BusinessDay 29 Jun 2020

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news you can trust I ** monDAY 29 june 2020 I vol. 19, no 594

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These 4 charts show why Nigerian refineries are in a sorry state I R

FMDQ admits N100bn MTN Nigeria commercial papers, N100bn Dangote Cement bond …providing long-awaited corporate benchmarks for pricing, valuation

SEGUN ADAMS

unning its refineries is rocket science for Nigeria, Africa’s largest oil producer, which has continued to import around 90 percent of its petroleum and related products despite decades and millions spent to refine locally.

The poor state of the country’s refineries is well-known but the maiden audited financial accounts by the Nigerian National Petroleum Corporation (NNPC) still managed to shock many.

Nigeria’s refineries made N154.37 billion in cumulative losses recorded in their operations in 2018 even though oil averaged $71 per barrel in the year. In context, losses made are capable of building 8,380

Continues on page 27

IHEANYI NWACHUKWU n a historic move, despite the economic downturn and realities of the COVID-19 pandemic, Dangote Cement plc and MTN Nigeria Communications plc have successfully tapped the market, raising the largest corporate bond and commercial papers, respectively, so far recorded in the Nigerian debt capital market.

FMDQ Holdings plc (FMDQ Continues on page 27

L-R: (1st row): Sandra Meme, panellist; Baba Akintunde-Johnson, country manager (Nigeria), Viacom International Media Networks Africa; Yewande Oshodi, consultant psychiatrist, JJ Omojuwa, moderator; (2nd row): Frank Aigbogun, publisher, BusinessDay Media; Ini Edo, Nollywood actress; Oliver Stolpe, country director, United Nations Office on Drug and Crime (UNODC); Odunayo Sanya, Ag. executive secretary, MTN Foundation; (3rd row): Sunday Dare, minister of sports and youth development; Dokun Adedeji, director-general, Christ Against Drug Abuse Ministry (CADAM), and Dakore Akande, Nollywood actress, at the virtual MTN ASAP’s drug convos, supported by BusinessDay, MTVBase and Nigerian Entertainment (Netng), on Friday.

Inside

N1.72trn after, Nigeria bids farewell to electricity subsidy P. 2

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news Persisting current account deficits throw hurdles at Nigerian businesses in need of dollars SEGUN ADAMS

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ith lingering current account deficits, Nigerian businesses will remain at the brutal end of an acute dollar shortage that has contributed to stifling their growth, and the economy’s, unless the country abandons its managed float exchange rate regime and allows the market determine the naira’s value.

Africa’s biggest economy has remained a net consumer (and borrower) to the rest of the world seen in its current account deficit of $4.88bn in the first quarter of 2020, although $2bn up from Q4 2019, the seventh quarterly deficit in a row.

As Nigeria sets to now unify its various exchange rates in bold reforms that could unlock growth, the reoccurring balance of payments problem is one more argument for a market-determined naira.

“Our managed float is causing the misalignments that result in our balance of payment problems which in turn are leading to the CBN adopting various means of managing demand for FX,” an economist who does not want to be named told BusinessDay. “This is putting a downward pressure on the economy.”

A current account deficit,

which usually occurs when a country imports more than it exports, puts pressure on the naira due to higher demand for dollars for international purchases.

Under a flexible exchange rate system, higher demand leads to higher price of dollars.

Otherwise, the central bank has to intervene to prop up local currency value by supplying dollars from its foreign reserve.

For Nigeria, with limited central bank buffer, the dollars cannot go round and for businesses that are not able to buy the greenback from the CBN, the more expensive parallel market is last resort.

A recent instance was the announcement by the CBN last year to restrict manufacturers of milk from accessing forex through the official window, after Godwin Emefiele, governor of the apex bank, estimated it cost the country between $1.2bn to $1.5bn annually to bring in milk and other dairy products into the country. No less than 40 items have been blacklisted by the bank.

The argument by the CBN is that Nigeria is depending on foreign markets for raw materials it can produce locally.

The apex bank has created and supported many initiatives aimed at boosting Nigeria’s self-sufficiency especially in food production.

Is NNPC becoming truly transparent under Kyari?

ISAAC ANYAOGU

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he Nigerian National Petroleum Corporation (NNPC), often criticised for being opaque, has begun taking steps to shine the light on its activities by publishing its audited accounts and opening its data for quicker audit review. Two weeks ago, in an unprecedented step, the stateowned oil company published its audited accounts for the first time in 43 years.

Though the published accounts, signed by Mele Kyari, the 19th group managing director (GMD) of NNPC, revealed the rot in the state-owned company, it demonstrated the GMD’s commitment to transparency, after four decades of secrecy that would have made Mafia groups proud.

The accounts, published on the company’s website, reveal staggering losses by the refineries in Port Harcourt, Warri and Kaduna. For the year 2017, the three refineries had operating losses of N252 billion, while in 2018 the figure stood at N154.54 billion. The audited financial statement showed that Warri Refining Company earned N1.98 billion as revenue while it made operational loss of N45.39 billion. The situation is also the same for the Port Harcourt Refining Company which

recorded total revenue of N1.45 billion in 2018 with processing expenses of N24.04 billion, resulting in a gross loss of N22.58 billion. Kaduna refinery spent N24 billion in direct costs to produce zero revenue, recording an operating loss of N64 billion for 2018. Despite recording zero revenue, another striking takeaway from the Kaduna refinery is training expenses of N447.7 million, security expenses of N230.5 million, communication expenses of N37.3 million, and consultancy fees of N843 million.

However, the knowledge of this rot in the state-owned oil company is only possible since Mele Kyari became GMD in July 2019. For instance, in 2014, the then Central Bank (CBN) governor, Lamido Sanusi, told a Senate committee that the NNPC had received US$67 billion and handed over only US$47 billion to government coffers. In response, then President GoodluckJonathanorderedaforensic audit in 2015 conducted by PwC Nigeria which found that the NNPC actually overpaid by US$0.74 billion in the period from January 2012 to July 2013, after remitting $50.81 billion to federation accounts of the $69.34 billion it had received.

But in an atmosphere of pattern of secrecy, many Nigerians believed Sanusi. www.businessday.ng

N1.72trn after, Nigeria bids farewell to electricity subsidy ISAAC ANYAOGU

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igeria is set to quit the expensive habit of subsidising electricity consumption for its people which has cost the country a staggering N1.72 trillion in five years, BusinessDay has learnt.

In 2020 alone, the Federal Government is committing N380bn and the three months delay in the implementation of the service-reflective tariff for the electricity sector means that that amount may not fully cover the exposure

for this year.

A major part of this N1.72trn has come via central bank (CBN) support for the power sector part of which the Federal Government will now be repaying with the $750m credit coming from the World Bank at the bearable interest rate of 3 percent and with a 20-year tenor.

Nigeria’s apex bank financed the N701 billion payment guarantee to power generation companies (GenCos) in 2017 and the N600 billion NBET payment assurance facility expansion loan of 2019.

In 2015, the CBN provided

N213 billion for Nigeria Electricity Market Stabilisation Facility (NEMSF). The rest of the subsidy has come from government coffers but, according to one senior government official, only N60bn will be voted for subsidy next year and this is meant only for supporting supply to Nigeria’s rural poor.

Data available to government suggest that a significant part of the N1.72trn, 60 percent to be precise, has actually gone to subsidising well-endowed industrial consumers as well as the rich and mighty who, by reason of

living in wealthy neighbourhoods in major cities such as Maitama in Abuja and Ikoyi and Victoria Island in Lagos, tend to have more power supply than others.

“There is something basically wrong with such a high proportion of the subsidy outlay going to the rich and now that the government no longer has the resources to fund this subsidy, it is time for those who get power the most to pay a fair tariff,” said the government official who would rather not be named.

Continues on page 27

L-R: Uzoma Dalhatu, secretary, Lagos Business School Alumni Association (LBSAA); Agada Apochi, vice president; Frank Aigbogun, president; Clare Omatseye, immediate past president, and Enase Okonedo, dean, Lagos Business School (LBS), during the LBSAA exco handing-over ceremony to the new exco.

Pic by Olawale Amoo

States’ inability to tap capital market could see another rush for FG’s bailout ... Amid worsening revenue decline MICHAEL ANI

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he inability of most state governments to raise debt instruments from the capital market amid declining revenues could see a rush for another round of bailout from the Federal Government, according to views of a wide spectrum of analysts surveyed by BusinessDay. “There are strong indications that we might see another round of bailouts given that FAAC allocations, which account for a major source of states’ revenue, have come under pressure due to the pandemic,” said Gbolahan Ologunro, an equity researcher at CSL Stockbrokers.

States’ finances are speedily drying up due to the coronavirus pandemic which has resulted in a double whammy of falling internally generated revenue (IGR) by states as well as the monthly allocations from the Federation Account.

Revenue shared to states from the Federation Account

saw a drop by 5.13 percent to N181.49 billion in April from the over N191.30 billion shared in January, according to figures from state-funded statistical agency, the National Bureau of Statistics, as the pandemic took a toll on both the demand and prices of crude oil, Nigeria’s biggest dollar earner.

The drop in the FAAC was despite the N360/$ conversion rate adopted by the Central Bank of Nigeria (CBN) in March, as opposed to the dollar to naira conversion rate of N306/$ when the apex bank had not devalued the currency. Allocation from the Federation Account, at 70 percent, accounts for the biggest chunk of states’ revenue.

Similarly, IGR which makes up an average of 27 percent of states’ revenue, is already threatened as businesses suffer the sour taste of falling sales and revenue arising from the slowdown of economic activities due to the coronavirus-induced lockdown.

When businesses make

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less profit, there will be less money paid to the government in the form of tax.

The effect of a decline in both IGR and FAAC could render state governments handicapped from fulfilling their fiscal expenditure needed to boost cumulative economic growth for the economy.

Only recently, the International Monetary Fund (IMF) predicted a deeper contraction for the Nigerian economy as the country continues to reel from both the economic and health impact of the pandemic.

IMF projected Nigeria’s gross domestic product to contract by 5.4 percent in 2020, much lower than the 3.4 percent negative growth it had estimated for the country in April.

The attendant effect of states’ falling finances in the wake of the pandemic could be better averted through the capital market route.

Amid the low yield environment helped by the CBN’s policy restricting non-bank @Businessdayng

institutional investors from participating in its short-term financial instrument, tapping from the capital market in the form of issuing subnational bonds could be a veritable option for most state governments to shore up their finances and implement infrastructural projects that would have a multiplier effect.

Most state governments have, however, are limited from raising finances by way of bonds due to their inability to meet certain conditions that will guarantee them access into the market.

“It is a lot more difficult for the state governments to tap the capital market because their cases are restricted by regulation, unlike corporates that only need the approval of their board and the SEC,” said Omotola Abimbola, a macro and fixed income analyst at Chapel Hill Denham.

For the states, he said, they need the approval of the Debt Management Office (DMO) and Ministry of Finance before they can raise debt from the capital market.

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Customers to pay service reflective tariff Decline in oilfield services continues as AEDC to effect new regime July 1 to threaten Nigeria’s oil, gas industry HARRISON EDEH, Abuja

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anagement of Abuja Electr icity Distr ibution Company (AEDC) on Friday said it would effect a new electricity tariff structure from July 1, which would see customers pay appropriately for level of power service provided to them by the company according to classification of its various tarring bands.

The development is part of measures designed to improve service level performance within its franchise area, AEDC said.

The review, which the company said had become overdue even before the outbreak of COVID-19, became necessary in view of radical changes in the macro-economic indicators such as inflation and foreign exchange.

Ernest Mupwaya, managing director, AEDC, explained that the new tariff was a total departure from the blanket and across board tariff structure used in the past in the sector and was predicated on the level of service available to customers in different clusters, especially in terms of hours of availability of electricity supply to specific geography within its franchise area.

Called the Service Reflective Tariff, AEDC said in a statement

that five tariff bands had been created, and listed the bands as Bands A - E. While Band A are customers who have to 20-hours of supply and above, Band B is made up of customers who enjoy electricity supply for at least 16 hours, but do so for less than 20 hours daily.

Bands C and D are customers who enjoy electricity supply for a minimum of 12 hours but not up to 16 hours, and a minimum of 8 hours but not up to 12 hours. Band E are customers who receive electricity for less than 8 hours.

Mupwaya said further that while customers within Bands A - D would experience a marginal upward adjustment in the cost of electricity, those in Band E would have their tariff frozen until the company can show an improvement in the level of service to the customers within the cluster.

“We have structured the new tariff regime in such a way that there can be fairness and equity both to the service provider and the customer.

Embedded in the new tariff regime is an incentive for the service provider to speedily ramp up performance to 24hrs in all clusters so that it can draw from the benefit of economics of scale associated with numbers, volume and other parameters within its

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geography,” he said.

While listing some of its achievements to include the sector leader in the metering of customers, installation of hi-tech technical equipment, a robust commercial management system as well as a multi-channel customer contact centre, AEDC said with the commencement of the tariff regime and the support of its valued customers, the company was prepared more than ever before to further raise the bar of performance in the sector.

On what it expects from the customers, Mupwaya said, “The Nigerian power sector has no doubt arrived at a critical juncture as it heads for the point where it can serve as a catalyst for industrial and socio-economic growth and development of the Nigerian nation.

“A critical element in this transformation journey is the role of the customers, which comes in the form of accurate and consistent payment for energy received.

“The electricity value chain - GasCo, GenCo, TCN and DisCo can only improve where investment and recovery are at par and the investor has the opportunity for a marginal compensation for his investment.”

Olusola Bello

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ecline in global demand for Oilfields Services (OFS) has continued to create serious threat to the Nigerian oil industry and by extension it economy as a result of low oil prices and COVID-19 pandemic.

The consequences of this are that there may not be serious activities towards big oil discoveries for a long time to come in the country, and also those fields that needed to be developed would have to be deferred.

The World Bank says collapse in oil prices coupled with the COVID-19 pandemic is expected to plunge the Nigerian economy into a severe economic recession, the worst since the 1980s.

Oil represents more than 80 percent of Nigeria’s exports, 30 percent of its banking-sector credit, and 50 percent of the overall government revenue.

With the drop in oil prices, government revenues are expected to fall from an already low 8 percent of GDP in 2019 to a projected 5 percent in 2020.

Meanwhile, the pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the

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combined amount of foreign direct investment and overseas development assistance.

Global demand for oilfield services (OFS) is measured in the total value of exploration and production (E&P) in company purchases, and is set for a massive 25 percent yearly drop in 2020 as a result of the Covid-19-caused downturn.

The oilfield equipment and services (or OFS) industry refers to all products and services associated with the oil and gas exploration and production process, or the upstream energy industry.

Dividing OFS into six segments – maintenance and operations, well services and commodities, drilling contractors, subsea, EPCI and seismic – only the first three will manage to rise in 2021, while the latter three will have to brace for another year of falling revenues before they can expect improvements, an industry analyst said.

Nigeria oil and gas industry is heading for a disaster if the price of oil remains low, as this would mean there would not be any reserve addition to the country’s oil reserve for a long time to come, industry stakeholders stated.

The demand for oilfield services has declined terribly to

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the extent that a good number of oil rigs contracts have been deferred, many contracts cancelled or deferred and no major projects are on sight, except the Nigeria Liquefied Natural Gas train 7 project.

Okorafor Bank-Anthony, immediate past president of Petroleum Technology Association of Nigeria (PETAN), said, “He fears that Nigeria oil and gas industry is head for disaster because nobody wants to invest at the moment because of low oil prices and COVID-19.

“You cannot grow reserve when the exploration budget has been cut. Everything goes with low oil prices.”

In the same vein, Abiodun Adesanya, managing director of Degeconek Nigeria Limited, said the development in Nigeria was a reflection of global situation with the industry. He said exploration would not happen because of this, but operating companies would only concentrate on production aspect of upstream to keep the industry going.

Global demand for OFS is measured in the total value of exploration and production (E&P) of company purchases, and are set for a massive 25 percent yearly drop in 2020 as a result of the Covid-19-caused downturn, a Rystad Energy analysis shows.

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Nigeria is administratively over-governed, the Oronsaye report is not the solution global Perspectives

OLU FASAN

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ix years after the Oronsaye report on the rationalisation of federal parastatals and agencies was submitted to his predecessor, President Muhammadu Buhari, on May 1, ordered its implementation. Later, in his June 12 Democracy Day speech, President Buhari explained why. “In the face of dwindling resources and rising cost of governance”, he said, “I have authorised that the White Paper on the Rationalisation of Government Parastatals and Agencies be reviewed for implementation”. So, economic realities have forced Buhari to turn to the report he has ignored for the past five years!

But is the Oronsaye report the panacea to Nigeria’s acute cost-of-governance problem? The answer is no! The truth is that the Stephen Oronsaye committee on the rationalisation of the federal bureaucracy, which submitted its report to President Goodluck Jonathan in 2014, should be an adjunct to the National Conference on the restructuring of Nigeria, which also submitted its report to President Jonathan in 2014. Any attempt to separate the Oronsaye report from the National Conference report misses the point, because streamlining the federal government must be seen in the context of restructuring Nigeria.

Let’s come back to the limitations of the Oronsaye report shortly. First, we must address two related issues: the credibility of Buhari’s decision to implement the report and its timeliness. There are three problems with Buhari’s sudden resort to the Oronsaye report. First, it lacks credibility; second, it’s too late; and third, it’s too little. As I said, we’ll return to the last problem.

For now, let’s consider the first two: the credibility and timeliness of the

decision.

Take the credibility issue first. Is there anyone who thinks President Buhari sounds credible when he talks about the cost of governance when, in fact, he has run a very profligate government over the past five years? Since assuming office in 2015, the Buhari administration has indulged in mind-boggling borrowing and spending sprees, taking Nigeria’s external debt from $9.7billion in 2015 to a whopping $27 billion by December 2019. The Federal Government’s debtservicing costs ballooned to 99.2 percent of its revenues in the first quarter of this year, before COVID-19 reached Nigeria.

Yet, President Buhari recently secured Senate approval for another loan of $5.5 billion!

In 2015, Buhari campaigned for president on radically cutting the cost of governance. One of his promises was to sell some of the presidential planes. But, once in government, he abandoned the promise. Nigeria still maintains, at huge running costs, 10 presidential aircraft.

Recurrent expenditure was about 70 percent of Federal Government’s budget before Buhari took over in 2015; today, five years on, it’s still nearly 70 percent.

One of President Buhari’s first policy announcements on assuming office in 2015 was to bring back a national airline for Nigeria, notwithstanding that such an elephant project would be a huge drain on state resources. Over the past five years, the Buhari administration has created several commissions and agencies. In his first term, President Buhari had 36 ministers; in his second, he ratcheted the number up to 43. His party’s manifesto in last year’s presidential election promised to create 2 new government-owned banks, 6 regional industrial parks, 6 special economic zones and 109 special products and processing centres – effectively more parastatals and agencies! It’s big state writ large!

Recently, during a discussion on how COVID-19 would affect Nigeria’s economic stability, the vice president, Yemi Osinbajo, agreed with the former Emir of Kano, Muhammadu Sanusi, that the cost of governance was unsustainable.

