d from a boutique Kelechi established 15 years ago. The brand is a globally recognised fashion academy known for creating solutions for women, girls and youth through skill acquisition in fashion. The academy has trained over 500 women and youths; put them in line for business, and as a result, received numerous awards
including 2018 Outstanding Leadership Award of Excellence for Outstanding Fashion School of The Year. Kelechi said her greatest ambition is keeping with her commitment to eradicating poverty by training and empowering women with the necessary skillset to thrive and become financially independent thereby reducing the violence women suffer like domestic abuse, rape and other vices. “I took it upon myself together with my team to reduce the suffering in our society by conducting free entrepreneurial sessions, seminars, workshops and scholarships for women and youth’s worth over 200 million naira,” she said. Kelechi has organised the SME’s scheme to support and encourage women and youths with brilliant ideas and so far, has given millions of naira to support them. “This is my vision, to create millions of entrepreneurs who will become great ambassadors and tomorrow’s leaders as I have always preached and done over the years,” said Kelechi. “And so, you will agree with me from the ongoing pandemic that we need it now more than ever.” www.businessday.ng
L-R: Chris Ogbechie, non-executive director; Yemisi Ayeni, chairperson; Olakunle Alake, non-executive director, and Paul Farrer, managing director, all of NASCON Allied Industries plc, at the Annual General Meeting of the company, in Lagos, yesterday.
COVID-19: Oyo gives tax reliefs to businesses, individuals REMI FEYISIPO, Ibadan
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o further cushion the effects of the Covid-19 pandemic, Oyo State government on Monday, announced relief packages for business organisations and individual tax payers in the state. The relief packages include extension of deadline for the filing of annual returns by individual taxpayers, including self-employed persons for five months- April 1 to August 31, 2020, extension of deadline for filing of annual returns of employees by employers of labour, for six months- March 1 to August 31, 2020. Also in the package are waivers of penalties and interests for employers in the primary sector of the economy (agriculture, fishing, transportation and mining) who file tax returns on or before August 31, 2020, and
50 percent reduction in penalties and interests for employers in the secondary sector of the economy- food processing, beverages, sachet and bottle water producers, who file tax returns on or before August 31, 2020. Commissioner for finance, Akinola Ojo who announced the reliefsatapressconference,saidthat thestategovernmentalsoapproved 75 percent reduction in penalties and interests for employers in the servicesector,whichincludehotels, educationalinstitutions,touristcentres that file tax returns on or before August 31, 2020. Ojo said tax agents were allowed to remit the Pay As You Earn (PAYE) tax to the extent of the staff strength that were paid in each month that Covid-19 has affected them. At the conference witnessed by captains of industries and representatives of corporate and professional bodies at the state House of Assembly, Ibadan, the
Buhari appoints new deputy commissioners of insurance Modestus Anaesoronye
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r e s i d e n t Mu h a m madu Buhari has a p p rov e d t h e a p pointments of Sabiu Bello Abubakar and Oba Olufemi Oluniyi as deputy Commissioners for Insurance, National Insurance Commission (NAICOM). Abubakar is the deputy commissioner, technical while Oba will serve as the deputy commissioner in charge of finance and administration. Both appointments are effective July 17, 2020 for an initial tenure of five years. Abubakar until his appointment was executive director, operations and training at Jaiz Takaful Insurance Plc. He is a fellow of both Chartered Insurance Institute of Nigeria (CIIN) and Chartered Insurance Institute of London as well as associate member of Nigeria Insti-
tute of Management (AMNIM). He graduated from Usmanu Danfodiyo University, Sokoto with Bachelor degree in Education and has a Master’s degree in Business Administration (MBA) in finance from the Bayero University Kano. Abubakar has verse experience in insurance regulation, oil and energy insurance, Reinsurance and Insurance product development and design. At NAICOM he was head Market Development and chaired many Committees such as Insurance of Government Strategic Assets Committee and contributed in development of many regulatory guidelines and policies. He is a professional manager and has proven records on management. Oba until this appointment was director in charge of finance and accounts at NAICOM.
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commissioner also announced a 25 percent reduction in undisputed bill or assessment served or to be served by means of harmonised billing system of Oyo State government to any business that intended to pay its bill on or before September 30, 2020. There is also 25 percent reduction in signage motor sticker of Oyo State Signage and Advertisement Agency. He said tax agents or their consultants who, because of interstate restriction, could not attend tax audit reconciliation meeting with the state internal revenue service were allowed to choose virtual meetings or seek postponement. Other reductions, he noted, were as contained in the Home Owners’ Charter land programme of the state, which enables home owners across the state without official documents for their land to apply and be granted a Certificate of
Occupancy (C of O) within 60 days of application with less than 20 percent of regular charges and levies. “Having critically studied the effects of the coronavirus on the formal and informal sectors of our economy, we have recommended some measures which we believe would be of significant benefit to the people and businesses in Oyo State. “All the relevant ministries, departments and agencies (MDAs) of Oyo State government have been duly informed of the implementation of the tax compliance incentives as listed and approved by the state governor. “We therefore implore all tax taxpayers and businesses to take advantage of these tax reliefs by voluntarily attending to their civic responsibilities and paying all taxes, rates, fees, levies and charges due to the government in any of the revenue collecting banks,” he urged.
Eid-el-Kabir: Scholar urges parents to protect children from exposure to violent extremists
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n Islamic scholar, Johnson Eghwrudjakpor has tasked Muslim parents to protect their children from the deadly exposure to violent extremists who manipulate and exploit children for their own evil agenda. Eghwrudjakpor also urged Muslims to practice peace which is a cardinal teaching of Islamic, as the Eid-el-Kabir celebration approaches. The scholar also urged the Islamic faithful to be “mirror through which others see the good virtues of the Muslim faith.’’ He said Islam was a religion of peace that upholds the values of tolerance and mutual coexistence without a place for hatred and violence. He further said that the greatest commitment to Islam was for Muslims to put its good virtues into practice, and by making justice and righteousness the guiding principle of their everyday life. According to Eghwrudjakpor, “Islam is a religion of peace. Muslims, therefore, should avoid violent extremist ideas that give Islam a wrong name @Businessdayng
because our conduct leave more lasting positive impressions than what we say by word of mouth.’’ He urged them to use the period to build a relationship of friendship and harmony with fellow citizens. The scholar prayed to Allah for the continued peace, progress, and the wellbeing of the country. He urged all Muslims in the forthcoming Eid-el Kabir to build a relationship of friendship and harmony, and importantly, practice the teachings of Qu’ran. He emphatically condemn women and youths who have refused to embrace the religion of their husbands/fathers. He urged muslims faithfuls and parents not to tolerate any such thought from their ward/children/wives. In the same vein, he also seize the opportunity to wish President Muhammadu Buhari, Inspector General Police (Idris Adamu), CP Delta State, Speaker of the House Delta State House of Assembly, Chief Imam FCT Abuja, the Chief Imam of Delta State chapter, and, Governor of Delta State, (Emmanuel Okowa).
Tuesday 28 July 2020
BUSINESS DAY
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POLITICS & POLICY Dangerous signs ahead of Edo gubernatorial election Zebulon agomuo
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igns that the off-season gubernatorial election slated for September 19 in Edo State may be attended by violence manifested last Saturday, July 25, 2020. Reports had it that there were some violent altercations between the supporters of the People’s Democratic Party (PDP) and those of the All Progressives Congress (APC) near the palace of the Oba of Benin, Omo N’Oba N’Edo Uku Akpolokpolo, Oba Ewuare II, when PDP governors, led by the Chairman of the PDP Campaign Council, Governor Nyesom Wike, who were in the state to flag off the campaign of its candidate, Governor Godwin Obaseki, visited the Oba. The opposing groups were said to have poured invectives on the parties and their candidates. Reports also had it that some of them sustained injuries and a few were also arrested by the police. Since Saturday, the PDP and APC have been treading verbal tackles over who caused the shouting match. The standoff has further heightened apprehension in the state and raised the likelihood of a bloody poll. Observers say that the Saturday’s event should send a signal to the relevant agencies involved in the conduct of the election in Edo on what they need to do to checkmate the looming violence, of the dimension that took place in Kogi State during the November 16 gubernatorial election. Analysts are of the opinion that the circumstances surrounding the election should make it more compelling for the security agencies to be on their guard to keep the peace before, during and after the exercise. Tony Ali, a political scientist and public affairs commentator, believes that now is the right time for the police and other security agencies directly connected with the Edo election to do their thinking very well in order to deploy the necessary intelligence, men and materials to nip in the bud any violence being planned by politicians. “The circumstances surrounding the emergence of Governor Obaseki as candidate of the PDP and Ize-Iyamu as that of the APC, should send a signal to the Independ-
Godwin Obaseki
Osagie Ize-Iyamu
ent National Electoral Commission (INEC) and the Nigeria police that Edo election is going to be a war. To that extent, every effort should be made by the police to put trouble makers at bay,” Ali said. Sounding pessimistic, he said: “But I am afraid if that route will be taken by the concerned agencies. We may end up having a repeat of the Kogi episode with all the warning signals that should propel us into action. I hope this does not happen.” President Muhammadu Buhari has also been urged to wade into the political crisis in Edo State to avert wanton bloodshed during the polls. “I want to call on President Buhari to live up to his pledge of instituting violence-free elections across the country. It is unfortunate that since 2019, elections in the country have not been free and fair. They have been bloody,” Casmir Okey, a policy analyst, told BusinessDay. According to Okey, “I do not like the idea of President sending out press releases condemning violence and bloodshed at elections when his government should have nipped such violence in the bud, if it wanted to. We saw the bloodshed in Kogi
even though there were signs leading up to the elections that things were tending towards that.” He further noted that Buhari being the President of all Nigerians and not just of the APC must take interest in what happens to every citizen of the country. “What I expect from President Buhari is to give the Inspector-General of Police a marching order to ensure that there is no drop of blood of any citizen in Edo State on account of the forth-coming election. If this is done, I tell you that there would be nothing like violence there. What has reduced Nigeria into a banana republic is this culture of silence on the part of the President. “He feigns ignorance of what is going on, until the worst happens. It is the same reason Fulani herdsmen are overrunning the country; same reason the Miyetti Allah people see themselves as more Nigerians than any other person and are suffering from entitlement mentality. I think this has to stop,” the policy analyst said. Recall that in the run-up to the Kogi election last year, there were disturbances caused by thugs rented by politicians. Natasha Akpoti, the Social Democratic Party
Olajuni emerges NNPP candidate in Ondo Iniobong Iwok
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niola Joseph Ojajuni, a former presidential aspirant on the platform of the Alliance for Democracy (AD), has emerged the Ondo State governorship candidate of the New Nigeria People’s Party (NNPP). Olajuni emerged at the NNPP governorship primary over last weekend through overwhelming majority votes of delegates at JENS Hotel in Akure. Speaking after emerging the party’s candidate, he vowed to unseat Governor Akeredolu and become the first governor of Ondo State from the South Senatorial district, stressing that the people of the constituency was been marginalised over the years like non-indigenes of the state. The NNPP standard bearer was born on the 28th of December, 1978 to the royal family of Ojajuni Karaki, descendant of Mesere family in Ugbo Kingdom, Ilaje LGA of the South Senatorial District. In 2015, he contested for the House of Assembly, Kosofe Constituency 1, Lagos, under AD; coming closely second.