Osinbajo said: “There is no question that we are dealing with large and expensive government.” But he blamed the current constitutional structure and federal

legislators for the problem. “Those who would have to vote to reduce the size of government, especially to become parttime legislators, are the very legislators themselves”, he said, adding: “So, you can imagine that we may not get very much traction if they are asked to vote themselves, as it were, out of their current relatively decent circumstances.”

But, as a pastor, Osinbajo must know what Jesus Christ said about “first removing the plank from your own eye, before removing the speck from your brother’s eye.” Yet, the vice president ignored the beam in the executive’s eye, while focusing on the mote in the legislature’s eye. He talked about the “relatively decent circumstances” of the legislators, what about the relatively decent circumstances of those, including himself, in the presidency? What about the costs emanating from the executive that could be addressed without the legislature, such as selling off some of the presidential planes and reducing the number of non-statutory agencies?

What about reining in the excessive borrowings and spending?

Truth is, President Buhari believes in the power of the state to solve every problem. He believes in big government, in fiscal activism, in setting up committees and in throwing money at problems. This ignores the fact that at the heart of the cost of governance problem is the size of the state. A bloated state doesn’t only breed inefficiency and corruption, it increases the cost of governance. Yet, the Buhari administration pays lip service to reducing the size of the state. Which is why the president’s outrage about the cost of governance is confected and his decision to implement the Oronsaye report lacks credibility.

But here’s the second problem. Even if there is no credibility problem with the decision to implement the Oronsaye report, it’s too late. Why now? Why not since 2015? The Oronsaye report identified 263 statutory bodies and recommended they should be reduced to 161. But even if President Buhari wants to abolish just one of them, he needs legislation to do it. Yet, he said the report should be implemented “possibly by October this year.” How? Has he secured the support of his party’s legislators in the National Assembly to push through the dissolution of statutory bodies swiftly?

‘

But even if President Buhari accepts the Oronsaye report in its entirety, the truth is that it’s not the solution to Nigeria’s costof-governance problem.

For instance, the report estimated there were 541 federal parastatals and agencies, but a recent World Bank study identified 821 federal agencies!

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

Safeguarding our communities through the COVID-19 pandemic

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inancial leaders are at a tipping point.

The choices they are making today will become the bedrock of the industry for years to come. Most organisations have been forced to respond to the COVID-19 pandemic without the luxury of time to consider implications on longer-term sustainability. This begs the question: how can financial executives ensure that the decisions they make today are feasible in a post-COVID future and contribute to a more resilient tomorrow?

At this point in time, private organisations are actioning operational and organisational decisions with profound implications on their local communities, with a generational impact on how they care and indeed, are there for their workforces and the markets in which they operate in. As such, these organisations must understand the needs of specific groups who might experience barriers to accessing information, care and support while engaging with communities and larger populations in the response to the immediate crisis. Similarly, enterprises looking to engage with their communities must consider the threat of potential irreversible economic downturn and a seismic shift in the way industries operate as possible obstacles.

To that end, banks, specifically, have the power to avoid a potential recession and maintain

the operation of several businesses throughout the region through the efficient provision of liquidity and support measures. Across Africa, upwards of 20 million job losses are expected, whereas in the United States, over 40 million jobless claims have already been made as a direct result of the pandemic. This points to a larger issue regarding profitability for corporations across the region, as well as operational stability caused by the pandemic.

At Standard Chartered, we have introduced numerous solutions to alleviate the financial burden implicated on clients during this period of uncertainty. Our actions speak for themselves and, as the pandemic took hold, the bank launched a series of charitable funds and financial assistance to aid those affected. Through our global commitment of $1 billion to finance businesses that aid in the abatement of the crisis, we are hopeful that long term progression in many markets is viable. Likewise, in March, we launched a $50 million global relief fund to directly aid those impacted by COVID-19 and support emergency efforts led by charitable organisations across the globe.

COVID-19 has presented itself as a powerful reminder of our interconnectedness and vulnerabilities. The virus respects no borders, meaning that combating it calls for a transparent, robust, coordinated, and nationwide response. Tackling www.businessday.ng

the pandemic is a shared effort intertwined with health, social and economic issues and minimising its impact on these factors remains our absolute priority.

At the bank, we are continuing to present a united front against this common threat. As of May, our donations to philanthropic organisations, such as the Red Cross and UNICEF, as well as local non-government organisations (NGOs) and Government Partners in Africa and the Middle East totalled $11.8 million. These funds were directed to provide emergency relief in countries across the region impacted by the pandemic. Funding to UNICEF for example will support the immediate protection and education of vulnerable children in Pakistan and eight markets in Africa and other such activities through remote education via TV, radio, online and mobile platforms. The capital will also aid in funding child protection measures, including alternative care arrangements and family tracing services for children separated from their families due to COVID-19, training for social workers to conduct home visits to vulnerable children for mental health support, and alternative care and protection services for children of parents or caregivers affected by COVID-19.

This commitment has been vital as we find ourselves at the cusp of a potential financial crisis. Banks lead the way in providing efficient

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History tells us that once a statutory body exists and vested interests are tied to it, abolishing it would be highly politicised and resisted. It takes strong political will and public opinion to defeat such vested interests.

President Buhari should have submitted a bill to the National Assembly since 2015 to dissolve or merge statutory agencies and worked constructively with the legislators to get it passed. But he spent his first term in a gridlock with the legislature. Abolishing a statutory body won’t be a child’s play as politicking for 2023 general elections kicks in.

Now, let’s return to the main problem.

Assuming that President Buhari’s decision to implement the Oronsaye report is not too late, well, it’s too little! He said the report’s “White Paper (should) be reviewed for implementation”. But if the focus is the White Paper, well, it rejected or merely “noted” about 90 percent of the recommendations. So, unless Buhari accepts the report’s full recommendations, what’s the point?

But even if President Buhari accepts the Oronsaye report in its entirety, the truth is that it’s not the solution to Nigeria’s cost-of-governance problem. For instance, the report estimated there were 541 federal parastatals and agencies, but a recent World Bank study identified 821 federal agencies!

Let’s face it, Nigeria is administratively over-governed and key shibboleths must be tackled. For instance, does Nigeria need the expensive presidential system?

Does it need a bicameral or full-time federal legislature? Does it need 36 barely viable states, each of which has expensive administrative structures?

But these questions and the related cost-of-governance problem cannot be addressed within the narrow scope of the Oronsaye report but within the wider context of restructuring Nigeria.

So, notwithstanding Buhari’s sudden fondness for the Oronsaye report, the solution to Nigeria’s acute cost-of-governance problem lies not in the fossilised report, but in holistically restructuring the country! That’s the way forward!

Olga Arara-Kimani money management services and consumers will continuously look to these institutions for guidance. If we can set a precedent with our commitment to encourage other leading institutions to follow, then we stand to contribute tremendously to the abatement of this pressing crisis.

To aid in relieving the financial burdens imposed by the pandemic on our clients, we’ve introduced numerous measures ranging from short-term payment holidays, the extension of the tenure of a loan, the option to pay interest only on the component of the loan or offering discounts on domestic payments via Striaght2Bank.

To continue adding value during the crisis, companies need to shift their thinking. Publicprivate partnerships are emerging, supported by a surge in solidarity funds across the continent.

COVID-19 is creating new needs, while enforcing enormous financial pressures across a broad spectrum of society.

Note: The rest of this article continues in the online edition of Business Day @https:// businessdayonline.com/ Arara-Kimani, Regional Head of Corporate Affairs and Brand & Marketing, Standard Chartered Africa & Middle East.

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An empty seat for Koleade Adeniji Abayomi, SAN; OON ‘ Kole, Adieu. Rest Bashorun J.K Randle

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t the Metropolitan Club, the bankers, architects, lawyers and Chartered Accountants who sit at Table four have taken to heart the mantra which doctors have been propagating: “Mice lie Monkeys exaggerate.”

“Mortui vivos docent” (“The dead shall teach the living.”)

Our work and duty are not over yet. On the first anniversary of his demise, we shall gather to celebrate

his life. We shall have plenty to talk about especially: − Explosive reports of Jim Obazee, Executive Secretary/Chief Executive Officer, Financial Reporting Council of Nigeria − Forensic Audit of NNPC/CBN on alleged missing $20 billion by Sanusi Lamido Sanusi − Forensic Audit of Oando Plc.

by Deloitte − Domination of the accountancy profession by the “Big Four” − The originator of Gold medal Lectures/Nigerian Economic Summit − British Airways (Lost luggage still missing after twenty years!!) − Land purchased from Mr. H.A. Lardner, SAN − “June 12” (Bashorun M.K.O Abiola/Bashorun J.K. Randle) − Coca Cola War (Grant Advertising/David Hemsley) − Olam/Colonel Harptrap Singh − Tollaram (Haresh Aswani) − Chagoury & Chagoury − Dr. J.K. Randle Towers on Broad Street, Lagos − Dr. J.K. Randle Towers, Onikan, Lagos − How Senator Hope Uzodima (now Governor of Imo State); Dr. Benjamin Ohaeri; and Bashorun J.K. Randle rescued Nigeria from the brink.

− Metropolitan Club: If You Think You Are Surrounded by Fools (parts I, II, III & IV) − Estate of late Chief John Edokpolo − Estate of late Ambassador Ade Martins − Procurement of banking licence for Standard Chartered Bank Limited − Nigeria’s cement armada − Forensic Audit of Petroleum Technology Development Fund [PTDF] − Forensic Audit of Monetisation of benefits-in-kind/fringe benefits of Nigeria’s public officers by Bashorun J.K. Randle − Consultancy services regarding the fixing of salaries and allowances for Nigeria’s public officers (RMFAC) − Raising of Bonds for Flour Mills of Nigeria Plc. − Fifty years as a Chartered Accountant and weekly newspaper columnist/book reviewer.

The Bible enjoins us to mourn with those who mourn and rejoice with those who rejoice. Joy will be our portion as we step forth to give thanks to the Almighty for his steadfastness and faithfulness. He has provided us with a glimmer of HOPE. The climax would be when Ambassador Patrick Dele-Cole is called upon to spill the beans on that day when Bashorun J.K Randle was of-

fered the Presidency of Nigeria by the military government. It is for real!!

The second testimony will be delivered by Hope Uzodima, the Governor of Imo who would provide details of how he, Benjamin Ohaeri and Bashorun J.K. Randle saved Nigeria from the brink of chaos when the Labour Union went on a warpath with the government of Chief Olusegun Obasanjo over the proposed increase in the price of fuel.

Finally, we must remain thankful to the Almighty who has granted us his grace: “Life has been divided into four equal quarters by the Almighty. The first twenty-five years is for learning and acquiring skills. The next twentyfive years are for applying knowledge and expertise. After that comes twenty-five years of Thanksgiving and decline!! At seventy-five come reinvigoration and redemption. When you hit 100 years, you are required to return your Pilot’s licence !!!”

Kole, Adieu. Rest in peace.

in peace

Concluded

J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services.

Email: jkrandleintuk@gmail.com

Nigeria’s private sector and corporate philanthropy in the light of the COVID pandemic

T

he donations and good will from Corporate Nigeria towards stopping the spread and mitigating the effects of the deadly Coronavirus have been unprecedented. During this pandemic, Corporate Nigeria stepped up and rightly so. We saw corporations build isolation centres from scratch. We saw donations of hospital beds and wards. We witnessed donations of ambulances, feeding of the vulnerable in our society through daily meals and giving of “care packs”; we witnessed the giving away free products and discounting of prices of goods and services by various corporates. The breadth of giving was also equally impressive. Virtually all industries were represented- from the Oil and Gas sector to the financial services industry, to the manufacturing sector and professional services firms.

The level of giving also spanned traditional forms of giving and the non-traditional forms.

So, for example, we witnessed insurance firms, gifting insurance policies to frontline health staff, media companies airing commercials for free, airlines discounting the cost of airlifting passengers, fashion designers and textile manufacturers refitting their factories to produce face masks and telecommunication companies discounting their services or offering their call centres to health authorities for use.

Many firms and industries could not keep silent while the virus spread. The pension industry was not left out. The industry donated to the Central Bank of Nigeria/Dangote Foundation enabled Coalition against COVID (CACOVID) in addition to various initiatives to feed the elderly and vulnerable in the society and support the health system. All in all, Corporate Nigeria as a whole deserves a huge pat on the back for their social responsibilities during this pandemic.

However, it’s very important to note that corporations can only donate from profits they

earn or free cash flows they generate. They can only discount prices of goods and services which they already offer profitably. So, it follows that if organisations are not operating profitably or sustainably, they will not have enough to “bail out” governments or their host communities/countries as the case maybe.

In essence, it behoves on all levels of government to do all they can to ensure that the environment is conducive and policies are favourable so that corporations can thrive, earn decent profits and have enough to be able to support when the need arises. Corporate Nigeria has shown that it can and will stand up to be counted in the face of an existential threat.

What they require is a corresponding commitment from the governments that they will also rise up the occasion by removing roadblocks to growth, encouraging fair play, setting probusiness policies and stepping out of the way for the private sector to do best what they know how to do -Drive sustainable growth.

Having said that, the COVID pandemic presents an opportunity for all to relook at and rewrite the unwritten rule between the private sector and the government. The unwritten rule reads (or should read) something like this: “We the government commit to set policies and enact regulations and laws that enable the private sector to thrive. We will ensure that the private sector has all it needs (infrastructure, policy direction, security, functioning educational system, an effective and fair justice system) to employ citizens, earn decent profits and operate within a fair and just business environment.

We the private sector agree to use the environment created for us to start and grow decent companies that add value to the society and create decent products and services with the right quality and price. We will pay fair wages for citizens employed, adhere to the policies www.businessday.ng

set by regulators and agencies and pay our fair share of taxes and levies. We also commit to be socially responsible by adhering to the highest standards of environmental and governing standards.”

On paper, this reads well, but in practice it almost always seems skewed against the private sector, especially in countries like Nigeria. In a situation where corporations have had to provide buses or means of transportation for their staff during the pandemic, buy data, provide for diesel to power generating sets and, in some cases, provide generating sets to power their staff’s homes. These companies are still expected to provide hospitals, beds and equipment for the health workers, insure health workers etc. This takes the contract a little too far and is not sustainable in the long run.

Whilst corporations are not necessarily complaining about having to support in times of crisis, the COVID pandemic provides us an opportunity as a Nation to look at this mode of engagement between the private sector and the government closely again and begin to make needed adjustments on both sides.

With a number of companies having to make the painful decision to lay off staff, reduce salaries, cut down capital expenditure and look for creative ways to reduce costs, it is only fair that the other partner in the contract does the same. For example, we have seen that public servants can indeed work remotely. We need to ask ourselves, if the government agencies require all their offices and buildings? Perhaps the country can be better served by selling or leasing them to free up cash? Can we begin to move to an e system of government, where citizens can procure passports, licenses, permits and government IDs without physical contact? This removes the need for buildings and non-essential staff. Can we begin to see which departments of government can be merged or

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Oguche Agudah

made to function in a part time capacity?

These moves and more will enable the country to free much needed resources for development. As the pandemic has shown, Nigeria was not prepared for this crisis. The bad state of our health system was worryingly exposed. The government needs to use this crisis as an opportunity to conserve cash and cut discretionary expenses and invest in social development.

They also need to ensure that they continue to provide a favourable environment for the private sector to act as an engine for growth.

Failure to do this might mean Nigeria might not be as fortunate in future crises, as the corporates themselves might not even have enough to bail themselves out and the consequences will be dire for the Nation.

The times we live in definitely call for a change in business models for many industries and organizations, but also a drastic change in the governance model for governments all over the world and Nigeria is no different. As the unwritten contract above shows, we need each other in order for society to run efficiently for the benefit of all.

Whilst appreciating the leadership provided by governments at all levels during this pandemic, it’s time for radical changes to the models of government spending and efficiency, so that we are better prepared for future crises.

On this part of the contract, we assure the other partner in this unwritten code of continued support from the private sector of which the pension industry stands as an active member.

Oguche Agudah, CEO, Pension Funds Operators Association of Nigeria (PENOP)

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The visible and unseen costs of lockdown

Gregory Kronsten

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he experts have their say on COVID-19, and in some cases governments shield behind them. They have different opinions like any group of people yet in most cases our leaders have taken the same route. The majority of governments opted for the draconian lockdown so as to contain the spread of the virus, and have since eased the restrictions for fear of the impact on the economy and society if they did not.

A few chose a half-hearted lockdown, or none at all. In Ethiopia the authorities decided that they lacked the resources and infrastructure, and relied instead on an army of health and community workers. In Brazil the government has given the signal that the threat from the virus is grossly exaggerated. In Sweden the government’s scientific advisor argued that lockdown was possible but would be

self-defeating. A small number insisted that the threat would be overcome by the power of worship.

Most governments went for it and have since abandoned it. In some cases, mostly in advanced economies, they have been able to justify their decision on the basis of a clear decline in the incidence of the virus and in the death toll. Elsewhere they have relaxed the controls without such positive data or even when COVID-19 is in the ascendancy. For all governments, a second lockdown would be very much the last resort. The response to a second spike would be localised rather than national.

We sense a fear at official level that the population would not be so compliant the second time around. This is particularly true of the said liberal democracies. The broader fear across all governments is that economies would not withstand an extension to lockdowns. The maximum pain threshold has been about three months in Western Europe, rather less elsewhere.

On that assumption, forecasts from credible agencies of double-digit GDP contraction for some Eurozone members this year are now in circulation.

Parallels with the global financial crisis of 2008 have long been dropped. The reference point has become the Great Depression of the early 1930s or even the Spanish flu of 1918-20.

A new country study on Nigeria from the World Bank office has some alarming findings and shows why the local lockdown had to be short and sweet. According to its statisticians, 40 per cent of nonfarm employees

suffered a loss of income in April-May this year. Further, half of Nigerian households benefit from inward remittances, which are set to decline due to recession in the remitting countries.

Gross tax revenue, already derisory, is forecast to shrink from 8 per cent to 5 percent of GDP in 2020, and possibilities of a powerful fiscal stimulus shrink in tandem. The study has the poverty rate in Nigeria rising from 40.1 per cent to 42.5 percent this year.

We see further evidence of the economic and social damage from the virus in COVID-19 Impact Monitoring, a note put out last month by the National Bureau of Statistics (NBS) within a global effort by the World Bank to support data collection. The findings are based upon a survey of 1,950 households that were nationally representative. The survey period coincided with the federally mandated lockdown.

On employment, the survey found that 42 per cent of respondents working before the outbreak were out of work as a result of it. The ratio was a little higher for the poorest households (45 percent) but still high for the wealthiest (39 percent). The worst affected sectors were commerce, services and agriculture.

The loss of work fed directly into household spending cuts. The survey also showed that 35-59 percent of households had been unable to buy staple foods in the seven days before their interview, and that 26 percent could not access medical treatment over the same period. The closure of schools was damaging, too: just 62

‘

A new country study on Nigeria from the World Bank office has some alarming findings and shows why the local lockdown had to be short and sweet.

According to its statisticians, 40 per cent of nonfarm employees suffered a loss of income in April-May this year

percent of households reported that their children had benefited from any learning/teaching during the closure.