Then he vied for Ondo State Governorship position in 2016; before taking the giant leap in 2019 as AD presidential aspirant. He attended the Lagos State University (LASU) in Ojo, Lagos, where he studied Law for his first degree and then proceeded to Ghana Business School to gain knowledge in Business Administration. Also, he has been to various business schools across African countries and in Europe. He started his business career at a very tender age. As a young person who developed interest in his mother’s business, he helped his mother in selling dried and smoked fish. Meanwhile, the NNPP has decried the continued closure of schools in the country, describing it as more tragic than the fear of coronavirus that initially led to the closure. In a press statement signed by the party’s Deputy National Publicity Secretary, Emmanuel Olorunmagba in Lagos Monday, the party commended the initial order for the suspension of public gathering including closure of schools in order to contain the spread of the avoidable Covid-19. www.businessday.ng
(SDP) candidate in the state, was harassed and intimidated to no end. Her campaign office was torched by supporters of another opponent. She got the shock of her life when she was prevented from attending a meeting convened by the INEC to address the issue of security. Despite the presence of the high echelon of the police at the meeting, who also watched her being harassed at the entrance of the venue of the meeting, she was bounced back without help. Akpoti continued to draw the attention of the police, other security agencies and the INEC on the need to make the election free and fair, but the bloodshed on the Election Day attested to the fact that nobody listened to her. The case of Edo State is not likely to be different on September 19. The reasons are obvious. Whereas the APC would try to do everything possible to assert their supremacy and to prove that the Adams Oshiomhole’s magic is still potent in the state, the PDP on the other hand would want to prove that the death of godfatherism in the state under Godwin Obaseki has become total and permanent. A politician, who chose to remain anonymous, told BusinessDay that Oshiomhole was ready to stake everything to ensure that Obaseki does not return to the Edo Government House. “The battle is beyond Obaseki and IzeIyamu. It is Oshiomhole’s battle, and the reasons are very clear. One, victory for APC at the September 16 election would re-launch Oshiomhole back to relevance in the party. Even if he does not return to his position as national chairman of the party, he could be given something good in the APC government. Two; if he loses to the PDP, that could mean a journey into political oblivion, and he knows this. “For Obaseki also, it is a battle that must be won. One, it would help him to declare a total annihilation on Oshiomhole’s reign and kingdom in Edo. That would mean a lot for him. Two, it would also solidify his stay and relevance in the PDP. If for any reason he loses the election, he would be treated as a leper thereafter. What the PDP is expecting is the trophy, anything short of that would not be cherished,” the politician said
Ondo guber polls: Akeredolu boasts of defeating Jegede, Ajayi in their LGAs James Kwen, Abuja
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head of the October 10 Ondo gubernatorial election, the All Progressives Congress (APC) candidate and Governor of the State, Rotimi Akeredolu has boasted that he would defeat the People’s Democratic Party (PDP) candidate, Eyitayo Jegede and Deputy Governor of the State, Agboola Ajayi in their local government areas. Akeredolu, who spoke with journalists at the APC National Secretariat in Abuja on Monday, however, advised his deputy, Ajayi, to stay back in the PDP and not dump the party because he has lost the governorship ticket. The governor, who admitted that it may not be easy for him to defeat the PDP’s candidate, however, said: “By His grace, I am going to win. I can assure that as it was in the beginning, so it shall be now and forever more. We will win this election by the grace of God.” Speaking on the defection of his Deputy to the PDP he said: “For me, the deputy leaving the APC to return to the PDP is good radiance to bad rubbish. We thought we could accommodate him at the APC but since he returned
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to where he truly belongs, it is all well and good. I always wish people the best I can. “From what I have been told, he has lost the ticket and I pray he won’t jump to another place but if he does, all well and good. However, for his own sake and as a big brother, I will advise him to stay back “He has made a case that he helped me to win, let him help him to win and we will confirm that he is popular. What I know is that he is of no importance, he has no hold on any local government, I can assure you that come during the election, I will defeat him in his local government and he will never recover from it. He is of no influence anywhere and we picked because we felt we have someone from PDP coming to join us. We picked him to join us but he felt and tells people that he is grassrooted. “Let me advice him again to stay with Jegede and let us see what happens. Jegede is my friend. We are colleagues and both members of inner bar, I don’t have anything against him and I just prayed that our campaign should be issue based without violence and I know that he knows that it will not be easy for him.”
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Tuesday 28 July 2020
BUSINESS DAY
news FMDQ Holdings holds 8th annual general meeting SEGUN ADAMS
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MDQ Holdings plc (FMDQ Group or FMD Q), Afr ica’s first vertically integrated financial market infrastructure (FMI) group, held its 8th annual general meeting (AGM) on Friday, July 24, 2020, following the respective AGMs of its wholly owned subsidiaries - FMDQ Securities Exchange Limited (FMDQ Exchange), FMDQ Clear Limited (FMDQ Clear), and FMDQ Depository Limited (FMDQ Depository), on July 23. In compliance with the COVID-19 directives and guidelines of the Lagos State government that prohibits gatherings of more than 20 persons, and FMDQ’s commitment to keeping its staff and stakeholders safe, the AGMs held virtually, with the shareholders and other attendees participating in the proceedings via Zoom. Presiding over the FMDQ Group AGM, the newly appointed Group chairman of the Board of Directors, Kingsley Obiora, presented the financial statements for the year ended December 31, 2019, to shareholders, together with the reports of the directors and auditors. He stated, “FMDQ achieved a resilient performance amidst the challenging operating environment, due to strategic initiatives implemented in its first strategic lustrum (2015 2019), which mitigated the impact of volatile market conditions.” According to Obiora, “2019 was a year of growth, expansion, and reorganisation for FMDQ, with the consolidation of its flagship wholly owned subsidiary, FMDQ Exchange, the second year of the operationalisation of its wholly owned subsidiary, FMDQ Clear, and the activation of another wholly owned subsidiary, FMDQ Depository, making
significant progress in its bid to help de-risk the financial markets by constructing market infrastructures in all components of the capital market value chain, from pre-trade, trade to posttrade.” He further stated that through FMDQ Securities Exchange, the Group admitted a total of 84 securities split across bonds, commercial papers (CPs), and funds from various sectors for listing and quotation on the platform of its platform, in addition to the registration of several CP Programmes. 2019 also saw the strengthening of the operational and strategic capacities of FMDQ’s clearing, settlement, and depository businesses in line with their drive to create value for stakeholders in the Nigerian financial market. Consequently, FMDQ Clear focused on building operational readiness and capabilities to extend its services from just clearing and settlement to providing central counterparty (CCP) services in the near term, whilst FMDQ Depository leveraged the digitised and integrated structure of FMDQ Group to operationalise its new business; yielding positive results and further paving the way for the Depository to actualise its vision of becoming the Depository of Choice in Nigeria. Furthermore, as part of the Ordinary Business of the AGM, the shareholders of FMDQ ratified, among other things, the appointment of the new Group chairman, Kingsley Obiora, deputy governor, Economic Policy Directorate, Central Bank of Nigeria; Emeka Onwuka, partner and head of private clients and Family Wealth Practice at Andersen Tax in Nigeria, and Sadiq Mohammed, deputy Group CEO of the Asset & Resource Management (ARM), both serving as Non-Executive Directors on the Board of FMDQ.
NOVA Merchant Bank’s debut N10bn bond oversubscribed by 300%
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OVA Merchant Bank, a leading merchant bank in Nigeria, has announced the successful issuance of its N10 billion 7-Year Subordinated Unsecured Bond under its N50 billion debt issuance programme. The transaction represents NOVA’s first bond issuance in the debt market and was oversubscribed by 300 percent. The offer, which opened June 30,2020,followingrelevant approvalfromtheSecuritiesand Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), closed on July 8, 2020,
with a bond yield guidance of 12 percent to 12.50 percent. In spite of volatility in markets due to COVID-19 pandemic, the transaction was highly demanded with a diversified order book made up of discerning investors including asset managers, insurance companies, domestic pension funds, non-financial institution corporates, high net-worth individuals as well as international fund managers. The lead issuing house, United Capital plc, described the transaction as unprec-
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How Africa’s free trade pact can boost regional economy Hope Moses-Ashike & Odinaka Anudu
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gain, the need for inter-African trade has been stressed by the World Bank as it says the African Continental Free Trade Area (AfCFTA) could boost regional income by 7 percent or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035, if implemented fully. The World Bank said in a
new report on Monday. In addition, experts say the trade pact will position Nigeria’s firm to compete better in the continental and global markets. AfCFTA represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. The report suggests that achieving these gains will be particularly important given the economic damage caused by the COVID-19 (coronavirus) pandemic, which is expected to cause
up to $79 billion in output losses in Africa in 2020. The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food. Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalisation accompanied by a reduction in non-tariff barriers—such as quotas and rules of origin—would boost income by 2.4 per-
cent, or about $153 billion. The remainder—$292 billion—would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains. It could be recalled that initially, the Manufacturers Association of Nigeria (MAN) was the biggest opposition to the AfCFTA, arguing that ratifying the
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L-R: (Top): Liyel Imoke, former governor, Cross River State/founder, The Bridge Leadership Foundation (TBLF); Mitchell Elegbe, founder, Interswtich; Yomi Williams, founder/group CEO, Gartner Callaway Group; Babajide Ipaye, founder, Kreexs; (Middle): Emilia Asim, practice director, sustainability and development, A’Lime Media Limited (AML); JJ Omojuwa, founder/chief strategist, Alpha Reach; Udoma Udo Udoma, founding partner, Udo Udoma and Bello-Osagie/member BOT, TBLF; Yvonne Ike Fasinro, MD/head of sub-Saharan Africa (EXRSA), Bank of America Merrill Lynch/member BOT, TBLF; (Bottom): Dayo Adegun, head, corporate communications and brand, Northwest Petroleum and Gas Co. Ltd; Asuquo Ekpeyong, chairman, The Davandy Group/member BOT, TBLF; Peter Obi, former governor, Anambra State, and Alex Otti, former MD, Diamond Bank/BOT member, TBLF, at The Bridge Leadership Foundation 10th Career Day event, weekend.