The most informative question in the survey covered safety nets (or their absence). The favoured mechanisms for coping were reduced consumption of food (51 percent of households) and drawing on personal savings (29 percent). The latter was presumably no higher because there were no savings on which to draw. The three next chosen mechanisms were reduced consumption of non-food items, support from family and friends, and borrowing from the same.

It is clear from the World Bank study and the NBS survey that the consequences of an extension to the lockdown could have been disastrous.

Political scientists can speculate about social upheaval and regime change.

This is not our territory. We will only say that the lockdown had to be limited in duration. The FGN can offer nothing approaching a Western-style safety net and lacks the resources to provide a furlough scheme or a cheque in the post for every household. Its pitiful record for revenue collection is common knowledge. As elsewhere, the time for a thorough independent analysis of how the government performed under the pressure will come once we have entered the post-COVID era. We would not be shocked if the lockdown emerges from the study as a luxury that the authorities could barely afford.

Kronsten is the head, macroeconomic & fixed income research at FBNQuest

A history of iterative recessions and recoveries - The Nigerian story

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recession is two quarters of negative economic growth. The main metric for a nation’s economic growth is the GDP. The GDP, which is an acronym for Gross Domestic Product, is defined as the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. It is the ultimate score card of how well our nation is doing. Sadly, thanks to wrong leadership, gross mismanagement and the global COVID-19 pandemics, we are not doing well as it is.

Normally our economy is expected to grow incrementally as every quarter passes us by.

But when it doesn’t consecutively, we say in macroeconomics, that we are in a recession.

Recession is generally a period of job losses, inflation, uncertainties, high debt and temporary economic decline. Also, most trade and industrial activities are reduced. Beyond recession is a depression. A depression is a long period of recession.

Through history, natural disasters, pandemics or bad economic policies or unfavourable disruptions have been the major cause of most recessions. Ours is mainly caused by ill policies or the mismanagement of macro-economic crisis that affects major sectors of the economy.

As we stroll into a new quarter, and as Nigeria heads into a likely recession in the coming days, we’ve been here before. Panic is not a strategy.

To get out, let’s see what history reveals first of all.

Historically, Nigeria’s first recession was in 1966 lasting 3 years, ending 1968. In fact, it was a depression. It was caused by the political instability and successions of coups. This eventually led to the bloody two and half years of civil war. Prior to it, oil had just been discovered in Nigeria. But the Biafran War crisis and the corresponding embargo placed on the secessionist East in mid-1967, led to weakening in the chances of exploiting optimally the oil output.

Thanks to the war, came the damage of capital,

death of millions of humans, disruption of trade and the destruction of properties. These were triggers of the first recession.

After the war came stability and growth.

Nigeria enjoyed some level of prosperity in the 70s. The oil boom of the 1970s was responsible for revenue, but also the emergence of disorderliness in Nigeria. There was a remarkable increase in the foreign exchange earnings during the oil boom era. Right around it, in 1975, we experienced our second recession.

This lasted for a year. It was also the year of a bloodless coup.

Two years later, in 1978 we experienced another recession, which also lasted for a year, this time. It was caused by falls in oil prices. Within two years again, we found ourselves in another depression. It was the second depression in our great history. Once again it was plagued by a shift in political power. This depression lasted for years spanning from 1981 to 1984. Major part of the 80s saw a global crisis in the Middle East that played to our favour as oil producers.

In between all of these prosperity and recessions, we really didn’t diversify our economy.

We were mainly dependent on oil. And even in the value chain, we didn’t quite have a thriving midstream. And our upstream was mainly played by foreign multinational firm that didn’t care much about our national interest.

We saw another depression in 1993, ending in 1995. 1993 also saw the nefarious leader, Sani Abacha, come into power. It was a dark period. International embargos were placed on us as looting thrived. There was also disregard for human rights and lack of support for the private sector. This affected our economy.

After the death of Abacha and the restoration of Democracy, we saw a decade of glory as Obasanjo tried to restructure major parts of the economy. Debts were forgiven; the telecom sector saw a boost with the advent of the GSM network as well as the attempt of privatisation of major areas of our infrastructural holdings. Our www.businessday.ng

economy was in steady growth but then came 2016. In 2016, we slipped into a recession in the second quarter of that year. And that recession maintained downward (negative) growths through the rest of the year.

Recessions are not new to Nigeria or Nigerians. So, we always assume or expect that this too shall pass. Usually, an economic recovery follows a recession as the economy adjusts and recovers. But there will always be gains lost and massive job cuts during a recession. The indicators of economic recovery include, employment decline, higher debt profiles by businesses and general panic and loss of confidence by investors. But there is usually a recovery.

It is also important to note, there are different types of economic recoveries. These recovery types are based on different alphabetical letter shaped, business cycle curves.

The V –Shaped Recession: the economy suffers through a sharp recession but quickly recovers.

It is usually caused by minor political crises and natural disasters. The U – Shaped Recession: The economy takes a much longer period of time to recover (usually in the neighbourhood of 12-2 government, usually caused by financial crises and major political crises (Overthrow of a democratically elected government). The L – Shaped Recession (Depression): Sharp recession, followed by years of stagnant growth (5-10 years) Stagflation, high unemployment of over 25 percent, and high crime rate.

Presently, we are faced with a global recession driven by the lethal COVID-19, the first medically induced recession in a century.

This recession is characterised by; economic lockdown for months, social distancing, ban on gathering of more than 20 persons at time, closure of places requiring the gathering of large number of people (banks, companies, markets), ban on interstate travel, limited movement within cities, and functioning of limited essential activities – food markets, grocery stories, limited banking activities like ATMs, Online

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EIZU UWAOMA banking etc.

However, for SMEs to survive and thrive through this COVID-19 recession, they must; find creative ways to survive, conserve cash flow, adopt technology, follow the economic news, take cheap loans when available. Internally, they also need to have honest conversation with their staff about the economic situation. This requires payroll cuts, suspension, and temporary layoff.

In total, we have had 3 recessions and 3 depressions. They were driven by political instability and oil price collapse. This reminds us that we have been here before, and it is important to note, blue chip companies mostly are born during recessions and survivors become champions.

Now, over to you. If you’ve lost your job or closed shop to this pandemic induced recession, it may be a perfect time for digital transformation, self-discovery, corporate remodelling and self-development. This is beyond luck and mere grace. Grace doesn’t help mentally idle people, neither do people whom it has sent for you. They are disguised in a robe called work. Get busy. The biblical mystery of capital is mathematical; it ministers seed to the sower not by miracle (but insights, people and ideas).

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Uwaoma is a start-up, corporate restructuring and strategy consultant. contacteizu@gmail.com

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EDITORIAL Frank Aigbogun

FG now seeing the bigger picture on subsidies

editor Patrick Atuanya

To achieve sustainability, subsidy removal must be backed by law

Publisher/Editor-in-chief

DEPUTY EDITORS John Osadolor, Abuja Tayo Fagbule NEWS EDITOR Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude 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

P

erhaps one of the more enduring impacts of the Coronavirus pandemic is the clarity it has brought on the ruinous impact of consumption subsidies. After years of wasteful spend, the Federal Government is saying good bye to the catastrophic policy - even if unwillingly.

This shift is not the product of deep thinking, rather a burgeoning fiscal crisis on account of a slump in crude oil earnings and a rampaging pandemic were the triggers.

With the exception of the new fiscal bill 2020, this government’s fiscal policy has been primeval leaving the economy comatose.

The Buhari government distrust private capital for investments but gladly accept it as loans. It wastes resources propping up the naira while ignoring billions of dollars’ worth of economic loss because investors, uncertain of recovering their money, keep them away. It builds expansive infrastructure but excludes mechanisms to recover costs. Lacking understanding of how markets function, it regulates thriving industries to death. Rather than push for inclusive trade, it shuts borders and is imposing

import-substitution in an economy where it is cheaper to move a container from China to Lagos, than from Apapa to Sagamu.

Last week, the Federal Government secured $750 million funding from the World Bank for the ailing power sector. The condition for this loan is that the government stop subsidising power and ensure tariffs guarantee commercial returns.

It has spent over N380 billion so far on electricity subsidies in 2020 after bailing out operators with the princely sum of N1.7 trillion since May 2015.

Since 2017, it has been burning over N1 trillion yearly to subsidise petrol while defunding healthcare and education. It maintains a dizzying amount of bureaucracy to manage the business of importing refined petrol from Custom officials to those managing petroleum equalisation fund. Yet, it spends a fortune paying workers of the three petroleum refineries who don’t even produce enough petrol to power their own generators.

As COVID-19 led to shut-down of factories and airlines, the demand for oil crashed and prices fell providing an opportunity to get out of fuel subsidies completely. Instead, the

government announced an end to subsidies but it would still determine prices. Only an economic jolt of irreparable proportions will wean this government from its obsession with petrol.

The Buhari government has cultivated the socialist posture and has gone to great lengths to disassociate itself from moves to raise prices of petrol. It took massive lobbying by Ibe Kachikwu, former minister of state for petroleum resources and officials of the ministry to secure Buhari’s approval to raise the pump price of petrol in 2016. Soon after oil prices rose and the government resumed paying subsidies but declined to speak about it publicly.

The government’s actions may be inspired from its rear-view focus in running the affairs of the nation. It met an economy in shambles when it assumed office, rather than get to work, it spent months lamenting the state of affairs. In keeping with this philosophy, it refused to abolish petrol subsidies fearing a similar backlash former President Goodluck Jonathan received in January 2012 when he announced an end to the policy which almost sank his government.

But at the time, the argument

for subsidy removal was unpopular in the context of the profligacy of government officials and widespread corruption which many Nigerians attribute low government earnings to rather than subsidies. This is why the mind-numbing disclosures of fraud from the subsidy scheme in 2011 didn’t sway the masses, in any case, it was the role of the government to prevent these frauds.

In reality, though, the subsidy is untenable today as it was in in 2012. For example, in 2011 alone, $9.3 billion was spent on subsidising imported refined petrol. This represented about 30 percent of Nigeria’s government’s expenditure, 4 percent of GDP and 118 percent of the capital budget. In comparison, Nigeria’s education, health and works/roads’ budget for 2011 were just a mere $2.2 billion; $1.32 billion and $680 million respectively.

But the Buhari administration which rode into power on the wave of popular discontent over corruption has continued to maintain the same policies like subsidies that bred corruption in the past. So, the current decision to abolish them augurs, well for the economy but to make them sustainable, they must be backed by law.

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COMPANIES&MARKETS CONSTRUCTION

Arbico posts highest first quarterly profit in 5 years on revenue surge SEGUN ADAMS

A

rbico’s profit for the first three months of 2020 hit the most in the comparable period since 2015 at least, more than 5,000 percent increase thanks to impressive an revenue figure recorded in the quarter.

The construction and engineering services firm on Friday, in its financial report published on the Nigerian Stock Exchange (NSE), said it made N899.63 million in profit from January to March.

The record profit reversed a slowdown seen in the same period last year and follows a U-turn in the company’s bottomline as it reversed a 2018 full-year loss last year.

Arbico grew its profit by the most since 2016, about 70 percent to N2.196 billion.

This is the highest in the periods considered.

Arbico delivers projects for government, multinationals, industrial groups, oil

and gas majors and high networth individuals with services including pre-construction, design-build, general contracting and construction management.

Some of its projects in-

Meyer holds 48th AGM, announces strategies to boost operation

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remium Paint Manufacturer Meyer Plc has said it is currently working on strategies to help speed up its business transformation plans in 2020 in a bid to regain market leadership position although it is aware of the attendant threats posed by COVID-19 to its business operation.

The manufacturer at its 48th Annual General Meeting in Lagos on Thursday said part of its plans includes the introduction of Meyer point-of-sales outlet with the pilot phase in Lagos, revamping of its website to enable online transactions, the re-introduction of a low-end product under a new name.

“We are going to be working closely with the management to ensure we turn the trend of things,” said Kayode Falowo, Chairman of the Board, Meyer, noting that with the outbreak of COVID-19 the company has lost a significant part of the year and that the fruits of ongoing efforts might be realized post-2020 due to dampened economic outlook.

Meyer also said it hopes to make a distribution to shareholders from the balance of the sales of its property after it

While the quarter was positive for Arbico, unlike the slowdown seen in Julius Berger’s first-quarter number, the construction industry is expected to feel the heat of the new corona-

virus outbreak that has left households, firms and the government cash-strapped.

With a grim outlook for the economy this year, analysts expect a slowdown in investment and expansion

L-R: Dotun Solanke, CEO, Mediatek; Habeeb Somoye, Marketing Director, Xiaomi Nigeria; Noimat Salako-Oyedele, deputy governor Ogun State; Sola Arobieke, senior special adviser to Ogun State governor on trade and investments; Gaya Samir, senior secretary, Xiaomi Nigeria, and Abdulquadri Umar, group accountant, Xiaomi Nigeria, at the donations of first Batch of Tens of thousands of surgical masks to Nigeria in aid of the Covid 19 pandemic by XIOAMI Nigeria to Ogun State Government.

MANUFACTURING

SEGUN ADAMS

clude Feyide House Victoria Island, Lagos, NBC Asejire Plant Ibadan, Oyo, Effluent/ Water Treatment Plant IjebuOde, Ogun, and the Oba Elegushi Residence Ikoyi, Lagos, to mention a few.

relocates its facility.

“We have been engaging our strategic business partners in Abuja and some parts of the north and that is going very well…we have a lot of market initiatives to encourage customers to buy from us,” said Rotimi Alashe, Acting MD Meyers. “We are doing well although not as much as without COVID.” The paint maker said it has put in place several cost reduction initiatives to offset the negative COVID-19 impact on revenue. In line with guidelines on social-distancing amid the coronavirus pandemic, proxies were used for the attendance of shareholders to limit the gathering and ensure participants kept the advised physical distance.

The meeting was also livestreamed on YouTube per the social distancing rules of the Nigerian Stock Exchange (NSE) and other regulatory bodies.

The General Meeting approved, amongst other resolutions, the individual Company, and consolidated financial statements for the fiscal year 2019. At the AGM, members approved the re-election of Erelu Angela Adebayo and Tony Uponi as Non-Executive Directors.

from companies and delayed consumption by households (which would affect the construction sector too.)

Importantly, diaspora remittance which is an important source of residential real estate financing by households is expected to plunge this year.

On the positive side, the federal government is looking to finance infrastructure investment through bonds and loans it receives.

Arbico posted a gross profit of N1.128 billion in the year, around five times what it realized in 2019.

Claim on insurance, other income and finance income all grew in 2020 which led to a 10 fold increase in the income outside the company’s main business.

Arbico’s salary expenses rose by 59 percent and employees benefits also saw an increase.

Arbico Plc is a full-service building and civil engineering construction company.

It was established in 1958 and has been quoted on the Nigerian Stock Exchange since 1978. The company has become one of the foremost building companies in Nigeria with presence across the geopolitical zones of the country

IBEDC, Ikeja Discos commence implementation LxLf Limited offers 40% discount on watch of electricity tariff review this week brands, celebrates one year anniversary OLUSOLA BELLO

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he management of Ibadan Electricity Distribution Company (IBEDC) Plc says as part of efforts to deliver excellent services to its esteemed customers, it will be implementing a tariff review beginning from the 1st of July 2020.

John Ayodele, the Chief Operating Officer, in a statement, said the objective of the review is to ensure that IBEDC adjusts its tariff in line with the current economic realities. This is required to meet the new Performance Improvement Plans (PIP) for Electricity Distribution Companies in Nigeria, as well as to achieve financial and fiscal sustainability in the Nigerian power sector.

“In order to provide more efficient and reliable service to customers, cost-reflective tariffs are required to cover the cost of critical investment in infrastructures and other parameters necessary for improved service delivery. This new tariff design is based on quantity of power supplied as customers will only pay based on availability of supply.” For example, the tariff design is based on service delivery, such that those receiving 20hrs supply daily will pay more than those getting 10hrs.

www.businessday.ng

He also explained that, the company is very mindful of the challenging economic situation occasioned by the global pandemic COVID-19, but the macroeconomic facts of rising inflation rates and a volatile foreign exchange market compelled the implementation of the new tariff design. “The tariff review is to reflect macroeconomic indices in Nigeria and the global harsh economic realities facing the power sector”.

He said, with this tariff, the company amongst other things will be in a better position to roll out more meters, upgrade aging infrastructure and be more responsive to the complaints of its customers. We appeal for the understanding and cooperation of our esteemed customers as we are poised to serve you better.

Also in the same vein Ikeja is notify it customers that it is carrying out the same exercise in its franchise area from July 1, 2020.

It stated that the new tariffs, which are Service reflective, are end-user rates to be paid for electricity based on the level of service (including availability and reliability) provided to a cluster of customers.

“This is in line with our Performance Improvement Plan (PIP) across the entire network in the coming months

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IFEOMA OKEKE

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s part of the activities to mark its one year anniversary, LxLf Limited, an online fashion retail store has disclosed plans to offer a 40 percent discount across all watch brands it retails.

LxLf Limited which is among the subsidiaries of I’s Age Limited started the promotion on the 1st of June 2020 and will end on the 30th of June 2020.

Watch brands the company intends to extend this promotion to include Police, French Connection, Lee Cooper, Ben Sherman and Sekonda.

Speaking on LxLf’s journey in the last one year, Okeisolobrugwe Clifford Ikpikpini, the Chairman and CEO of I’s Age Limited, explained that it hasn’t been an easy journey both in the setting up of LxLf Limited and its subsequent operations sustenance especially trying to convince new customers that LxLf Limited only sell brands they have retail agreements with either directly or with their Nigerian accredited dealer.

Ikpikpini said the company has built trust amid the menace of too many fraudulent online retailers, those that display a product image and deliver something else @Businessdayng

to those that sell replicas as original.

He said he is grateful in general to every company that agreed to be a part of LxLf Limited operations from DHL EXPRESS that handles all its customers orders delivery nationwide, to the brands Nigerian authorized retailers and most importantly all its customer that took a leap of faith trusting LxLf and making purchases before and during it’s one year anniversary 40 percent discount promo, he also said I’s Age Limited is working diligently on getting retail agreements with more luxury brands for LxLf Limited so as to increase the brands/category options/ choices for present and future customers.

LxLf Limited which began public commercial operations on the 10th of April 2019 engages in free nationwide delivery in two working days with DHL EXPRESS and makes claims of their returns being free of charge.

The company also provides free after sales services within warranty period for all products that come with warranty and ensures that all watches they sell come with their respective manufacturers internationally accepted warranty.

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Monday 29 June 2020

BUSINESS DAY

Live @ The Exchanges Stock market ends week on positive note Stories by Iheanyi Nwachukwu

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igerian equities market ended the last trading session of the week on a positive note, recording an increase of 0.83percent on Friday June 26.

The market halted its six consecutive sessions of capital depreciation, driven by gains in stocks like Airtel Africa Plc, Nestle Nigeria Plc, UACN Plc and ETI Plc. Increased bargains in favour these stocks helped to reroute the benchmark performance indicator

which ended the trading week on a positive note, after rising by +0.01 percent week-on-week (WoW).

Record dip in shares of Dangote Cement Plc which led the laggards could not reverse the trend.

The stock market has been pressured lately as fear of second wave of Covid-19 pandemic takes a toll on investors’ confidence.