Government may have realised N4.4bn from oil bid round processing so far … as stakeholders doubt transparency of exercise Olusola Bello
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he Federal Government of Nigeria may have so far raked in an estimated N4.4 billion already from the marginal oil field processing bid round. Total revenue from processing alone will be more than N5 billion by the end of the process. This amount to be realised from the processing does not include the signature bonus that would be paid based on the value of the assets concerned at the end of the bid round. Analysis of the payment so far indicates that 600 investors have paid N500,000 each as registration fee, which amounted to N300 million; another estimated N800 million is believed to also have been paid as application fee by 400 out of the 600 investors. They paid N2 million each.
Also, same 400 investors must have paid about N1.2 billion at N3 million as bid processing fee. These fees were paid before any of the investors was prequalified, according to BusinessDay’s finding. If all the 400 investors are prequalified by the Department of Petroleum Resource (DPR) at the stipulated $15,000 each for Data Prying, the stage the exercise is now, this fee translates to N5 million each at N360 to a dollar, and would amount to N2 billion. Adding all the fees paid so far together at this level means about N4.4 billion has been paid into the coffer of the Federal Government as revenue as at last week. A number of those that have been prequalified, BusinessDay learns, are now jostling across the country scouting for people that would be on their management boards to fulfil one of the conditions
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in the guidelines, as their boards must reflect Federal Character. It was leant at the weekend that politicians in Abuja are also positioning themselves for negotiations with those prequalified for necessary assistance to ensure they succeed in the bid round. “All I can tell you is that some politicians are making moves to get in touch with some of the investors to help them negotiate their way through the government,” a consultant to one of the companies tells BusinessDay. Many oil and gas industry stakeholders are however sceptical about the level of transparency in the conduct of the exercise, as they believe that many genuine investors may not get the fields they would bid for but rather some party and government cronies. Some observers say for @Businessdayng
the government to have put Federal Character as part of the conditions that must be met by investors, alone, is an indication that there will not be transparency in the exercise. They are also of the view that the government is doing the exercise to raise money. According to them, if genuinely the government wants real investors in the exercise, technical and commercial ability of investors should be more of paramount importance than Federal Character. When Paul Osu, spokesman for DPR, was asked to comment on this, he said raising money was not the primary motive of the government but rather to develop local capacities and create jobs for Nigerians. He assured that the exercise would be as transparent as possible, judging from the processes the various stages had been subjected to.
Tuesday 28 July 2020
BUSINESS DAY
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News Third Mainland Bridge closure: Helicopter... Continued from page 1
find other way to get to their destinations. The Federal and Lagos State government on Friday, July 24, 2020, partially closed the Third Mainland Bridge in Lagos for repairs, and the closure has resulted in attendant traffic jam. In response to this, some aviation logistics firms, such as Tropical Arctic Logistics Limited (TAL) and Nesto Aviation Services Limited have started helicopter shuttle services to convey people from the Mainland to Lagos Island. TAL has scheduled helicopter services to take care of the people, especially the high net-worth individuals who dread the gridlock the closure might trigger. TAL firm operates AugustaWestland AW139 Helicopters, Sikorsky S-92A helicopters, among others in its fleet, according to information gathered on its website. BusinessDay’s checks show that it will cost $500 (N194,000 at the official exchange rate of N388 to a dollar per trip) while a return ticket would cost $1000 (N388,000) per passenger. The flight takes off from the Murtala Muhammed Airport (MMA2) Ikeja to Ozumba Mbadiwe in Victoria Island. While a lot of residents in Nigeria’s busiest city are expecting the advertised shuttle services to be retail or Uber-like, the helicopter companies left them disappointed, according to a potential passenger. “It is a charter service; whoever is booking it would have to charter the entire helicopter. It is a 12-seat shuttle and goes for $5000 for a return trip,” a representative from Nesto Avia-
tion Services, a Lagos-based company that recently announced its shuttle services on social media, informs BusinessDay. Tayo Ojuri, an industry expert/CEO, Aglow Limited, an aviation support services firm, says there is a need for the helicopter charter services, but there is no disposable income for people to charter helicopters. The bridge will be closed partially not completely, Ojuri notes, adding that this will mean people can actually leave their houses on time and get to wherever they want to go. “I think the business model for the helicopter service is shaky. Oil companies that should have been the major clients are reducing their budget as a result of the crash in prices of crude oil. “Even with the soon resumption of international flights, the alternative for an average traveller is to rather book a hotel close to the airport at an average of N15,000 to N30,000 than pay N194,000 for a oneway ticket from VI to Ikeja using a helicopter,” he states. According to some industry players and passengers, the ‘Uber for helicopter’ service may not be sustainable in Nigeria, at least, not in this period when COVID-19 pandemic has eroded consumers’ purchasing power. “I was hoping I could book online and be able to use the helicopter shuttle service at an affordable rate,” Arua Nnamdi, a Lagos-based consultant, says. “Helicopter shuttle service now available - to and from Lagos Mainland to Island. Take off and land at Ikeja and Ozuma Victoria Island,” Travel with Sam Global, said in a flyer.
NOVA Merchant Bank’s debut N10bn bond... Continued from page 30
edented, while the joint issuing houses, Stanbic IBTC Capital, UCML Capital Limited, Emerging Africa and Greenwich Trust Limited, jointly stated it was a remarkable deal. This is one of the major corporate bond issuances by a merchant bank in Nigeria’s capital market, thus reflecting NOVA’s strong credit quality as well as the resilience of its business model, despite current global challenges. Chairman the merchant bank, Phillips Oduoza, expressed excitement over the success of the company’s debut issue as it placed the bank on a firm footing to achieve its shortterm and long-term goals. “The oversubscription of this bond offer is yet another significant milestone in the history of the Bank and represents a vote of confidence by the investment community in the resilience of our business model. We will continue to
march forward with confidence in the realisation of our strategic objectives,” Oduoza said. The bank is well positioned to fulfil its promise to focus on providing long-term funding, which is critical to the economic development of Nigeria, he said. Anya Duroha, the bank’s managing director, said, “The resounding success of this bond offer helps us achieve our goal to re-establish merchant banking as a key economic driver by providing long-term funds. It will also help us better meet the financing needs of our clients.” NOVA Merchant Bank Limited is a licensed, investment grade rated merchant bank in Nigeria, offering an integrated suite of financial solutions covering wholesale banking, investment banking, asset management, securities trading, wealth management, trade services, deposit taking, lending activities, transaction banking, cash management and digital banking. www.businessday.ng
President Muhammadu Buhari participates in a virtual meeting of the Extraordinary Session of the Authority of ECOWAS Heads of State and Government, at the State House in Abuja, yesterday. NAN
Ahmed expects Nigeria to exit recession Q1... Continued from page 1
but if we are fully able to
deploy this N2.3 trillion, we might end up in -0.59 percent. That is a bit fair,” Ahmed said Friday in an exclusive interview with BusinessDay in her Abuja office. “Meaning that by the end of Q1 2020, we should have been out of the recession and back to steady growth. So, the implementation of the ESP is very important,” the minister stressed. Central Bank of Nigeria (CBN) governor, Godwin Emefiele, has sounded similar optimism with a forecast of a -1.03 percent contraction in GDP for the second quarter of 2020; even though many economists say a deeper recession is more likely. The International Monetary Fund (IMF) projects Nigeria’s gross domestic product (GDP) will contract by 3.4 percent this year. But the Federal Government revenues have surprised to the upside, a signal that the economy is healing quickly from the ravages of the lockdowns imposed on the country’s two largest cities, Lagos and Abuja, the minister said. “Even in our Federation
Account Allocation Committee (FAAC), we kept being surprised because we were expecting a huge dip. The last FAAC we did recently, we saw revenues of around N690 billion,” she noted. In another sign of the economy performing better than expected, the NBS reported Monday that the Federal Government generated a total of N651.77 billion as Value Added Tax (VAT) for the first half (January-June) of 2020, an 8.45 percent increase compared to N600.98 billion recorded in first half of 2019. One of the reasons for the better than expected revenue collection by the government was the impact being made by the Federal Inland Revenue Service (FIRS), Ahmed pointed out. “What happened was that, when the outlook for oil and non-oil revenue dropped, there were still many other stimulators that were acting as stabilisers for the economy. The FIRS is also active in pushing revenues up even though this is a time where you can’t push so much in terms of collection of taxes,” the minister noted. The Federal Executive Council (FEC) in June approved the immediate implementa-
How Africa’s free trade pact can boost... Continued from page 30
agreement could kill industries in Nigeria. MAN had said it was important for Nigeria to position local manufacturers for competitiveness first before ratifying the AfCFTA. However, the association later made a U-turn, saying African nations needed to trade more with one another. “MAN recognises the imperativeness of creating a beneficial free trade area for export of the products of members and has strongly worked assiduously to promote the articulation of evidence-based positions on AfCFTA,” Mansur Ahmed, president of MAN, said at a South-West sensitisation workshop in Lagos in February 2020.