This was evidenced in four out of the five trading sessions of the review trading week which closed on a negative note.

The Nigerian Stock Exchange (NSE) All Share Index (ASI) increased to close at 24,828.96 points. The market’s negative return

year-to-date (YtD) stood lower at -7.50percent. The value of listed stocks increased to N12.952trillion.

Market watchers expect the market to start the new week on a positive note, amidst portfolio re-balancing for second quarter (Q2) by portfolio/fund managers.

Eighteen (18) equities appreciated in price during the review week, higher than 14 equities in the preceding week. Fortythree (43) equities depreciated in price, lower than 47 equities in the preceding week, while 102 equities remained unchanged, same as in the preceding trading week.

ASHON to harmonise members’ trading on FMDQ, NASD, LCFE

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arring unforeseen circumstances, there are strong indications that Association of Securities Dealing Houses of Nigeria (ASHON) has stepped up an arrangement to ensure that its members trade on all the securities exchanges in Nigeria in line with the new name of the professional trade group.

ASHON, the umbrella body for all Securities Dealing Ho u s e s i n Ni g e r i a w a s formerly known as Association of Stockbroking Houses of Nigeria until last year, when the trade group swiftly and creatively changed its name to reflect the enlarged functions of its members without prejudice to the existing acronym. As part of its brand positioning, the Association also changed its logo and launched it with fanfare to reflect an array of its members’ functions.

This is consistent with the Bill that will recognize Stockbrokers as Securities Dealers as against the current narrow perspective of their roles being limited to dealing in equities only.

Informed sources explained at the weekend explained that the report of a Technical Committee, set up by ASHON to harmonize the relationship between its members with FMDQ Plc, NASD Plc and Lagos Commodities and Futures Exchange (LCFE) was ready for discussion by the Council, whenever the members meet. “ ASHON is proactive.

Recall how it swiftly changed

Onyenwechukwu Ezeagu, ASHON’s, chairman

its name to reflect the enlarged roles of Stockbrokers as part of the expectations from the anticipated endorsement of the Securities Bill. It achieved this without losing the initial acronym. This was followed by setting up of a Technical Committee to fashion out modalities that will enable our members trade seamlessly on all the securities platforms in Nigeria. The Nigerian Stock Exchange has been the only platform over the years but we now have FMDQ, NASD and LCFE is ready for full blown operation. The Committee’s report will be reviewed by the Council and appropriate decision shall be taken “, said a source who pleaded anonymity at the weekend.

Market watchers have observed that Stockbrokers are not so active in trading fixed income securities on the FMDQ whereas the financial instrument was the hub of transaction on The Exchange in the past. “ Stockbrokers slept and bankers have taken over their job before the day break. I think ASHON is ready to reverse the trend. ”, said a Custom Street analyst. www.businessday.ng

CWG ends 2019 financial year with net revenue of N9.56bn

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WG Plc has held its Annual General Meeting where it presented its results showing record net revenue of N9.56 billion in the 2019 financial year, representing a 23 percent increase from 2018, while gross profit growth rate of 25 percent was also recorded.

The 2019 AGM was held online by the largest system integration company in Nigeria, owing to the Covid-19 pandemic ravaging the world, which has forced many organizations to constitute a remote-working policy.

Reading the summary of the 2019 financial year report which ended in December 2019 to shareholders.

Phillip Obioha, the chairman of CWG noted that the valueadded revenue and gross profit were due to the re-introduction of some valuable IT services and an increase in customized service businesses.

“In 2019, revenue and total profit growth were as a result of the renewed partnership with our strategic partners. OPEX was reduced by 23percent, 2019 over 2018, due to different optimisation exercises that

were carried out in the year.

We also closed 2019 with a positive EBITDA of N892million and PBT of N634million.

Right now, we are charting a course of a new organisation that would be around for the next 50 years,” he told the shareholders.

While assuring the shareholders that CWG Plc will continue to innovate and create cutting-edge technology and services that will be relevant today and fit for the future, Obioha stated that CWG is well-positioned and equipped to redefine innovation that provides solutions to the technologicallybased institution gaps that are seen in potentially viable and critical sectors of the Nigerian economy and SubSaharan Africa.

Adewale Adeyipo. the chief rxecutive officer of CWG Plc attributed the performance in the 2019 financial year to what he described as the ‘five pillars’ strategy the company adopted two years ago. The five pillars, according to him are Growth, Profit, Liquidity, Brands and Dividend.

He disclosed that strict adherent to the five pillars has

Wi t h t h e i m p e n d i n g demutualization of The Nigerian Stock Exchange and increasing level of uncertainties in the system, A S H O N ’s C h a i r m a n , Onyenwechukwu Ezeagu had consistently maintained that his members would remain innovative as part of the strategies to sustain their operations. “ We a re re v i e w i n g ou r bu s i n e ss m o d e l t o accommodate the new normal. We have constituted a committee to advise our Council on the effect of the pandemic and part of their terms of reference is to chart a way forward for our business, therefore, it will not be right to preempt the work of the committee at this time. “ The pandemic has come to recalibrate the world and redefine humanity. It is important that we all learn to readjust to the dictates of the times; Stay safe by following the directives of the experts.Keep hope alive and do not give in to fear. Help one another and look out for one’s neighbor. Change the way we live, work and play to conform to the realities of the pandemic. Collaboration rather than competition should help all to overcome the new normal.”, said Ezeagu Only recently, the Association’s Spokesperson, Ify Ejezie said that ASHON’s Committee on COVID-19 had submitted its report on how the members can operate seamlessly irrespective of the impacts of the pandemic on the operating environment. https://www.facebook.com/businessdayng

@Businessdayng

helped CWG to deliver on its mandate to enable the growth of its clients.

“That is the level of focus we have delivered with the five pillars we created. If you also want to go to some certain deliverables; then we can begin to talk of our BillnPay platform presentment platform, which is an app of CWG 2.0.

On BillnPay last year, we recorded a transaction volume of over N12 billion, which is a major chunk of over 3000 percent of what we had in 2018, 2017 and 2016 combined. So, I can tell you that the underlining principles that have kept us focused are these five pillars,” he said.

He added that these pillars have created an essential guide on what CWG Plc does and how to do it, explaining that CWG evaluates every decision and determine what will be the contribution of the decision on any of these pillars.

“These pillars have enabled us to create some focus and clarity. It has given us insights on what we need to take seriously and what we need to stop doing. With these pillars, we measure the success or otherwise of our company,” he further stated.

Monday 29 June 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

23

• Utilities • Managing your Tax

Money tips for single mums a position to work virtually, this may be the best option. If you are effective and efficient in your role, your boss may well consider this as a long-term option for you. Working from home is the new normal; put things in place to make it possible for you to do so.

Invest in yourself You are your greatest asset; don’t relegate yourself to the bottom of your priority list. Bring yourself to the top because it is important not just for yourself, but for your children.

Get the skills, qualifications, certifications that you need to perform at your best and earn those salary increases and promotions that you deserve.

You need to be at your best to be in a strong position to set up your own business.

Invest in a network of proactive ambitious people that support, encourage you and help you grow.

Don’t ignore your insurance As a single parent, health, life, and education plans are crucial. Even if you feel confident that your children will be cared for by their father or other relatives should anything happen to you, do put firm arrangements in place for them.

As morbid as it may sound, if you are the primary breadwinner with dependent children, it is your responsibility to try to ensure that there will be some financial cushion

www.businessday.ng

‘

As a single parent, health, life, and education plans are crucial. Even if you feel confident that your children will be cared for by their father or other relatives should anything happen to you, do put firm arrangements in place for them

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ecent analysis has revealed that single parents, in particular single mums, who form over 80% of single parenting have experienced the hardest economic shocks as a result of the global Covid-19 crisis.

Single mums face unique financial challenges as they simultaneously try to provide for the family, take care of their own financial needs, whilst ensuring that, should anything happen to them, their children will be taken care of. Whether you are a single mother by choice or by circumstance; unmarried, divorced or widowed, here are some issues to consider as you manage your money.

Create a Budget Budgeting is important for us all but when there is only one income to support a family, it takes on a whole new meaning. Set a realistic budget and try to stick to it as this will form the basis on which you can confront any financial pressures.

How much are you spending? Is there anything you can cut back on?

Paying close attention to how you spend by tracking your expenses over a period of a month or two is good preparation for establishing a realistic budget. This will help you to plan systematically to meet your immediate needs and long-term financial goals.

Build an Emergency Fund Many single mums raise their kids with little or no financial other support from their children’s fathers. With no second income to fall back on, there must be a safety net, a back up plan to tide you over difficult situations or emergencies. Children fall ill, there may be ageing parents to take care of - which tends to be the

responsibility of daughters, or there may be car or home repairs to worry about. Such events come out of the blue without warning, so it is important to be prepared with some funds set aside to fall back on. Six to twelve months of expenses are recommended.

Where will you live?

Particularly if you have relied on two incomes to maintain the family’s standard of living, it could be a hard knock finding that you have to downsize.

Your priority should be to find affordable housing in a secure location. Naturally, there must be a balance between the need to live in a decent home in a safe environment versus having to put up with substandard housing that is not what you hoped for your children. Don’t let keeping up appearances come into the mix; it’s better to “downsize” in the short term, than to jeopardize the future financial security of your family.

You need a support system A support system matters more now than ever, in this pandemic situation. For many single mums, especially those that are essential workers, it can be so difficult to find or indeed afford the right child minder, whilst maintaining the important protocols to keep your family safe. This will take a chunk of your income but is very important for your peace of mind and being able to keep your job. If you are in

should you lose your job, become ill or in the event of your untimely death.

A life insurance policy will help to replace and protect your income and can help to prevent your children from becoming totally dependent on the goodwill of relations or friends. It can also provide legal guardians with the resources to care for your children and to ensure that they have the opportunities you would have wished for them.

By putting in place the right type and amount of insurance, you will have peace of mind in the knowledge that you are securing your children’s future.

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Invest for the future Even with the huge demands of single parenthood, you cannot afford to ignore your own future financial security. By starting to plan and invest early, even a little amount set aside regularly over several years can accrue over time into a significant sum. The earlier you start saving for your retirement, the more you will have set aside to ensure a comfortable and secure retirement.

Estate planning isn’t a death sentence An estate plan is more important than ever for a single parent. A will provides clear directions about who will inherit your personal property, bank accounts and investments and who will execute your affairs after your death. Carefully determine who would be capable and willing to assume responsibility for your children and that they understand the full implications including the significant financial responsibilities that accompany legal guardianship.

Verbal instructions carry little weight; if you die intestate, that is, without a written will, everything involving your estate and your children will be decided by a probate court and might not be in accordance with your wishes. You may also want to consult with a lawyer about setting up a living will which expresses your wishes if you become terminally ill or incapacitated, and a durable power of attorney to empower someone you trust to carry out your express wishes.

Don’t spoil your children For many single parents, especially following a divorce, there is a tendency to spoil children.

With the societal pressure and the psychological pull of social media, it can be difficult to navigate the minefield of excessive buying and spending, particularly for your children.

This can be very damaging to not only your finances but to their attitude towards money as well. You absolutely do not need entitled, spoilt children with all that you already have on your plate. Don’t feel @Businessdayng

guilty about not providing everything that they want.

Encourage them to earn and to start to save some of their own pocket money.

Don’t be distracted by societal pressure It is so easy to compare yourself to others and want to stretch yourself to try to do what you really cannot afford. Stay focused on your own goals and don’t get swayed by a need to keep up appearances. There will have to be some conversations with them to manage expectations even as you involve them in discussions around family goals and what you are working towards.

With clear goals, deliberate planning, and proactive action to reach them, many single mums are living their dream lives; they are able to provide for themselves and their children, and are also able to afford some of the luxuries of life with a clear view of a life of financial security.

Nimi Akinkugbe has extensive experience in private wealth management.

She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.

For more personal finance tips, contact Nimi: Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.

For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

24

Monday 29 June 2020

BUSINESS DAY

real sector watch

How GBfoods completed N20bn tomato processing factory in Nigeria Odinaka Anudu

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n 2019, Gbfoods makers of Gino, Jago, and Bama products set out to build a fully backward integrated tomato processing factory in Nigeria. The goal was simple: To build a factory that produces raw materials on the farm and then processes them within the same area.

Not only does this minimise the post-harvest loss, but it also guarantees a direct line of conversion from farm products to finished goods. Once harvested, the fresh tomatoes will be converted to tomato concentrate which GBfoods uses to make Gino Tomatoes Mix and Gino Tomatoes Pepper Onion.

The factory, located in Kebbi State, was completed in 2020 despite the impact of COVID-19. The most critical ingredient for a tomato farm is a constant water source.

While conducting research, GBfoods explored several states with good arable land to find the most suitable location for the factory.

Kebbi State emerged as the destination of choice. Not only did it have the land the company needed, but it

Atiku Abubakar Bagudu, Kebbi State governor (right), and his entourage, during an inspection of N20bn GBfoods’ tomato processing factory built in partnership with CBN in Kebbi recently

also had an adequate water source from a river nearby.

GBfoods says that the support from the Kebbi State Government, the Emir of Yauri, and the Central Bank of Nigeria was crucial to the success of the factory.

As construction of the factory progressed, the world was hit by the Coronavirus (COVID-19) pandemic. Countries shut down their borders and several cities in Nigeria and globally were locked down for health and safety reasons.

To cope with the pandemic and any concerns it raised, GBfoods immediately put in place all safety measures required by global health standards. The team on site operated within a closed ecosystem that allowed no outsiders. All staff working and staying on site were tested regularly, not just for COVID-19 symptoms but also for other tropical diseases (like malaria, typhoid, hepatitis, among others).

The company provided its staff with personal protec-

tive equipment (PPE) and had their vital signs checked daily. The resident nurse on-site also monitored their health regularly.

In 2018, the global tomato market revenue was $190.4 billion, up 6.5 percent from the previous year.

The total amount of tomatoes produced worldwide totalled 188 million tonnes in 2018. According to PricewaterhouseCoopers (PwC), the production of fresh tomatoes in Nigeria has grown by 25 percent from 1.8 mil-

lion tonnes to an estimated 2.3 million tonnes over the last decade. Nigerians consume roughly 2.3 million tonnes of tomatoes every year as it forms a major part of many local dishes, including the world-famous Jollof Rice. This shows there are a huge market for tomatoes globally and massive consumption needs locally.

However, the domestic production of tomato is at 1.3 million tonnes (after factoring in tomato wastage along the value chain).

There is not enough to meet demand. To bridge the gap, Nigeria relied heavily on tomato paste importation in the past. This meant a significant loss of revenue and jobs for the country. Data show that the country imported tomato paste at an estimated cost of $360 million annually in 2016 and 2017. But things changed in 2017 as the federal government introduced a policy to boost the local production of tomatoes and set Nigeria up to be a major player on the global stage.

Apart from increasing the local production of fresh tomatoes, the policy was also aimed at increasing the local production of tomato concentrates and reducing post-harvest losses. This

set the stage for GBfoods to make history with the new tomato factory three years later.

Now with the factory in operation, over 1,000 jobs have been created, including 500 farming jobs, 150 factory jobs, and 150 construction jobs. The company says more jobs will be created upon expansion. Already, the project has impacted the lives and businesses of over 5,000 smallholder farmers in Kebbi State, according to the company. While building the factory, GBfoods also ensured the provision of amenities to support the host community, including the provision of clean water for cooking and drinking, even to communities nearby.

For GBfoods, this Factory presents an opportunity to increase local production of tomato products for sale and consumption. It also presents a long-term opportunity to export tomato concentrate to other markets, especially within ECOWAS. This sets Nigeria up for a much bigger role in the global market while improving the lives of its tomato farmers, boosting revenue, and diversifying the economy.

FrieslandCampina WAMCO pledges to expand Nigeria’s dairy capacity as revenue rises 9% …commissions factory for yoghurt production Odinaka Anudu

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airy maker Friesland Campina WAMCO has pledged to raise Nigeria’s milk capacity to ensure that Africa’s largest economy achieves self-sufficiency in the industry.

The makers of Peak and Three Crowns milk announced a turnover of N161.8 billion at the 47th annual general meeting (AGM) held at the FC Academy in the company’s head office in Lagos, last Thursday.

The meeting was held under strict adherence to government-approved COVID-19 protocols, including social distancing and re-

strictions on the maximum number of persons at a gathering.

At the meeting, FrieslandCampina WAMCO reported a turnover of N161.8 billion, representing an 8.5 percent increase over 2018 and a profit before tax (PBT) of N18.8billion, a 15 percent increase over previous year.

The shareholders unanimously approved a total dividend payout of N9.49 per N0.50, having paid an interim dividend of N2.68 per N0.50 share in November 2019 and a final dividend payout of N6.81 per N0.50 share.

“In the year under review, the business environment remained challenging. In spite of the headwinds, FrieslandCampina www.businessday.ng

WAMCO played a leading role in Nigeria’s backward integration initiative led by the Central Bank of Nigeria in the dairy sector,“ Ben Langat, managing director, FrieslandCampina WAMCO, said in a statement sent

to BusinessDay. The company has activated its Dairy Development Programme (DDP) in Bobi Grazing Reserve, modeling its 10-year success of the programme on a 10,000-hectare grazing

reserve in Mariga local government area of Niger State.

Also, in line with its business plan, the company has commissioned a factory for the production of yoghurt and introduced the new Peak Yoghurt Drink in

L-R: Ore Famurewa, executive director, corporate affairs, FrieslandCampina WAMCO Nigeria PLC ; Ben Langat, managing director; Moyo Ajekigbe, chairman, board of directors; and Peter Eshikena, non-executive director, at 47th AGM of FrieslandCampina WAMCO Nigeria plc held virtually with shareholders last Thursday. https://www.facebook.com/businessdayng

@Businessdayng

three distinct flavours (Plain Sweetened, Strawberry and Orange) into the market.

According to the statement, the board of directors and management of FrieslandCampina WAMCO remain positive and confident about the future of the company despite the disruption by the current pandemic.

The company will remain focused on its purpose of providing better nutrition and advocating healthy living and will continue to actively engage consumers and pursue its backward integration for business sustainability, the statement further said.

The 47th AGM adopted the company’s financial statement for the year under review.

Monday 29 June 2020

BUSINESS DAY

Start-Up Digest

25

In association with

Rosemary Owolabi: Building successful interior design brand Josephine Okojie

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uilding a successful interior design brand can be very tough in Nigeria. But this is not the case for Rosemary Owolabi, chief executive officer of Robid Interiors.

Rosemary started her entrepreneurship journey at an early age and was inspired to establish Robid Interiors in 2016 out of her passion and love for designs.

“I did a lot of buying and selling to make ends meet and also develop the intriguing passion of creating beautiful spaces, so I started decorating my friends’ rooms for free and later started charging little token when I got referrals,” she says.

To further develop her skills in interior decoration, the young entrepreneur attended an interior design school and took an entrepreneurship management course at the Lagos Business School.

Since starting, the busi-

ness has grown its customer base and service offerings steadily, a feat the educationist-turned-entrepreneur attributes to her employees and customers.

“With the support of my staff, artisans and customers, we have experienced steady growth in our customer base and service offerings,” she says.

“We have also expanded the number of clients that we serve and the number of states where we work,” the young entrepreneur adds.

Currently, she has four full-time employees and works with over 100 artisans and three architects serving individuals and corporate clients across the country.

She says creativity, innovation and simplicity have helped her remain in business over the years. She explains that the business has created a niche for itself in the country’s interior design industry.

“Our ability to attend to the needs of high-net-worth and low-income individuals and corporates has helped

Rosemary Owolabi

us to remain relevant in the space,” she says.

“We leverage on the power of technology, provide advisory services to potential clients and we have never compromised on quality products,” she notes.

She tells Start-Up-Digest that her business sources its raw materials both locally and foreign.

“Our mater ials are sourced from vendors in and out of Nigeria. Our design is focused on the needs of our

We hope to empower 1,000 home-grown businesses in 5 years – CEO TACC ...to hold ‘Fix It’ conference IFEOMA OKEKE

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lori Ajayi, CEO and co-founder of The Arc Coaching Company (TACC), has a vision to empower over 1,000 home-grown businesses.

Ajayi, the CEO of TACC, a global coaching company that focuses on helping people discover and unleash their potential, says 1,000 businesses will be competing on a global scale

in their respective industries and sectors.

She assures that the people to run these businesses will be world leaders and culture shapers.

Speaking during the launch of TACC in Lagos, she said, “The coaching company is not stratified by sectors. It is about the individual. The person driving that business is more important than the business. We decided that we want people from all walks

of life,” Ajayi says.

“We deal with the rich, those not-so-rich, and those in the poverty stricken areas. When you are birthing something, it is not easy and not the way you want it to be. That is why it is a rebirth process.

The programmes are in three levels: Level one, two and three. The first level deals with mind; level two, money; and level three, business.

Speaking on the coach-

Boye Ajayi, co-founder/CEO, Arc Coaching Company (TACC); Olori Ajayi, co-founder/COO, and Just Ibe, product development consultant at the launch of TACC in Lagos recently www.businessday.ng

ing company’s first conference coming up July 4, she says, “Through the ‘Fix It’ conference, we will give 50 people access to some form of investment fund. What we aim to do is to be a part of 50 businesses. With the knowledge, network and coaches, we will be giving people that access.”

Boye Ajayi, the co-founder of TACC, says the mission of TACC is to raise people of dominion who would shape culture, adding that TACC is developing people to lead in their respective fields and go ahead to influence their nations.

“We inspire people. We empower them and give them the right tools they can use to develop themselves. Our target audience is people between the ages of 18 and 45 years who are interested in getting more out of life. There are career people that we help, there are people with small businesses and some others just have an idea and we help them work through that process to make their idea realistic.”

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clients,” she further says.

“We have also mastered the art of combining foreign and local products depending on the needs of our clients,” she says.

Evaluating the country’s decoration industry, she says the industry is fast evolving.

She explains that Nigerians are now appreciating the value that interior designers bring and are now patronising their services in handling their projects.

“Honestly, the industry is changing. Clients are appreciating what value the interior designers and decorators are bringing to the table,” she says.

“People have started seeing beyond designing their homes themselves and hiring professionals in handling their project,” she explains.

She notes that the business plans, in the long run, to establish showrooms in major cities in the country, to allow clients to walk in and pick up pieces of furniture and designs for their use.

In the short run, the business plans to help emerging

interior designers and artisans make more money by allowing them to place some of their products in spaces of her business.

She states that getting artisans to deliver highend quality finishing has remained the major challenge confronting her business.

She says the business is addressing the issue through its quality assurance system and effective monitoring as well as inspiring artisans to create world-class designs.

She urges the government to create a world-class training institute for interior designers to help upscale the skills in the industry.

On her advice to other entrepreneurs, she says, “have solid business plans that can evolve; prepare for financial challenges; do not be afraid to ask for help, and ensure you have a trusted mentor who has practical experience of managing business and providing leadership.”

“Most importantly, build a team that shares your vision,” she adds.

How SMEs can mitigate COVID-19 impact Gbemi Faminu

T

he coronavirus pandemic has dealt an overwhelming blow on the global economy, causing a series of hitches on the businesses, economies and lives.

In Nigeria, micro, small and medium scale enterprises (MSMEs), which account for 90 percent of all businesses in the country and contribute 50 percent to the GDP, have been largely affected as they are much more susceptible to shocks due to the nature of their formation, activities and limitations.

BusinessDay recent sample survey of MSMEs in Lagos, Aba, Ibadan and Ogun revealed that while some have had to hold on with business operations, others have experienced difficult challenges in carrying out their activities despite the partial resumption of activities in the country.

Andrew Nevin, chief economist at PWC, said the effect of COVID-19 and other economic issues have consequent impact on the business environment. ”Subsequently, businesses that are able to withstand the economic headwinds are those that have built mechanisms and designed internal strategies to weather the storms that occur in the global and local economic spheres,” he said.

A PwC MSME Survey 2020 themed ‘Building to Last: Navigating MSME Growth and Sus@Businessdayng

tainability in a New Decade,’ provides viable options for MSMEs to succeed amid the pandemic.

The survey aims to measure the experiences of sector players, assessing the underlying issues which MSMEs face and providing insights on the sector.

According to the survey, “The world is fast becoming a global village due to innovations underpinned principally by technological advancements. Technology has brought about changes in consumer perceptions, tastes and preferences.” It urges MSMEs to invest in technology and use it to propel and reform business activities and further satisfy clients.

In addition to the investment in technology, business owners are advised to strengthen cybersecurity platforms in order to minimize fraud and enhance information security and privacy of documents and internal resources.

Entrepreneurs have also been advised to employ the use of alternatives in supply chain and particularly adopt local quality materials as substitutes for imports in the short-term to reduce production costs.

Uyi Akpata, country and regional senior partner, PwC Nigeria, said in a statement that “In the aftermath of the pandemic and as we enter an age of disruptions to traditional business models, traditional approaches to doing business in Nigeria surely must change.”

26

Monday 29 June 2020

BUSINESS DAY

news

ANALYSIS

Should NNPC, which cannot run refineries, build hospitals?

STEPHEN ONYEKWELU

O

n June 11, Nigeria’s national oil company announced plans to build hospitals in 12 of the 36 states of Africa’s most populous country after failing to run four refineries in the last decade.

The 12 hospitals are billed for N21 billion ($54 million) and are part of a new corporate strategy of the Nigerian National Petroleum Corporation (NNPC) to grow non-oil investments, which will also include housing and power.

The decision to invest in hospitals comes on the heels of the novel coronavirus pandemic that exacerbated the inadequacies of Nigeria’s health infrastructure.

The state-owned company’s exposure to the boom and bust cycle of global oil prices has been a source of major concern as it exposes government revenues to these external shocks, which in 2016 sent Africa’s biggest oil producer into a recession, when oil prices crashed in the international market. So, the NNPC said this is among “measures to cope with the boom and bust cycle in the global crude-oil market and to sustain revenue generation”.

This year alone, crude prices crashed to historic lows as demand fell with the outbreak of COVID-19. Before this, oversupply caused by volume and price wars between Saudi Arabia and Russia was already moderating oil prices downwards.

This sent warning signals to Nigeria’s economy managers as the country depends on oil for more than half of its revenue and 90 percent of export earnings.

By April, oil prices had fallen to a 21-year record low, making

President Muhammadu Buhari’s budget plans unrealisable.

However, the national oil company’s inability to run Nigeria’s four refineries has cast doubts on its ability to build and operate the proposed hospitals.

In the last decade, the four refineries with nameplate combined capacity of 445,000 barrels per day have operated at an average capacity utilisation of about 20 percent, placing Nigeria at the bottom of the ladder among African refineries.

People with a deep understanding of the sector have said that the series of so-called turn around maintenance (TAM) in the last 21 years have been shams and never done properly. The only one that was done properly was the one at the Port Harcourt refinery in 1991, after one and a half years of operation by the original contractor who brought in Saipem as a sub-contractor.

A TAM requires preparations.

New parts are made available, and the refinery is taken apart.

The pumps are cleaned and put back together.

“No other turnaround maintenance has been done since 1991, not in Warri, not anywhere.

The contracts are awarded and frittered away. No audit has been carried out to check those TAMs,” Alexander Ogedegbe, former managing director of the Port Harcourt Refining Company, said in a recent webinar on refining in Nigeria.

According to the National Refineries Special Task Force Report of 2012, during the early 1990s, Nigerian refineries produced enough petroleum products to satisfy national demand and exported the excess.

Save the economy, implement Oronsaye report now, NECA tells FG Joshua Bassey

N

igeria Employers’ Consultative Association (NECA) has asked the Federal Government not to waste time in implementing the Oronsaye report, which recommended the scrapping and merger of some agencies of government in order to reduce Nigeria’s over-bloated cost of governance.

President of NECA, Taiwo Adeniyi, at the association’s quarterly briefing in Lagos at the weekend, alsourgedthegovernmenttoimplement what they termed ‘retention jobscheme’bygrantingtaxholidays to organised businesses to enable them weather the Covid-19 storm.

Adeniyi, who spoke in company of the director-general of NECA, Timothy Olawale, described as worrisome that Nigeria operates with too many agencies some of which perform overlapping functions and continue to drain the national purse.

“We commend the president for approving the implementation of the Oronsaye report, albeit eight years after its submission to the last administration. Over the past years, we have reiterated that the implementation of the report is fundamental to the institutionalisation of operational efficiency and reduction of government expenditure in the long term.

“It is worrisome that with over 250 institutions, parastatals and agencies of government, the average cost of governance in Nigeria remains among the highest globally. We urge that the Oronsaye

report should not suffer the fate of the Ahmed Joda Panel report and the Allison Ayida report of 1995,” Adeniyi said.

He noted that the implementation of the report had become more imperative in the face of crashing oil revenues and the negative impact of the ravaging Covid-19 pandemic.

“The recent global economic downturn has proved that the country cannot afford the burden of wasted billions of naira and over-lapping roles of some of the ministries, departments and agencies. Some overlapping activities of the MDAs are, in reality, hindering the Ease of Doing Business efforts of government.

“For the cost of governance to be reduced and ensure fiscal discipline, government must go beyond the implementation of the Oronsaye report and deliberately reduce other leakages arising from over-bloated retinue of aids of political officers and expenditure profile with no direct national development impact,” the NECA chief said.

Speaking on Covid-19 and the impact on the economy, he noted that the measures so far taken by thegovernment,thoughcommendable, were not far reaching enough to guarantee job security within the organised business community.

According to Adeniyi, with many businesses closed down and many others on the verge of bankruptcy, the organised private sector (OPS) had expected the government to give attention and support to businesses to ensure their survival and competitiveness. www.businessday.ng

L-R: Zouera Youssoufou, CEO, Aliko Dangote Foundation (represented Aliko Dangote); Babajide Sanwo-Olu, Lagos State governor; Godwin Emefiele, governor, Central Bank of Nigeria (CBN), and Herbert Wigwe, CEO, Access Bank plc, at the inauguration and handover of a 150-bed isolation centre to the Lagos State government by the private sector-led Coalition Against Covid-19 (CACOVID), in Lagos, yesterday.

MTN Foundation drives national conversation on substance abuse-free Nigeria Anthonia Obokoh, Godsgift Onyedinefu & Desmond Okon

U

sing a multi-sector stakeholders approach, the MTN Foundation has engaged media houses, celebrities and social media influencers to create a snowball effect calculated to warn against and offer solutions that will free Nigerians from substance abuse.

To commemorate this year’s International Day Against Drug Abuse and Illicit Trafficking themed ‘Better Knowledge for Better Care’, the Foundation through BusinessDay’s Digital Dialogues convened a 12-person panel from government, non-governmental organisations, celebrities from entertainment and the private sector. The aim was to harvest solutions from every segment of society to

deliver a powerful life-changing message.

According to Nigeria’s National Bureau of Statistics (NBS) as of 2018 statistic, nearly 15 percent of the adult population in Nigeria (around 14.3 million people) reported a “considerable level” of use of psychoactive drug substances. This is a rate much higher than the 2016 global average of 5.60 percent among adults.

However, the prevalence of drug abuse has increased dramatically since the outbreak of COVID-19 in Nigeria, which was already at a high rate before the pandemic.

Oliver Stolpe, country director, United Nations Office on Drug and Crime (UNODC)

NDEP declares record dividend at 25th AGM SEGUN ADAMS

N

iger Delta Exploration and Production plc (NDEP) held its 25th annual general meeting (AGM) recently, where shareholders unanimously approved a dividend of N17 per share, the company’s highest in its 13th year of consistent dividend payment.

The AGM was held virtually June 17 due to the impact of COVID-19 pandemic in line with currentHealthandSafetyprotocols and in accordance with the guidelinesprovidedbytheNigerianCorporateAffairsCommission(CAC).

Speaking at the event, NDEP’s chairman of the Board, Ladi Jadesinmi, reviewed the outstanding and remarkable previous 10 yearsjourneyofthecompany,and predicted a future next 10 years of further significant achievements with rewards for shareholders.

The interim CEO, Layi Fatona, reassured shareholders of the strong positioning of the company, saying, “NDEP is on a solid growth track and is wellpositioned to weather the current challenges of the operating environment,” including a low oil price regime, reduced OPEC production quotas and the uncer-

tainties surrounding COVID-19 pandemic.

Fatonaalsoassuredshareholders that the well-being of staff and thecompany’sstakeholderswasof paramount importance to NDEP, adding that the company had made considerable investments towards ensuring the Health and Safety of its Human Capital following the outbreak of COVID-19.

Among the highlights of the company’s financial performanceswasitsToplineRevenuegrowth of 16 percent, from N39 billion to N46 billion, the highest in the past decadeduetoitsstrongassetquality, and operational processes.

NDEP also recorded a sustained robust share of profit of N9 billion from its associate, ND WesternLimited,whileitscrudeoil revenue rose to N38.3 billion from N29.4 billion in 2018, a year-onyearimprovementof24percent,as aresultofanincreaseinproduction despitethemarket’spricevolatility.

The company also had a lot of positives in its operational highlights for the 2019 financial year, recording 10MM man-hours with noLossTimeInjury(LTI),despitea significantincreaseinactivitylevels, while average daily production at its Ogbele Field increased to a record 7,500bbls/d.

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said a recent poll conducted in partnership with the United Nations Children’s Fund (UNICEF) found that substance abuse is worsening and spreading due to COVID-19 with its attendant social and economic consequences. Over 50 percent of respondents mainly youths confirmed they knew somebody who has used drugs in the last 12 months and agreed that the menace got worse since COVID-19. In 2019, the UNODC found that over 14 million Nigerian adults used drugs at least once and 3 million people are living with a drug use disorder.

“At the moment, there are not many reasons to be optimistic,” Stolpe said.

A bigger challenge is the fact that mental health care systems are almost non-existent in Ni-

geria to support people who are heavily or mildly abusing substances. Stigmatisation is another factor working against drug users seeking help from mental health professionals. “Nigeria is a harsh environment to live in, people are also struggling economically,” Dakore Egbuson, a Nollywood actress and one of the panellists said.

Egbuson suggested that today parents need to unlearn the communication style they learned from their parents. This, she said will make a lot of difference. Parents have to be present, especially with all the assault in the system. “Substance abuse is heavy. If you don’t have parental love and guidance, when these situations (peer pressure) come, you will not be able to handle them.”

TAJBank’s TAJXPRESS to drive financial inclusion SEGUN ADAMS

T

AJBank, Nigeria’s most innovative non–interest financial institution has launched TAJXPRESS, the bank’s full service financial inclusion suite as part of its drive to significantly boost financial inclusion in Nigeria.

The financial inclusion suite includes a digital wallet,*898# USSD code, 360 degree account on-boarding through Mobile and Internet Banking platforms in addition to 10,000 agents spread across the North East and North West regions of Nigeria.

Reiterating the bank’s commitment to boost financial inclusion in the country, the chief operating officer, TAJBank, Hamid Joda, noted, “Currently, statistics on financial inclusion are daunting. In a population of almost 200 million people, financial inclusion rate is around 63.5%, which means that tens of millions of Nigerians are not in the financial system.

“This is an urgent mandate for us as an institution. Because @Businessdayng

for us, this is a clear indicator that in order to achieve an optimal level of financial inclusion in Nigeria, it is imperative that the unbanked and underserved are consistently empowered to further inspire growth and development of our economy. As such, we have created TAJXpress, a financial inclusion suite leveraging on our innovative technological infrastructure to ensure deployment of our financial inclusion service across all states within our catchment area.”

The chief marketing officer, Sherif Idi, noted several peculiarities of the existing financial ecosystem and environment, “Progress has been slow in improving financial inclusion and this has been bedevilled by several challenges such as poor infrastructural challenges, low literacy rate and more.

“Carefully, considering these peculiarities, we’ve decided to implement this initiative and serve our customers in areas which may have hitherto not enjoyed or may not be able to enjoy our products and services”.

Monday 29 June 2020

BUSINESS DAY

27

news FMDQ admits N100bn MTN Nigeria...

These 4 charts show why Nigerian refineries...

Continued from page 1

Continued from page 1

Group or FMDQ)’s wholly

owned subsidiary, FMDQ Securities Exchange Limited (FMDQ Exchange or the Exchange), says it is privileged to have admitted for listing the Dangote Cement plc N100.00 billion Series 1 Bond (the Dangote Cement Bond) under its N300.00 billion Bond Programme, and for quotation, the MTN Nigeria Communications plc N100.00 billion Series 1 & 2 Commercial Paper (CP) notes (the MTN Nigeria CPs) under its N100.00 billion CP Issuance Programme, both on the Exchange’s platform.

In same vein, FMDQ, through its central securities depository, FMDQ Depository Limited (FMDQ Depository or the Depository), has also emerged the depository of choice, having won the mandate as the sole depository for the lodgment of the MTN Nigeria CP notes, in addition to being a joint depository for the Dangote Cement Bond, providing the securities with the efficient value chain linkages which the FMDQ vertically integrated structure guarantees, as well as credible asset servicing and reliable data and information, amongst others.

The admission of these securities on FMDQ validates the innovative and credible capital market solutions championed and efficiently delivered by FMDQ, over the last few years. Furthermore, in line with its mandate to facilitate global competitiveness of the Nigerian financial market, FMDQ, through these admissions, has provided the market and its diverse stakeholders – local and international – the much-needed corporate benchmark for the bond and commercial paper markets.

These high-value issues will not only promote credible benchmark pricing and valuation in the DCM, but will foster investor confidence in the potential of the Nigerian capital market even at such a time as now, in view of the COVID-19 crisis. Indeed, the admission of these securities to FMDQ Depository, has again delivered power of choice to the investors on where to entrust their assets, validating the foresight of Lagos State Government in choosing FMDQ Depository for its bond earlier in the year.

Commenting on this milestone, Ferdinand Moolman, CEO of MTN Nigeria, noted that the N100.00 billion MTN Nigeria CPs issued and quoted on FMDQ Securities Exchange represent the largest debut CP issuance by a Nigerian corporate.

According to him, “This issuance will allow MTN Nigeria to broaden its sources of funding; combining its

established lines of credit with access to capital market funding, which will lower the Company’s overall cost of borrowing.”