The Lagos Chamber of Commerce and Industry (LCCI) is backing the trade deal, arguing that if smaller African countries are not afraid of it, Nigeria with 200 million people and humongous $430 billion GDP, must grab it with both hands. Muda Yusuf, directorgeneral, LCCI, told BusinessDay in 2019 that multinationals would be the biggest beneficiaries when the AfCFTA started. “Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Yusuf had said. “The continental trade is more about economies of scale and the amount
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tion of the Nigeria Economic Sustainability Plan (NESP) or stimulus that has an estimated N2.3 trillion price tag. Given Nigeria’s limited fiscal space, the source of the funds were to be: special accounts – N500 billion, CBN structured lending – N1.11 trillion, external bilateral/ multilateral sources – N334 billion, other funding sources – N302.9 billion. The plan aims to stimulate the economy by preventing business collapse and ensuring liquidity, retaining or creating jobs using labour intensive methods in key areas like agriculture, facility maintenance, and housing and direct labour interventions, and extending protection to the very poor and other vulnerable groups – including women and persons living with disabilities – through propoor spending, among others. Nigeria’s GDP decelerated in Q1 2020, with a 1.87 percent growth compared with 2.55 percent growth recorded in the Q4 of 2019. Services and the oil sector GDP posted growth of 3.5 percent and 5.1 percent year on year (YoY), respectively, in Q1. The impact of the coronavirus lockdowns on cyclical Nigerian corporates has been
mixed so far, as Q2 results begin to trickle in. Dangote Cement, Africa’s largest maker of the building material, reported a 1.95 percent increase in revenues to N476.85 billion in the halfyear period (January – June). Standalone revenues for Q2 rose marginally by 0.04 percent to N227.67 billion, despite the economic slowdown from lockdowns due to the Covid-19 pandemic. After-tax profits rose by 5.79 percent to N126.1 billion in the six months’ period ending June 2020. On the other hand, Julius Berger, the largest listed construction firm, saw sales drop by 48.022 percent to N102.055 billion in June 2020, posting a loss of N1.93 billion as at June 2020, from N2.83 billion profit it recorded the previous year. Ahmed said the Nigerian economy had proven to be quite resilient, despite the coronavirus, saying, “Sincerely, we have hope that we might escape this recession or even if we slide into a recession, it will be a shallow one that will be easy for us to come out from and that is the target of the ESP.”
of what you produce. The higher you produce, the lower the unit cost, which is why small companies will benefit but not as much as large firms,” he further said. AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent. It was supposed to start in July 1, 2020, but has been postponed to January 2021 owing to COVID-19 pandemic. Experts believe AfCFTA is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.
The AfCFTA is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 if all the countries sign up. The treaty liberalises 90 percent of products manufactured in Africa, meaning that a country can only protect 10 percent of its local industries. Bismark Rewane, CEO, Financial Derivatives, said the AfCFTA would favour Nigeria, Kenya, Egypt and Ghana, among others, but warned that any government that was not effective would fail within the AfCFTA environment. “Nigeria will benefit. But it will forced to be effective because if not, people can easily go to Cotonou to set up plants,” he told Channels TV in 2019, adding that government failures would be glaring under the trade arrangement.
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• Read full interview next Tuesday
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BUSINESS DAY Tuesday 28 July 2020 www.businessday.ng
Climate change: Asset managers join forces with the eco-warriors
The pandemic has persuaded some investors of the potential financial damage from global warming Attracta Mooney in London and Patrick Temple-West in Tampa
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s 2020 kicked off, Dan Gocher at the Australasian Centre for Corporate Responsibility, a shareholder advocacy organisation, was feeling “pretty optimistic” about its plans to force big Australian energy companies to tackle climate change. BlackRock, the $6.8tn asset manager, and other large investors had proclaimed an urgent need to arrest global warming. With the renewed focus on climate change following the devastating bushfires in Australia, the ACCR was hopeful several climate-related resolutions filed at oil and gas producers Santos and Woodside would gain strong shareholder support at their annual meetings in April. Then came the coronavirus pandemic. “Once the virus hit, we said ‘God, we won’t get anything done [on climate change] for 18 months’,” says Mr Gocher. Like many others, Mr Gocher feared investors would swiftly retreat from recently made climate pledges as markets plummeted. Critics had long argued that the fund industry’s nascent love affair with environmental, social and governance investing was in reality a marketing ploy that would be dumped at the first sign of trouble. Instead, in spite of the pandemic, 2020 has proved to be a landmark year for investor action on climate change, with significant resolutions being passed and investment pouring into sustainable funds. With both regulators and clients increasingly calling for change, asset managers are now broadening their remit beyond energy-intensive industries such as oil. Rather than drive investor attention away from climate change, the pandemic has cemented interest, with many investors fearing the economic fallout seen during the pandemic could be replicated if the world fails to halt global warming, says Mirza Baig, global head of governance at Aviva Investors. Until the virus, “there was still a significant portion of the investor base” that believed tackling climate change “could wait until tomorrow”, he adds. “That has changed. Companies and investors are starting to look at the importance of acting now.” At Santos, 43 per cent of shareholders supported a resolution to require the energy company to set targets in line with the Paris agreement to tackle climate change — the first time a targets-based resolution had received such a high level of support in any country. More than half of shareholders voted in favour of a similar motion at Woodside a few weeks later. “We were very much surprised by the support,” says Mr Gocher. In Japan, 35 per cent of share-