As the sponsor of the MTN Nigeria CPs on FMDQ Securities Exchange, Bolaji Balogun, CEO of Chapel Hill Denham, said, “Chapel Hill Denham is proud to have acted as Sole Arranger to MTN Nigeria on its debut N100.00 billion CP issuance and programme.

This landmark transaction for MTN Nigeria was many times over-subscribed and priced tightly, indicative of the issuer’s strong rating with investors. Chapel Hill Denham is pleased to have introduced an important new issuer into Nigeria’s debt market, attracting participation from a diverse orbit of eligible individual and institutional investors.”

Speaking on this great achievement, Bola Onadele.

Koko, CEO of FMDQ Group, expressed his delight on the admission of these securities to FMDQ Exchange and FMDQ Depository, and the wider implication for the market.

“The market has been yearning for corporate benchmarks for pricing and valuation of securities in the debt capital market, and coming at a time when the resilience of the Nigerian financial market is being tested by the impact of the COVID-19 pandemic is even more commendable,” Onadele. Koko said.

“The success of these issuances by the premier and largest business conglomerate in Africa, Dangote Industries, through its subsidiary, Dangote Cement plc, and the debut made into the Nigerian DCM by leading telecommunications giant, MTN Nigeria Communications plc, lend credence to the untapped and great potential of the Nigerian capital market to support sustainable development in Nigeria, and the confidence of investors, as well as the commitment of FMDQ Group to empower the markets to deliver prosperity to Nigeria and Nigerians,” he said.

With FMDQ Exchange providing an efficient and reliable platform for the registrations, listings, quotations, and trading of debt securities as well as reporting of data and information; FMDQ Clear Limited (FMDQ Clear) ensuring adequate risk management and facilitating settlement finality; and FMDQ Depository providing a robust and secure securities depository for the Nigerian capital market, FMDQ Group has continued to provide the Nigerian financial market a one-stop platform, enabled by data & information and technology, for market participants to begin and end their market transactions seamlessly and cost-efficiently. www.businessday.ng

primary health centres across the country’s 774 local government areas, BusinessDay checks show.

Grounded One of the most surprising numbers posted was zero – the revenue Kaduna refinery made in 2018 – hence 100 percent decline from 2017’s N2.24 billion. Port Harcourt refinery at N1.99 billion was 70 percent less from the

current shut down the refineries for Turn Around Maintenance.

Not making money Compared to other NNPC subsidiaries like the National Engineering and Technical Company Limited (NECTO), Nigerian Gas Company Limited (NGC), and Nigerian Petroleum Development Company Ltd (NPDC), the refineries are barely making the state-owned oil company any money. The

prior year, while Warri refinery recorded 70 percent more revenue to N1.46 billion.

Overall, these refineries posted less than half of N8.31 billion they reported in 2017 despite improvements in consolidated capacity utilisation from 4.9 percent in 2015 to 8.27 percent in 2018, according to BudgIT data. Nigeria desires 85-95 percent capacity utilisation and has

Warri refinery which was the best-performing refinery in 2018 made around 5 percent revenue of NETCO while NPDC posted N1.37 trillion in revenue.

Doing bad business A glance at the operating expenses (OPEX) of these refineries is enough to understand how inefficient they are in the hands of the government.

Kaduna refinery which did not make any revenue

N1.72trn after, Nigeria bids farewell to...

Continued from page 2

This is a reference to the latest attempt by Nigeria to enthrone a service-reflective tariff regime which will kick off on July 1, under an arrangement whereby electricity consumers will face tariff increases largely determined by how many hours of power supply they get daily.

Whereas Nigeria remains beset by dilapidated physical infrastructure in its electricity sector, the illiquidity of the market has long been identified as the greatest obstacle.

“The erosion of capital in the power sector due to the absence of a credible market and poor tariffs are some of its biggest challenges,” said Eyo Ekpo, CEO of Excerdite Consulting Limited, at the

BusinessDay digital dialogue on June 17.

The government is hoping that the new tariff regime will address this illiquidity problem by ensuring that the DisCos remit up to 90 percent of their monthly commitment to the market so the bulk trader, the Nigerian Bulk Electricity Trading (NBET) company, will then be in a position to pay GenCos and their gas suppliers.

“We are strongly of the view that the so-called gas to power problem is more of a question of lack of guarantee of payment. If the market can guarantee that gas suppliers will get their invoice paid as and when due, the suppliers will send out the gas even at today’s prices,” said the senior government official earlier quoted.

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incurred N39.99 billion operating cost. Across the board, OPEX was over 1,000 percent more than revenue earned. This means to earn one naira the NNPC had to spend at least N1,000 in running the refinery.

The most notorious, Kaduna refinery, spent nearly half a billion in training staff, N30 million on electricity, N23 billion on employee cost for its 312 staff, only around N4 billion less than it spent

of building 8,380 primary health centres in all the country’s 774 local government areas.

It is also sufficient to rehabilitate IkoroduShagamu road in Lagos State which cost N750 million, while also completing the dualisation of Ibadan-Ife-Ilesha road in Oyo State which has an average cost estimate of N700 million.

The BusinessDay report further estimated that the losses can rehabili-

in 2017 even though it had around 710 less employees from the prior year. Four directors were paid between N10 million-20 million (excluding pension contribution and other benefits) while the highest-paid took home N33 million.

Losing money According to a recent BusinessDay report, the 2018 refineries’ loss of N154.37 billion is capable

tate Gombe-Biu road in Gombe and Borno States with an estimated cost of N1.2 billion, and can also complete the Ijebu Igbo-Olomi Olunde road in Oyo State which has an estimated cost of N350 million.

The opportunity cost is also equal to at least 10,000 libraries (at a cost between N10 million and N20 million each) across the country.

He said this view is supported by facts suggesting that while the government-owned power plants at Olorunshogo and Papalanto never get adequate gas supply, large private consumers along the same axes get gas supplies for 90 percent of their need and the difference is just because one pays for the gas it gets and the other does not.

Analysts have long said this pattern of bailouts poses system risk to the economy because it excludes other critical sectors where funds can be better deployed to achieve measurable impact.

“Giving out these bailouts without evaluating the impact they are having is like pouring water into a bottomless pit,” Chinwendu Enechi, senior manager, oil, gas and power at Anderson Tax, told BusinessDay.

While these bailouts have often been described as loans, there is no clear sight to repayment by these cash-strapped power companies with current market shortfalls and huge debts. The 11 DisCos cumulatively recorded over N787 billion in retained earnings last year.

Now the government is boxed to a corner, staring down at a fiscal crisis on account of declining oil prices and the coronavirus pandemic which has blunted the global economy. It has no option but to stop playing charity.

The International Monetary Fund (IMF) on Wednesday said the Nigerian economy will contract by 5.4 percent in 2020. The new projection, the IMF said, is lower than the 3.4 percent negative growth it had estimated for the country in April.

@Businessdayng

28

Monday 29 June 2020

BUSINESS DAY

In Association With

The next catastrophe

AShort-selling Balkan betrayal

Politicians ignore far-out risks: they need to up their game

Wirecard’s scandal shows the benefits of short-sellers

Preparedness is one of things that governments are for

I

N 1993 THIS newspaper told the world to watch the skies. At the time, humanity’s knowledge of asteroids that might hit the Earth was woefully inadequate. Like nuclear wars and large volcanic eruptions, the impacts of large asteroids can knock seven bells out of the climate; if one thereby devastated a few years’ worth of harvests around the globe it would kill an appreciable fraction of the population.

Such an eventuality was admittedly highly unlikely. But given the consequences, it made actuarial sense to see if any impact was on the cards, and at the time no one was troubling themselves to look.

Asteroid strikes were an extreme example of the world’s wilful ignorance, perhaps—but not an atypical one. Low-probability, high-impact events are a fact of life.

Individual humans look for protection from them to governments and, if they can afford it, insurers.

Humanity, at least as represented by the world’s governments, reveals instead a preference to ignore them until forced to react—even when foresight’s price-tag is small.

It is an abdication of responsibility and a betrayal of the future.

Covid-19 offers a tragic example. Virologists, epidemiologists and ecologists have warned for decades of the dangers of a flulike disease spilling over from wild animals. But when SARS-CoV-2 began to spread very few countries had the winning combination of practical plans, the kit those plans required in place and the bureaucratic capacity to enact them.

Those that did benefited greatly.

Taiwan has, to date, seen just seven covid-19 deaths; its economy has suffered correspondingly less.

Pandemics are disasters that governments have experience of. What therefore of truly novel threats? The blazing hot corona which envelops the Sun—seen to spectacular effect during solar eclipses—intermittently throws vast sheets of charged particles out

into space. These cause the Northern and Southern Lights and can mess up electric grids and communications. But over the century or so in which electricity has become crucial to much of human life, the Earth has never been hit by the largest of these solar eructations.

If a coronal mass ejection (CME) were to hit, all sorts of satellite systems needed for navigation, communications and warnings of missile attacks would be at risk.

Large parts of the planet could face months or even years without reliable grid electricity (see Briefing).

The chances of such a disaster this century are put by some at better than 50:50. Even if they are not that high, they are still higher than the chances of a national leader knowing who in their government is charged with thinking about such things.

The fact that no governments have ever seen a really big CME, or a volcanic eruption large enough to affect harvests around the world— the most recent was Tambora, in 1815—may explain their lack of forethought. It does not excuse it.

Keeping an eye on the future is part of what governments are for.

Scientists have provided them with the tools for such efforts, but few academics will undertake the work unbidden, unfunded and unsung.

Private business may take some steps when it perceives specific risks, but it will not put together plans for society at large.

Admittedly, neither the Earth’s

volcanoes nor the Sun’s corona can be controlled. But early-warning systems are possible, and so is thought-through preparedness.

Historically active volcanoes near large cities, such as Fuji, Popocatépetl and Vesuvius, are well monitored, and there are at least plans for evacuation should it seem necessary. It would not be that hard to extend this sort of care to all potentially climate-altering volcanoes.

Governments could also ensure that grid operators have plausible plans for what to do if DSCOVR, a satellite that hangs between the Earth and the Sun, provides a halfhour warning that a CME is on its way, as it is designed to do. Ensuring that there are offline backups for some vital bits of grid equipment would be more expensive than a volcano-alarm, and would reduce, not eliminate, risk. But it would be worth the effort.

Nor would it be that hard to provide better early warning of possible pandemics. Stopping all transmission of new pathogens from wild animals is a fool’s errand—though putting a limit on the most intensive farming and egregious exploitation of wild ecosystems would help. But, again, risk can be reduced. Monitoring the viruses found in animals and people where such transfers seem most likely is eminently feasible (see article). For countries to trust each other to do so might be a challenge; so would achieving the sort

of transparency which would make such trust unnecessary. But if there were ever to be a moment to try, it is surely today. Before the Indian Ocean tsunami of 2004 there were few early-warning systems for tsunamis. Now, thankfully, there are many.

It might seem quixotic to insist on esoteric preparedness when there are greater threats staring the world in the face, including catastrophic climate change and nuclear war. But this is not an either/ or. The structural changes needed to reduce climate risks—changes many countries are now pursuing, if with insufficient urgency—are of a different order from those needed under other headings. What is more, the approaches which make sense for arcane threats have implications for more familiar ones, too. Thinking about risk reduction, rather than elimination, should encourage steps such as taking nuclear weapons off continuous alert and new approaches to arms control. Taking environmental monitoring more seriously could help provide an early warning for sudden shifts in the patterns of climate disruption, just as it could detect rising magma under faraway mountains of which the world knows little.

Scanning the future for risks and taking proper note of what you see is a mark of prudent maturity. It is also a salutary expansion of the imagination. Governments which take seriously ways the near future could be quite unlike the recent past might find new avenues to explore and a new interest in sustaining their achievements well beyond a few turns of the electoral cycle. That is exactly the sort of attitude that stewardship of the environment and the containment of armed conflict require. It can also be a relief. Almost all the large asteroids which can come close to the Earth have now been found. None is a near-term threat. The world is not just a demonstrably safer place than it seemed. It is also a better place for having found it out.

The markets need more sceptics

G

ERMANS CONSUMED by tech envy of America allowed themselves a flush of pride when Wirecard won a place in the DAX index in 2018, and its stockmarket value surged above €24bn ($28bn). Here, it seemed, was a European fintech champion: a digital-payments firm headed for global glory. Today, faces are red again—with embarrassment. Wirecard has admitted it has a €1.9bn hole in its accounts. Its founder and boss, Markus Braun, once lauded as a visionary, quit on June 19th and was arrested and bailed this week on suspicion of false accounting and market manipulation. The firm faces bankruptcy or a fire-sale.

Wirecard’s rise and fall is a case study in the carnage possible when a firm’s accounting goes awry but

national regulators and big investors are so seduced by the company’s narrative that they cannot, or will not, see it. It is also a reminder of how markets stand to benefit from short-sellers—who try to make money betting against listed firms, by selling borrowed shares and buying them back later at a lower price.

Had the warnings from Cassandras who detected a bad smell around Wirecard years ago been heeded, billions of dollars of losses, many of them borne by pension-fund investors, could have been avoided.

Questions about the firm’s accounting began to swirl in 2015 (see article). They have intensified in the past 18 months with a series of articles in the Financial Times, informed by short-sellers and whistle-blowers. Instead of taking these seriously, Germany’s markets regulator, BaFin, seemed keener to shore up confidence in Wirecard and attack the attackers.

Continues on page 29

Monday 29 June 2020

BUSINESS DAY

29

In Association With

Into darkness

Israel weighs the future of the West Bank

Talk of annexation shows how badly the peace process has failed

F

AR FROM being a show of strength, it smacked of desperation. On June 22nd thousands of Palestinians held a protest in Jericho against a possible Israeli annexation of parts of the occupied West Bank. They were joined, unusually, by diplomats from across the globe: Britain and Russia, Jordan and Japan. The United Nations envoy, Nickolay Mladenov, made a speech. After months of public warnings and quiet pressure, the world’s collective diplomatic clout perched on plastic chairs beneath the beating summer sun.

On July 1st Israel’s cabinet can start to discuss annexation. The date is less a deadline than a starting-point laid down in the coalition agreement signed in April

by Binyamin Netanyahu, the prime minister, and his governing partners. Israel could decide to annex a large swathe of territory or annex nothing at all, or—as seems likely— do something betwixt the two.

If it does anything, it will happen over widespread objections.

Some of Mr Netanyahu’s partners are hesitant. The public, although split on the wisdom of annexation, mostly thinks it a distraction from the covid-19 pandemic and a likely recession. Democrats in America oppose the move. So do many European allies. Friendly Arab states warn that it would threaten ties with Israel. Even some Israeli settlers are opposed (albeit for different reasons). And then there are the Palestinians themselves, once again bystanders in their own drama.

It is quicker to list those in favour: some of Mr Netanyahu’s right-wing allies, some Israeli hawks, a few members of Donald Trump’s administration. Yet this narrow band of supporters have pushed annexation from the fringe of Israeli politics into the realm of possibility.

What Mr Netanyahu does matters less than the fact that he might do it. The Oslo Accords, signed in 1993, were to usher in a short transitional period on the way to a Palestinian state. Almost 30 years later the world is scrambling not to clinch a two-state solution but to preserve a status quo that should have ended in 1999—the terminus of a peace process that has become more about process than peace.

Israel has already annexed East Jerusalem and the Golan Heights, two other territories captured in 1967—but not the West Bank, home to 3m Palestinians who see it as the heart of their future state, and 430,000 Israeli settlers.

(Another 230,000 settlers live in East Jerusalem.) The West Bank’s status has long been regarded as a question for a final peace agreement between Israel and the

Palestinians.

Like his predecessors, Mr Trump took a stab at drafting one.

His “Peace to Prosperity” plan, released in January, envisions a Palestinian state—should the Palestinians meet a list of onerous conditions—in Gaza and on 70% of the West Bank (see map). It allows Israel to annex the remaining 30%, which consists of settlements and the Jordan Valley.

The Palestinians rejected the plan. Mr Netanyahu endorsed it and immediately tried to annex the land earmarked for Israel. But the Americans asked him to wait, in part because Mr Netanyahu was at the time fighting for his political survival. Three elections in the span of a year had failed to produce a government until he made a deal with his exhausted rival, Benny Gantz.

As July 1st draws near, though, Mr Netanyahu’s plans remain fuzzy. Israel could annex the full 30% or something smaller, perhaps one or two settlement blocs (such as Maale Adumim, pictured on the previous page). Another option is to annex scattered settlements deep within the West Bank to establish “facts on the ground”.

Some in Israel’s security establishment think Mr Netanyahu will do less still: play for time and form a committee to prepare for annexation. On June 3rd security officials held a war game to plan for possible violence on the Palestinian side. They were in the dark about their own government’s intentions. “Annexation? What annexation?” asks an Israeli diplomat.

Like his nine predecessors since 1967, Mr Netanyahu has made no serious moves towards annexation beyond East Jerusalem. It became an issue only on the eve of the election in April last year, when he promised to annex settlements close to the pre-1967 border. Many saw this as a gimmick. Five months later, as another election loomed, he unveiled a proposal to annex the Jordan Valley. Then, five weeks before the last vote, came the Trump plan.

Some who have spoken with Mr Netanyahu believe he wants to be the leader who redrew Israel’s

borders. Others still think this a ploy to distract from his ongoing corruption trial and the pandemic.

“He needs annexation as a diversion so Israelis won’t speak about the economy,” says Yair Lapid, the opposition leader. “Instead he’s got everyone running around like headless chickens talking about annexation.”

He has met surprisingly fierce opposition from some settlers, for whom any mention of a Palestinian state is anathema. Mr Netanyahu has told them not to fret: the Palestinians will never accept the Trump plan. They are not convinced. “There isn’t a partner on the Palestinian side now,” says Yigal Dilmoni, head of the Yesha Council, a settler lobby. “But who’s to say in the future there won’t be such leadership? They will be able to say that Israel already agreed to them having a state on 70% of the land.”

Few have asked what the Palestinians prefer. “It’s like they’re inviting people to a wedding where the bride doesn’t show up,” says Zahi Khouri, a businessman in Ramallah. There is near-unanimous opposition to annexation, of course, but also a sense of resignation. Palestinians have watched Israeli settlements expand for decades. Hopes for a negotiated peace have faded; their leadership seems powerless to do anything. Over half of Palestinians in the West Bank say they would back a return to “armed struggle” if Israel annexes territory.

About two in five would like to dissolve the Palestinian Authority (PA), their limited self-government, and force Israel to take responsibility for the occupied territories. Unpopular to start with, the PA risks losing its raison d’être: if Israel annexes a large chunk of territory, the PA can no longer claim to be the government of a state-in-waiting. But the PA’s president, Mahmoud Abbas, and the old men around him are loth to take any drastic steps. Even their recent decision to suspend security co-ordination with Israel was largely for show. It has discreetly continued.

If the leadership is static,

though, the public is not. A growing share of Palestinians have lost faith in the two-state solution. A poll from February put support at just 39%, the lowest level in a generation. Annexation won’t help. Amos Gilad, a retired general who once led Israeli policy in the territories, says it would cause the Palestinians to “demand rights as citizens in Israel”. Mr Netanyahu has heard similar warnings from his security chiefs. But he believes the Palestinians will capitulate and accept a series of isolated statelets.

That is what Mr Trump offered.

But his administration is divided on whether to back unilateral annexation. His ambassador in Jerusalem, David Friedman, used to run a charity that raised millions of dollars for settlements. He wants Israel to move ahead now, in case his boss loses the election in November. Jared Kushner, the president’s son-in-law and the author of his plan, is less enthusiastic. He has no ideological objections but worries annexation will scupper his chance to play peacemaker. Mike Pompeo, the secretary of state, says it is up to Israel.

Outside the administration, annexation carries risks. Bipartisan support for Israel in America has been ebbing for years: Mr Netanyahu’s testy relations with Barack Obama and embrace of Mr Trump hurt his standing with Democrats.

Annexation would erode it further. Joe Biden, the Democratic presidential nominee, opposes the move. For now, though, the party has ruled out cutting America’s $4bn in annual military aid to Israel. Warnings from European leaders are also probably just that.

Still, none of this is good for Israel.

Egypt, one of two Arab states that has official relations with Israel, has been conspicuously silent.

It is busy with other crises, from covid-19 to the war in Libya. Jordan has been louder. King Abdullah worries annexation will trigger unrest among his large Palestinian population and revive talk of “the Jordan option”, which imagines his country as the future Palestinian state. But he has little leverage over Israel; few expect he would go so far as to rip up their peace treaty.

Mr Netanyahu has made much of Israel’s growing ties with Gulf states. None officially recognises Israel. But their armies and spy services swap intelligence and there are discreet economic ties as well.

On June 12th Yousef al-Otaiba, the ambassador of the United Arab Emirates (UAE) in Washington, warned on the pages of an Israeli newspaper that annexation would put all this at risk. “We would like to believe Israel is an opportunity, not an enemy,” he wrote. “Israel’s decision on annexation will be an unmistakable signal of whether it sees things the same way.”

Wirecard’s scandal shows the benefits of short-sellers Continued from page 28

It temporarily banned shorting of the firm’s stock, a first, and opened a criminal case against journalists for suspected manipulation.

Big banks and investors, including Deutsche Bank and its DWS fund-management arm, backed Wirecard and kept the faith, in some cases doubling down, even as more and more red flags popped up. Many did scant due diligence, instead relying on puff pieces churned out by sell-side analysts right to the end: half a dozen still had buy recommendations on the stock when Mr Braun resigned. Wirecard’s auditor, EY, faces scrutiny, too. Germany’s media, for the most part, swallowed Wirecard’s line that it was the victim of a nefarious plot by Anglo-Saxon marauders.

When so many clever people can get it wrong, anything that injects scepticism is welcome. Such counterweights to market consensus are especially helpful when politicians and central banks are boosterish on asset prices, as they are now, and in countries with a corporatist mindset. Even as Germany has embraced shareholder capitalism, the view that company managers are more trustworthy than their shareholders, especially less patient ones, has proved stubbornly persistent.

Those who bet against companies have long been eyed with suspicion; short-selling bans date back to 17th-century Amsterdam.

But claims that shorting causes instability do not hold water: financial crises are more often caused by investors borrowing to go long, not short. Sometimes short-sellers are up to no good, as when they engage in speculative “naked” shorting (placing bets without first borrowing stock). More often than not, though, they are on to something. Over the past year they have uncovered several big frauds, from the fabricated sales at Luckin Coffee, a Starbucks wannabe—the latest in a line of fantastically fraudulent Chinese firms laid low by contrarians—to the debt-disguising shenanigans at NMC Health, a FTSE 100 company.

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Nigerian refineries face impending solvency over debt BALA AUGIE

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igeria’s largest refineries face impending insolvency over debt, as they continue to generously pay workers for doing nothing, validating calls by experts that the moribund assets be privatized.

The remarkable collapse of refineries once operating at full capacity is a big loss to government and reputational damage to stakeholders.

The existential risk to the 3 assets (Port Harcourt Refining Company Limited, Warri Refining and Petrochemical Company, and Kaduna Refining Company) is the combined total short term debt of N687.39 billion and cumulative total liabilities of N1.25 trillion as at December 2018.

Perhaps more worrisome is that they haven’t been generating revenue over the past few years, while pipelines are lying fallow, which is why the country imports petroleum product to meet local consumption.

According to the 2018 audited financial statement of the 3 refineries as glimpsed from their

websites, cumulative sales stood at N3.44 billion as at December 2018, a 58.86 percent drop from N4.87 billion the previous year.

That means Nigeria National Petroleum Corporation (NNPC) has been piling debt and expenses on moribund refineries over the past year, which underscores gross mismanagement, corruption, and lack of transparency on the part of managers.

Little wonder these refineries are technically insolvent as total liabilities of N1.25 trillion exceeds total assets of N101.34 billion, resulting in a negative shareholder fund or total equity of N1.15 trillion, A N1.15 trillion deficit means Nigerian assets have been making losses more than profit since

their existence. And that gives us an idea that investors will only be willing to pay pea nuts for refineries that cost government hundreds of millions of dollars to build.

Analysis of losses is grim, but the story has to be told so that stakeholders will know the level of decadence in the oil and gas industry.

For the year ended December 2018, the largest refineries in Africa’s largest economy recorded combined loss of N154.54 billion.

Over the past five years, Port Harcourt refinery posted a combined loss of N205.15 billion.

NNPC is paying inefficient workers, as huge wage bill are more than revenue. Even Manchester City was banned by foot-

ball governing body UEFA from next year’s Champions league for breaking financial fair play rules.

The cumulative average loss per employee for the three largest refineries was N94.18 million as at December 2018; what this mean is that each staff is making N94.18 million loss per head.

They employed 1639 staff, and have a combined total personnel cost of N46.27 billion, their personnel cost per employee is N24.39 million. This means on average a worker is paid N24.39 million in organizations that have not been producing a drop of refined products in eight months.

Kaduna Refinery, which did not generate revenue in 2018, has the largest wage bill as personnel cost per employee is 74.63 million as at December 2018.

Industry experts say the refineries should be privatized and included in the public assets that Bureau of public Enterprises (BPE) is poised to dispose in its 2020 Privatisation Work Plan.

While refining capacity is below 60 percent, turnaround maintenance has not been done in the past decade.

The NNPC said that the three refineries processed no crude and produced -5031 metric tonnes of finished products; comprising -3052MT and -1979MT utilised by the WRPC and the PHRC respectively in November 2019.

It added that the combined yield efficiency is 0.00 per cent owing largely to on-going rehabilitation work in the refineries.

For the month of November 2019, the three refineries produced 385MT of intermediate products at combined capacity utilisation of 0.00 per cent.

While Nigeria has 445,000 bpd of refining capacity across four separate facilities, the NNPC imports bulk of the country’s gasoline because the refineries operate below capacity.

P.E

SHORT TAKES N312m After a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312 million in full-year 2019 for the period ended 31 December. Revenue dipped 13.5 percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn

5 The stock market declined for the fifth-straight trading session on Friday to end its worst week after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run.

Nigerian equities fell for all five trading sessions last week to close 2.65 percent lower weekon-week, and end January on a very different tempo than it began the month.

Bank stocks shed 5.17 percent to push Year-to-date return to 7.46 percent, down from around 10 percent at the beginning of the week, while analysts say the bearish sentiment will likely extend to trading this week.

“Next week, we expect bearish pressures on the equities market to remain, as investors continue to selldown on banking counters,” said analysts at Lagos-based Chapel Hill Denham in a note to clients.

N23bn Interswitch Limited has listed its N23bn callable senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date. In essence, a callable bond allows the issuing company to pay off their debt early.

According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc.

BusinessDay MARKETS INTELLIGENCE Team Lead: BALA AUGIE, IFEANYI JOHN; Graphics: FIFEN FAMOUS

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team balaaugie@yahoo.co.uk; augiebala@gmail. www.businessday.ng

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news

Delta graduating STEPreneurs to ‘hit the ground running’ as government empowers them with starter packs Mercy Enoch, Asaba

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he 112 youths that made up the first set of the 521 youths enrolled into the Delta State’s Skills Training and Entrepreneurship Programme (STEP) under the 2019/2020 Cycle of the Job and Wealth Creation Programme, have successfully completed their trainings and are expected to hit the ground running, to become entrepreneurs and job creators.

This is because the state government through the office of the Chief Job Creation Officer has established them to do so, by giving them starter packs to help them in their various enterprises, having graduated from three-month training.

Their various enterprises include Catering and Confectionery; Decoration and Event Management; PoP, ScreedMaking and Painting; Production of Cleaning Agents, and Hairdressing, Makeover and Braiding.

The items in the starter

packs are made up of the grants component consisting of the various equipment and tools they need to start up their businesses.

The other part was the cash component, for their shop rents, which is a micro credit with six months moratorium payable within 24 months.

Due to Coronavirus (COVID-19) pandemic, the successful STEPreneurs were made to come in groups of 20 each, in two segments daily, to receive the starter packs, just to ensure physical distancing and total compliance with the COVID-19 preventive guidelines.

The three-day exercise that commenced in Asaba on Wednesday, June 24, ended on Friday, June 26.

The handing out of the starter packs to the beneficiaries was approved after they were certified by the Office of the Chief Job Creation Officer, having completed the training and passed the Completion Proficiency Test meritoriously.

While congratulating them

for the successful completion of their training, the coordinator of STEP in the Office of the Chief Job Creation Officer, Nkenchor Onyeisi, affirmed that they were invited to receive their starter packs because they had been certified by the job creation office to begin their enterprises having meritoriously completed all the activities in the programme.

Nkenchor commended the state government for sustaining the programme in the past five years, stressing that through STEP, thousands of unemployed youths had been gainfully engaged to live meaningful lives.

He recalled that the beneficiaries had come out stronger, having gone through the various training activities such as the Orientation and Personal Effectiveness Training (OPET); the hands-on-training at the various training centres across the state; the Completion Proficiency Test, and the Entrepreneurship and Business Management Training, which ended last week.

MainOne’s 10 years of enabling West Africa’s digital revolution

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ainOne, West Africa’s leading provider of wholesale and enterprise connectivity and data centre services, celebrates 10 years of delivering innovative, worldclass service in West Africa.

Ten years ago, the company launched its operations with the commissioning of the first private submarine cable on the West Coast of Africa. The company has played a critical role in enabling internet access across West Africa where penetration rates have grown from less than 10% in 2010 to close to 40% 10 years later.

Since inception, MainOne has invested over $400 million in infrastructure in West Africa as part of its efforts to bridge the digital divide and enable the digital economy. The investments include submarine cables, terrestrial fibre networks, and Points of Presence (POPs) across the region. Within this period, the company has deliv-

ered services to 10 West African countries and has built Tier III data centres in Nigeria, Ghana and Cote d’Ivoire hosting the largest institutions and global content in the region, with on-going expansions of its data centre footprint in Nigeria and Ghana.

These investments and contributions to the economy have led the company to numerous awards on both local and global stages. Prominent of these awards are the Datacloud Africa Award for Excellence in Data Centre (Africa) and Africa Cloud Service Provider of the Year, Presidential Enabling Business Environment Council (PEBEC) Impact Award, Lagos Chamber of Commerce and Industry Award for Excellence in Broadband Infrastructure, NTITA Telecoms Wholesale Provider of the Year, Frost & Sullivan Best Practices winner for the Nigerian Data Centre Customer Value Leader-

ships Award, Ghana Telecoms Awards: Telecom Wholesale Carrier of the Year and Nigerian Telecoms Awards: Broadband Company of the Year, among others.

Reflecting on 10 years in business, Funke Opeke, CEO of MainOne, said, “We started on this journey to deploy critical infrastructure to bridge the digital divide in West Africa.

While we are pleased that we have made an impact, there is so much more work to be done.

“The recent challenges we have faced with COVID-19 Pandemic highlight the need for additional investment and smarter policies to deploy shared infrastructure required to make access to broadband a reality for more Africans at a price they can afford. MainOne has been leading that charge across West Africa for 10 years and we are even more committed to realising our vision today than we were 10 years ago”.

Toll gates back soon as FG consults on handover of select roads to private partners …begins concessioning of 2225km of roads …to generate N160bn - Fashola CHUKA UROKO & HARRISON EDEH

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mid dwindling revenue shortfalls, the Federal Government is exploring options of handing over some select federal highways to private partners, which could see toll plazas return through a proper concessioning structure by the Infrastructure Concession Regulatory Commission (ICRC).

The highways slated for concessioning are Benin-Asaba, Abuja-Lokoja, Kaduna-Kano, OnitshaOwerri-Aba, Shagamu-Benin, Abuja-Keffii-Akwanga, KanoMaiduguri, Lokoja-Benin, EnuguPort Harcourt, and Ilorrin-Jebba.

Babatunde Fashola, minister of works and housing, disclosed this in his keynote speech at a webinar on ‘Public Private Partnership for National Highway Development and Management Initiative’ hosted by the Lagos Business School on Thursday, June 25,2020.

Fashola noted that 10 major highway routes totalling 2225km, which represents 6.4 percent of the entire federal highway across the country, would kick-start the first phase of the concessioning, noting that economic impact and linkages of the select routes were considered.

The minister explained that the highway development initiative was intended to revolutionalise the

highway sector and create enabling environment for private involvement in the construction and management of nation highways, and auxiliary road infrastructure.

The initiative seeks to bring multidimensional resources and skills, manpower, finance, technology, and much more into Nigeria’s highway governance, especially starting with 35,000 kilometres of federal highway network.

“What this initiative seeks to achieve is to bring order, accountability and profitable entrepreneurship into operation, management and maintenance of our federal highways,” Fashola noted.

According to Fashola, “What we have done is to identify 10 highways, which represented 2225km, which is about 6.4 percent of our 35,000km highway network that would constitute the first phase of the Highway Development Maintenance Initiative.”

The first phase of the 10 routes of 2,225km, Fashola said, can elicit an investment of over N160 billion, approximating to about N16 billion per route and unleash opportunities for prosperity. On possible opportunities through the concessioning, he said, “We see opportunities for erecting of operational signages, all of which our ministry has designed, standardised. We see opportunities for toll plazas, and this has already been designed and standardised.

Abbey Mortgage announces retirement of MD/CEO, chairman

A

bbey Mortgage Bank plc has announced the retirement of its chairman and managing director/chief executive officer.

The bank’s chairman - Ifeanyi Boniface Ochonogor has retired from the bank with effect from February 28, 2020, having served for almost 30 years. During that

period, he led the Board with uncommon passion and zeal to entrench the culture of excellence in the bank.

The bank is pleased to announce that Emmanuel Kanu Ivi has been appointed to replace Ochonogor effective from February 28. The new chairman was a non-executive director at Abbey

www.businessday.ng

Mortgage Bank for 28 years and a FellowoftheInstituteofChartered Accountants of Nigeria.

The managing director/CEO, Rose Ada Okwechime, has also retired from the bank with effect from May 31, 2020, having pioneered and led the management for 28 years. She has worked passionately to build, nurture and consolidate the bank’s reputation as an icon in the Nigerian mortgage banking industry.

“I am filled with gratitude as I write this to let you know that I will be handing over my position at Abbey Mortgage Bank Plc. As we are moving into a new decade, ourplanforAbbeyMortgageBank is only growing bigger. With this significant growth that we are goingtoexperience,therewillalsobe some change. That is why my title as Managing Director will come to an end for my successor to be abletotakeAbbeytothenextlevel”. https://www.facebook.com/businessdayng

@Businessdayng

“We see opportunities for weighbridges, and construction of weigh houses to facilitate the operation of the weighbridges.

We also see opportunities for wet and dry cargo, of which we have the design.

“We see opportunities for street lightning and advertising opportunities, and we see opportunities for rest houses, which sites have been well designed. We also see opportunities for road maintenance and vegetation clearing, and enormous labour employment, as well as towing vehicle operations with thermostatic paints. For right of way for telecommunications support infrastructure.”

Chidi Izuwa, director-general, ICRC, while applauding the initiative at the webinar, noted that fast tracking the economic sustainability initiative of the Federal Government had a lot of connectivity in our ability to close infrastructure gap.

One of the key participants, Oscar Onyema, CEO, Nigerian Stock Exchange, assured the government that the Exchange would work with everyone in the value chain to deliver the scheme.

Also, Bola Onadele Koko, managing director, FMDQ OTC plc, said there must be a strategy to de-risk foreign exchange to attract investors into the road concessioning plan of the government.

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FINANCIAL TIMES

World Business Newspaper

Nigeria oil chief promises more transparency at state producer NNPC has published first accounts in 43-year history as critics call for group to be dismantled NEIL MUNSHI

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he head of the Nigeria National Petroleum Corporation promised “a new season of transparency and accountability”, pushing back against critics calling for the break-up of the state oil company as the country struggles to manage the fallout from battered oil prices.

Mele Kyari, group managing director at NNPC, oversaw the public release this month of audited accounts for 20 of the company’s subsidiaries for the first time in the firm’s 43-year history.

The publication, while incomplete, provided a window into a notoriously opaque organisation. It revealed how NNPC’s profitmaking investment, exploration and retail arms are propping up lossmaking subsidiaries, particularly the country’s four refineries, which logged hundreds of millions of dollars in losses in 2018.

“We have done the right thing . . . we have followed the law,” Mr Kyari said in an interview, noting that a requirement to publish accounts was written into the legislation that established NNPC. “This is a new season of transparency and accountability for the company of our country.”

Critics conceded that the release was a good first step, but said it had not gone far enough. The lack of a consolidated audited account statement for the entire business meant the disclosure had provided an incomplete overview, said Oluseun Onigbinde, from budgIT, a Nigerian transparency organisation. The details that were published painted a worrying, albeit unsurprising, picture of a giant, dysfunctional company that must be broken up,

A Nigeria National Petroleum Corporation tanker. The group dominates the oil industry in Africa’s biggest crude producer, but for decades it has been viewed as a cash machine for politicians © Bloomberg

he added.

It’s something that civil society and transparency organisations like us have been clamouring for some time Waziri Adio, head of the Nigerian Extractive Industries Transparency Initiative “We need to dismantle the whole monolith and allow the subsidiaries to try singly — that’s the only thing that will make NNPC more efficient,” Mr Onigbinde said. “You have oil prices bleeding, state financials are not solid enough, the federal government has to step up and say it’s time to rebuild this.”

Founded in 1977, NNPC dominates the oil industry in Africa’s biggest crude producer. It produces, buys, sells and trades crude, mostly through joint ventures operated by oil majors including Shell and Total, and regulates itself.

For decades the company has been viewed as a cash machine for

politicians and is currently the subject of several multibillion-dollar, international lawsuits related to alleged corruption. Former vicepresident Atiku Abubakar called NNPC a “mafia organisation” during his presidential campaign last year, in which he vowed to break it up and sell off the refineries.

Mr Kyari acknowledged that NNPC had failed to run its refineries profitably and said it was in the process of rehabilitating the facilities to be run by private companies in partnership with the government.

The four refineries generated a N162bn ($450m) loss in 2018 on just N3.44bn in revenues, the accounts showed. The facility in Kaduna, in the centre of the country, generated no revenue in 2018 at all but incurred a N64bn loss.