holders supported the country’s first-ever climate change proposal at Mizuho Financial, calling on the banking group to disclose a Paris agreement plan. In the US, a resolution calling on Chevron to disclose its lobbying on global warming passed, while almost half of shareholders backed a climate proposal at JPMorgan, the US bank. The fact that only a few of these resolutions passed demonstrates that the arguments within the investment world are far from settled. But pressure on energy companies from the world’s most powerful investors is rapidly increasing. Ordinarily for resolutions of this type, 99 per cent of shareholders vote according to management recommendations, according to Follow This, a green shareholders’ group that filed resolutions at BP, Royal Dutch Shell and Equinor, the European energy companies. Overall, in the US and Canada, average investor support for environmental resolutions during the first six months of 2020 was 32.7 per cent, up from 21.9 per cent in 2019, according to Proxy Insight, a data provider. “We have had the most successful AGM season ever [for climate resolutions], but because of Covid it didn’t get much attention,” says
Mark van Baal of Follow This. “One by one, these investors see that climate change is such a threat to their assets.” The Greta factor Since the Paris agreement was signed in 2015, the $85tn asset management industry has slowly awoken to the growing risks of global warming. The enormous publicity surrounding the campaigns of Greta Thunberg and Extinction Rebellion in 2019 forced even the most sceptical of big investors to pay attention, says Wolfgang Kuhn, director of financial sector strategies at ShareAction, a responsible investment charity. “You suddenly have every asset manager talking about how deeply ingrained ESG is in their DNA. There is good work going on, but it is also true that if you are seen to be responding to this trend and introducing the right products, you can make money from this,” he adds. European asset managers including Nordea, Legal and General Investment Management, BNP Paribas Asset Management, Aviva Investors and Robeco have been at the forefront of this movement. Investment companies from the US to Australia have been slower to react. A study by ShareAction found that 38 of the world’s 75 largest asset managers scored badly on
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Rather than drive investor attention away from climate change, the pandemic has cemented interest, with many investors fearing the economic fallout seen during the pandemic could be replicated if the world fails to halt global warming
ESG issues, including BlackRock, Vanguard and State Street. The trio are hugely influential and control about a quarter of US markets alone, through the popularity of their passive funds and other investment products, meaning their views drive change in the corporate boardroom. After years of criticism over alleged inaction, BlackRock, the world’s biggest asset manager, in January revealed plans to put climate change at the centre of its investment process by rolling out new ESG funds, divesting some coal holdings and taking a tough line on global warming during boardroom discussions with businesses around the world. At the time, BlackRock chief executive Larry Fink warned that global warming represented a risk to markets unlike any previous crisis. This prospect of a financial hit has galvanised many investors. In an open letter in March, pension funds executives, including Hiro Mizuno, who was at the time chief investment officer of Japan’s Government Pension Investment Fund, the world’s largest, said climate change has the potential to destroy $69tn in global economic wealth by 2100. Regulators such as Mark Carney, former head of the Bank of England, have also warned of a big investment risk from “stranded assets” — where investors have holdings that become unsellable because of climate change. For others, their new foray into climate issues has been driven by demand from clients, including younger investors who want their investments to do good as well as generate a return. Even as investors retreated from mainstream funds during the pandemic, ESG products continued to attract cash. Sustainable funds in Europe pulled in €30bn in the first quarter of 2020, compared with outflows of €148bn across all European-based funds, according to Morningstar, the data provider. ESG fund performance has been strong. Research from BlackRock in
May found that sustainable strategies have outperformed during this year’s period of intense volatility, with 94 per cent of leading sustainable indices beating their parent benchmarks in the first quarter. With a growing business case, more than 450 asset managers, with $40tn in assets, have now signed up to an initiative called Climate Action 100+ to force the world’s biggest carbon emitters to tackle global warming. BlackRock joined the group in January. “There has been a big shift in the past five years: the understanding, the awareness of climate change has grown enormously, particularly in the last year,” says Eugenia Unanyants-Jackson, ESG research head at Allianz Global Investors. “It is a physical risk to people, it’s a big risk to our investment portfolios, and we need to do something.” Growth in ESG expertise With their new-found interest in global warming and other ESG issues, asset managers have gone on a hiring spree. The number of investment professionals specialising in holding boards to account on issues such as climate change and corporate governance almost doubled at the world’s biggest asset managers over the past three years, according to FT research, while they have also invested heavily into building new systems to examine climate risk. Their interactions with companies on climate issues is also changing. For years, small religious organisations or advocacy groups spearheaded climate change agitation at companies. These lonely crusades, though supported by a handful of other mainstream investors, failed to rattle most boardrooms. “A lot of faith-based investors have been raising these issues for years and years,” says Kate Monahan at Friends Fiduciary, a non-profit investment firm for 400 Quaker communities with more than $500m in assets under management in Philadelphia. These religious investors now have company, with big asset managers also taking a more active approach at annual meetings. BNP Paribas AM, the asset management arm of the French bank, for example, filed this year’s environmental lobbying proposal at Chevron. Asset managers are also more willing than ever to use their vote to push for environmental change. “It was almost a rule that [asset managers] don’t vote for an NGO [climate] resolution. But it looks like that is changing now,” says Mr van Baal. Still, there is a divide in how big asset managers vote. BlackRock and Vanguard supported no environmental resolutions in the US in 2015, but this rose to 13.8 per cent and 16.7 per cent respectively in 2019, according to Proxy Insight. BNP Paribas AM and AllianzGI, in contrast, backed at least 90 per cent of environmental resolutions in the US last year.
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