The NNPC boss said the company planned to complete the refurbishment work on all four facilities by 2023 but admitted that

only the Port Harcourt refinery, in the oil producing south, had a “clear line of sight on financing” needed to complete the work.

Tunde Ajileye, partner at SBM Intelligence, a Lagos consultancy, questioned Mr Kyari’s partnership model, arguing that the refineries should simply be sold. “[I am] curious to see which investor wants to put money in, as a government-owned going concern, into refineries that combined accumulate upwards of [$450m] in losses,” Mr Ajileye asked.

By 2023, Nigerian billionaire Aliko Dangote’s massive 650,000 barrels per day Lagos-based refinery is expected to be complete.

NNPC’s refineries regularly operate at about 10 per cent of their combined capacity of 440,000 bpd. Mr Kyari said NNPC viewed Mr Dangote’s project as a “complement” rather than competition. “But it’s also put us on our toes to make sure

that we’re profitable.”

The refurbishment of the refineries are part of a wider NNPC effort to improve efficiencies. “What we are doing today is to cut down our costs in every possible manner, introduce more efficiency . . .[so that] there will be a surplus that the corporation may deliver to the [government],” he said. “We know that there are pricing issues this year because of the Covid-19 impact, but you know, ultimately, on a cost-to-value basis we know that even 2020 will be a net benefit for the country.”

Some subsidiaries such as NNPC’s Nigerian Pipelines and Storage Company will be hard to fix.

The unit generated N42.9bn in revenues in 2018, but it tallied N43.67bn in administrative expenses, leaving it with a N768m loss. Mr Kyari said the pipeline business would be farmed out to private companies, with NNPC remaining “mere equity holders”.

NNPC’s international trading arm, Duke Oil Company, generated $41m in gross profits in 2018 but only paid a $40,419 dividend to the government. Mr Kyari said the profits were invested back into the business. NNPC wants Duke Oil to rival the trading arms of other national oil companies. Mr Kyari said its profits had risen in 2019 and would again in 2020, as would the dividends.

Waziri Adio, head of the Nigerian Extractive Industries Transparency Initiative, praised NNPC’s decision to partially open its books and pressed for more disclosure.

“It’s something that civil society and transparency organisations like us have been clamouring for some time,” he said. “But . . . this is further justification for even more transparency, which will allow us to figure out how to best optimise our resources.”

Covid-19 cases hit new records in US states Officials begin closing venues and beaches again as coronavirus surges

PATRICK TEMPLE

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he numbers of new daily coronavirus cases hit records in several US states on Saturday as the national total reached 2.5m, prompting President Donald Trump’s re-election campaign to postpone events next week.

Florida’s cases increased by 9,636 to 132,545, the state’s health department said on Saturday. The state, the third largest in the US, reported 8,942 new cases on Friday.

South Carolina and Nevada also reported record numbers on Saturday. More than 125,000 people have now died of Covid-19 in the US, according to Johns Hopkins University.

More than a dozen states in the south and west have experienced a new wave of cases, raising the

prospect that many of the regions that reopened their economies will have to reverse the measures.

As a result, Mr Trump’s campaign has postponed events in Arizona and Florida that Vice-President Mike Pence was scheduled to attend next week.

Texas recorded 5,707 new cases on Friday, the fourth straight day of more than 5,000 infections.

Arizona, another western state that has seen a sharp increase, had 3,428 new cases — near a new record. California recorded 4,890 and San Francisco’s mayor said the city would delay reopening measures scheduled for Monday.

Anthony Fauci, the infectious diseases expert helping to lead the US pandemic fight, said on Friday that some states might have to return to full “shelter-in-place” policies, but suggested they should www.businessday.ng

first start with less severe restrictions such as limiting crowds and ordering the wearing of masks.

As the US recorded its largest one-day increase in coronavirus cases since the pandemic began on Friday, fears that the country’s economic rebound could be shortlived caused the benchmark S&P 500 to fall 2.4 per cent for the day.

Florida’s new cases are a setback for its economy, which had been recovering from lockdowns ordered earlier this year. People poured into Florida’s vacation rental homes in May, bringing much-needed tourism revenue into the state.

But on Friday, Florida governor Ron DeSantis prohibited alcohol consumption in bars, effectively ordering them to close just weeks after many had reopened. Miami said its beaches would be closed

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over the July 4 independence day holiday.

More positive Covid-19 test results among young adults and rising hospitalisation forced the decision to close beaches, Miami-Dade County mayor Carlos Gimenez said: “If people are not going to be responsible and protect themselves and others from this pandemic, then the government is forced to step in and restore common sense to save lives.”

The decision to close bars on Friday confused some local police officers who started closing restaurants that did not need to be shut, said Carol Dover, head of the Florida Restaurant and Lodging Association.

After the governor’s announcement “there just was a lot of confusion”, Ms Dover said on Saturday.

In Nevada, the Culinary Union @Businessdayng

said it would file a lawsuit on Monday on behalf of workers in Las Vegas casinos to demand better sanitary measures. The union represents about 60,000 workers including most of those in the city’s casinos.

In Texas, governor Greg Abbott also ordered all bars to close and limited public gatherings to fewer than 100 people.

Mr Abbott’s executive order, which requires restaurants to cut their indoor dining to half capacity, was the second attempt in as many days to snuff out a sudden jump in cases in Texas.

“If I could go back and redo anything, it probably would have been to slow down the opening of bars,” Mr Abbott told a Texas news station on Friday. “A bar setting, in reality, just doesn’t work with a pandemic.”

Monday 29 June 2020

BUSINESS DAY

39

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

US stocks end lower as states roll back reopening measures S&P 500 down 2.4% as investors question how virus flare-ups will be handled BRYCE ELDER, SARAH PROVAN AND HUDSON LOCKETT

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S stocks dropped on Friday after Texas and Florida rolled back reopening measures, raising fresh fears that the coronavirus would derail an economic recovery. Banks were among Wall Street’s sharpest fallers after the US Federal Reserve told them to limit shareholder payouts.

In New York the S&P 500 ended down 2.4 per cent for its lowest close since June 11. For the week the S&P 500 and Nasdaq were down 2.9 per cent and 1.9 per cent respectively.

European markets had earlier slipped back in tandem with Wall Street, erasing most of their intraday gains. The Euro Stoxx 50 closed 0.5 per cent lower, Germany’s Dax fell 0.7 per cent and the FTSE 100 ended the day little changed, having been up as much as 1.8 per cent.

The Fed said on Thursday it would cap share buybacks and dividends by America’s biggest banks after stress tests showed Covid-19 could trigger $700bn of loan losses and push some lenders close to their capital minimums.

Shares in JPMorgan Chase, Bank of America, Wells Fargo and Citigroup fell between 5 and 7.5 per cent in response. The price moves reversed gains on Thursday that were prompted by a decision

Investors remained focused on pandemic statistics, with Florida reporting a new record daily increase in coronavirus infections © AP

by regulators to relax certain prefinancial crisis rules.

“The Fed created more uncertainty which will probably leave investors frustrated,” said DA Davidson analyst David Konrad.

“The implication that banks need to earn their dividend could put a few banks’ dividends at risk going forward.”

Investors remained focused on pandemic statistics after Texas, Florida and California reported 5,000 new coronavirus infections on Thursday — and Florida reported almost 9,000 on Friday. Texas Governor Greg Abbott said that a spike in new cases meant bars had

to close and restrictions would be put on outdoor gatherings, while Florida suspended alcohol sales in bars.

“Equities will surely remain under pressure so long as the worrying resurgence in new coronavirus cases in the US continues unchecked,” analysts at Capital Economics said in a note. “But if outbreaks can be controlled across the world’s largest economies without reinstating tough nationwide lockdowns, we think that equities will comfortably outperform again.”

BofA analysts concurred. “The more the US virus numbers de-

teriorate, the more the market will probably doubt the sustainability of the recovery,” they said in a note.

Still, a slower case count in many European countries has lifted hopes for a recovery, BofA said, as it expects confidence to improve in the eurozone over the next few weeks.

“While higher US virus numbers could weigh on market sentiment, it would be highly unusual for asset prices not to respond to such a strong improvement in macro momentum,” they added.

BofA forecasts “are consistent with a further 15 per cent upside

for the Stoxx 600 . . . by November”. The bank’s analysts forecast outperformance, for example, in the banking, energy and mining industries.

Wall Street sentiment has been bolstered in recent weeks by the expectation of further stimulus if reimposed lockdowns or changes in consumer behaviour due to fresh outbreaks knock the nascent economic recovery off course.

“The market is being supported by hope — hope of more stimulus both from the US government and, if required, from the Federal Reserve,” said Derek Halpenny, an analyst at MUFG. Christine Lagarde, the European Central Bank president, was also in the mix on Friday, saying the eurozone was “probably past the lowest point of crisis”.

She added the caveat that the economic recovery from the pandemic hit would be “restrained” as households save instead of spend. Furthermore, some airlines and hotels would suffer “irredeemable” damage, warned Ms Lagarde.

In the Asia-Pacific region, Japan’s Topix had closed higher by 1 per cent, with the Australian ASX/200 gauge up 1.5 per cent.

South Korea’s Kospi rose 1.1 per cent.

Oil prices followed equities lower with Brent crude, the international benchmark, down 0.8 per cent to $40.74 a barrel, and West Texas Intermediate, the US marker, falling 1.2 per cent to $38.25.

How quickly can the German economy recover?

Market Questions is the FT’s guide to the week ahead FT REPORTERS How quickly can the German economy recover? ermany’s economy is facing its most severe postwar recession, but it has still come through the coronavirus pandemic less damaged than other leading European countries. On Wednesday investors will get a progress check with the release of unemployment and retail sales data for June and May, respectively.

Jobless numbers have already been rising, jumping by 238,000 between April and May and pushing the unemployment rate up from 5.8 per cent to 6.3 per cent, its highest level since 2016.

However, the German job market entered the crisis with almost full employment and it has been shielded from the fallout from the pandemic by the more than 10m people who have applied for the government’s furlough scheme.

Economists worry that such support has delayed, rather than averted, a much bigger hit to German jobs. “Looking ahead, higher unemployment, insolvencies and weak external demand are likely to put a cap on the pace of the recovery once the technical V-shaped rebound is behind us,” said Carsten Brzeski, an economist at ING.

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Indications of the Federal Reserve’s next steps to prop up the US economy will arrive on Wednesday with the release of minutes from June’s policy meeting . Also in focus this week are key US, German and Chinese data. © FT montage

Much will depend on whether German consumers start spending again. Last week there were some encouraging signs after research institute GfK’s consumer sentiment index rose by 9 points from its June forecast, although it remains deep in negative territory at a minus 9.6 point projection for July.

Hopes of a rapid rebound have helped Germany’s Dax stock index gain more than 40 per cent since its low in March, when coronavirus tore through global markets. But it has stumbled in recent days on worries about a Covid-19 outbreak www.businessday.ng

among more than 1,500 workers at a German abattoir and the collapse of Wirecard, the country’s biggest payments provider. Martin Arnold How much more support will the Fed provide?

Federal Reserve chairman Jay Powell struck a decidedly dovish tone at the press conference that followed the US central bank’s most recent monetary policy meeting earlier this month. He emphasised the bleakness of the economic outlook as a result of the coronavirus outbreak, and the long period of time it would take for the labour market

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to heal fully.

Mr Powell was explicit in his assurance that the Fed would not consider raising interest rates and that, if anything, additional support was more likely.

On Wednesday, when the minutes of June’s policy meeting are released, investors will get additional details about how the chairman and his colleagues view not only the prospects of a full recovery but also the risks to those forecasts and what more they think can be done to limit them.

The jobs report for June, released on Thursday ahead of a public holiday on Friday, will help to determine if such measures are needed. Last month’s report surprised market participants by revealing that US employers boosted hiring in May, with 2.5m jobs added against a forecast of up to 8m losses. But economists have cautioned that any further progress is likely to be slow.

Investors have emphasised the need for the Fed to consider a more explicit form of so-called forward guidance, which tethers policy-rate adjustments to inflation, growth or unemployment metrics. Some have also thrown their support behind a policy known as “yield curve control,” under which the Fed sets targets for government bond yields. @Businessdayng

While the central bank has not explicitly signalled it will pursue such policies, it has not ruled anything out. Colby Smith Will Covid outbreaks hurt China?

China will release its official manufacturing purchasing managers’ index for June on Tuesday.

Economists expect the closely watched gauge of sentiment to hold at 50.6, just above the 50-point threshold separating growth from contraction.

However, global markets have been volatile over the past week as viral outbreaks in the US threaten further lockdowns in cities across that country. Some strategists are concerned that events in the world’s biggest economy could start to drag on China’s rebound, via a fall in orders for Chinese products.

Iris Pang, greater China chief economist at ING, said export orders were important to ensure the nation’s factories kept busy in June. China’s domestic growth was unlikely to mount a strong recovery in the second half of 2020, Ms Pang warned, unless Beijing further relaxes social-distancing measures and export orders remain strong from key markets such as the US. She estimated that the PMI for services, due out on Friday, was likely to weaken slightly from 55 in May to just above 54 in June.

Company IN FOCUS

BUSINESS DAY Monday 29 June 2020 www.businessday.ng

At 11th AGM, Caverton plc looks into the future with renewed optimism amid pandemic impact OLUFIKAYO OWOEYE

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ompanies across the globe are now adjusting their future earnings as the double whammy impact of novel covid-19 and plunging oil price continue to impact business operations.

And for companies that provide offshore support services to oil and gas companies such as Caverton Offshore Support Plc, there is need to double down on all its business segments.

The company’s profit had taken a hit back in 2016 due to crash in oil prices which not only affected the oil companies but also, the Nigerian economy in general. Apparently, the decline in global oil prices led to lesser contracts for Caverton, as most of its clients struggled to survive the economic hardship necessitated by the ensuing economic contraction.

Caverton Offshore Support Plc is a marine and aviation logistics company which operates in Nigeria’s oil and gas sector.

The company is estimated to have close to 80percent market share. Caverton was incorporated in 2008 and positioned for the acquisition of Caverton Marine Limited and Caverton Helicopters Limited, two previously existing logistics companies that were incorporated in 1999 and 2002 respectively.

Caverton became a group following the acquisitions. Also, the company is currently quoted on the Nigerian Stock Exchange.

It is on a mission to fully take advantage of the Nigerian Government’s ‘Local Content Policy’.

As an aviation and maritime logistics company operating in Nigeria’s oil and gas sector, Caverton is focussed on providing transportation and environmental support services to its many clients. Specifically, the company provides emergency/ medical evacuation services, maritime and coastal surveillance services, search and rescue operations, among others.

At the company’s 11th Annual General Meeting which was held virtually in Lagos, Olabode Makanjuola, CEO, Caverton Offshore Support Group, warned that the financial performance in the ongoing financial year ending December 31, 2020,

would be greatly impacted by the Covid-19 pandemic, especially in the second half of the year.

He was however confident that the group is well-positioned to continue to deliver good results in the years ahead.

“While seizing opportunities to build and grow our businesses, we aim to anchor our position as the trusted and preferred logistics solutions partner in the industry,” he said.

In the financial year ended December 31, 2019, the group’s revenue reserves increased by 37 percent from N9.49 billion in 2018 to N12.96 billion. Shareholders’ funds also witnessed an increase of 20 percent, from N17.94 billion in 2018 to N21.45 billion in the review period.

Increased its net profit by 14 percent from N3.8 billion to about N4.35 billion in the financial year ended December 31, 2019. in the review financial year also declared a dividend of 20kobo per share for sharehold-

ers out of its 128kobo Earnings per Share (EPS) portfolio.

The Group’s Earnings per Share moved up by 14.3 percent from 112kobo per share in 2018 to 128kobo per share in 2019.

Analysts say the decision of the firm to reduce its exposure to banks in terms of borrowing in the review financial year was commendable, especially as it continues to plow-back profit to fund its operations in the years ahead.

Speaking at the AGM, Aderemi Makanjuola, Chairman, Caverton Offshore Support Group plc, said despite headwinds faced, 2019 was indeed a good year for the company, noting that the performance reflected continued effective execution of the group’s bold strategy as it continues to innovate and break barriers to boost the bottom line in building a customer-centric group ready to generate sustainable long term value to its shareholders.

‘‘

In the financial year ended December 31, 2019, the group’s revenue reserves increased by 37 percent from N9.49 billion in 2018 to N12.96 billion.

Shareholders’ funds also witnessed an increase of 20 percent, from N17.94 billion in 2018 to N21.45 billion in the review period

“The focused leadership, concerted effort of your agile and devoted workforce, and continuing support from our stakeholders enabled us to achieve this feat,” he said.

Specifically, he said, a new 7 years contract for the provision of five aircraft to support Shell Nigeria Exploration and Production Company and Shell Petroleum Development Company Limited was won after a successful bid.

“This award demonstrates the quality of character and tenacity of purpose of our management team and this laudable development also represents true commitment towards ensuring the seamless running of the nation’s oil and gas industry and by extension the Nigerian economy,” he said.

Another notable mileage achieved by Caverton in the 2019 financial year was the acquisition of Flight Simulator Training Device (FSTD) being the first in Nigeria and the African continent at large. The group said it aims to leverage on the increase of ‘AW139 Operators’ to create business value. The FSTD according to the Caverton group is a new aspect of its business that focuses on training. According to the Chairman, the new business segment will fall under the purview of the Caverton Helicopters Training Division.

In March this year, the company signed a Factory Acceptance AW139 Reality HFull-Flight Simulator deal with French aerospace engineering company, Thales Group. This makes Caver-

ton the first company to install a full helicopter flight simulator level “D” in Africa.

The Thales Reality HFull Flight Simulator level “D” is one of the most advanced commercial helicopter simulator in the world. Pilots, who successfully complete the simulator training, often get certified to fly the AW139 under various Civil Aviation Authority (CAA) approvals.

The Thales flight simulator is expected to make it possible for Caverton to deliver various state of the art training to helicopter pilots. These training could range from Initial Type Rating, Recruitment Training, Proficiency Checks for Visual Flight Rules, and Instrument Flight Rules. The simulator also helps to train pilots on both offshore and onshore missions, VIP operations, and emergency landing.

The company recently had a faceoff with the Rivers State Government when two pilots working for Caverton Helicopters flew into Port Harcourt from an offshore mission. The pilots were subsequently arrested by the Rivers State Government, even as the company’s offices were put under lock.

The Rivers State Government’s action was based on the fact that Caverton Helicopters violated an initial executive order by Governor Nyesome Wike, which had prohibited the entry of vehicles and flights into the state starting from the 19th of March, 2020 in the wake coronavirus spread in the state.

Some caveats for Caverton The company has already signed a major contract and upgraded its fleet in readiness for expansion and profitability in coming years. However, these are chiefly dependent on the impact of coronavirus on players in the oil & gas and stability in global oil price. Perhaps, a diversification away from oil price shocks.

Caverton must also keep an eye on its competitors such as Bristow Helicopters and OAS Helicopters for market share.

Those two companies are understandably making their own expansion moves with hopes of taking more advantage of the market. More so, Caverton must also ensure to reduce its liabilities and operational costs down.

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