BusinessDay 31 Oct 2018 by BusinessDay

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NGUS DEC 26 2018 364.27

igeria faces a third straight year of lower than planned revenues, as the Federal government now has barely four

Deficit to balloon

months to raise N5 trillion if it must meet its 2018 revenue target, according to Business Day analysis. The government could only

NGUS MAR 27 2019 364.72

NGUS SEP 18 2019 365.62

FG faces N5trn revenue shortfall in 2018 LOLADE AKINMURELE

fgn bonds

Treasury bills

manage N2.45 trillion in the first eight months of 2018, according to data obtained from the Central Bank; half of the N4.77 trillion it should have raised in

that period to meet a full-year revenue target of N7.165 trillion. Except government expendiContinues on page 38

Microfinance banks to lose 70% of directors to new CBN governance code ... Government to divest equity holdings within 2 years HOPE MOSES-ASHIKE

new corporate governance code introduced by the Central Bank of Nigeria (CBN) for Microfinance banks (MFBs) could see about 70 percent of directors retiring in the next three years. The CBN on Tuesday released the code of corporate governance for Other Finance Institutions (OFIs) operating in the country. The OFIs are microfinance banks, primary mortgage banks, development finance institutions, bureau de change and finance companies. In a circular signed by Kevin Amugo, director, financial policy and regulation department, CBN, the full implementation of the codes shall come into effect in April 1, 2019. Continues on page 38

Inside Controversy trails renewal of defunct Chanchangi Airways Air Operating Certificate P. 2 L-R: Emeka Emuwa, CEO, Union Bank; Vice President Yemi Osinbajo; Adenrele Sonariwo, founder, Rele Gallery/director, The Art Summit Nigeria, and Gbenga Oyebode, founding partner, Aluko Law Firm and Oyebode, at the opening of Art Summit Nigeria, with the theme ‘The Future of Art || Artist as the Nucleus’ in Lagos, yesterday.

Oando records N10.4bn profit in Q3 P. 2

2 BUSINESS DAY NEWS

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‘Over the next 10 years, the emphasis will still depend on oil’ The Minister of State for Petroleum Resources, Ibe Kachikwu in an Interview with Bloomberg’s FRANCINE LACQUA and TOM KEENE explained some of the reason for volatile in oil prices, production shortfalls from Iran and Venezuela and corruption in Nigeria’s oil and gas sector. Excerpts:

ACQUA: Well, I’m very pleased to welcome Emmanuel Kachikwu. He is the Nigerian Minister of State for Petroleum, a position he’s held since 2015. He’s previously served as executive Vice Chairman of ExxonMobil Africa. And, Minister, you’ve also just come back from the U.S. where you’ve received a number of awards and you’ve also been made an honorary citizen of the United States. So congratulations on that. Overall, when you look at the price of oil, it’s been so volatile. What’s going on? KACHIKWU: Well, uncertainties everywhere. Obviously, we’re still at this periodic pressure where they might keep a cap and stability on the prices. So I think the problems you have obviously with the -- especially the Iran ban, some (inaudible) all over the world on (inaudible) capacities in very many OPEC countries in terms of being able to reach the typical capacities that we have, how much of that shale can cover, it’s all (inaudible). LACQUA: What are we misreading? So what do you see for 2019? Are we putting too much emphasis on the Iran and Venezuela shortfalls? KACHIKWU: I think so. My feeling is that those things (inaudible) with some discipline will have the capacity to probably provide some of the gaps that you see. And the sort of prices you have, the shale will continue to be bullish. So I think we’re overestimating a sudden in production or supply, and that’s (inaudible) impact in the market. Overall, I think this oil prices figure that you have about now of about $70, $77 sort of pendulum, it’s sort of the numbers you’re going to see for the rest of the year and potentially by the end of the year. LACQUA: Minister, we’re hearing about some kind of agreement deal that OPEC would do with nonOPEC allies. What does that exactly mean and what are you talking about and would you support it? KACHIKWU: Well, I will have to know the details on whether I will support it. I wasn’t part of that meeting.

They just took place a few days ago. But I know that the genesis for that was right and have a cyclical agreement for extension of cooperation that we had with Russia that, there was a need to have sort of alliance so that they have automatic triggers if things happen. And I’m sure that that is probably the basis of the agreement deal. I don’t think it’s anything different from what we really agree to in terms of cooperation, in terms of trying to stabilize the oil market. I think at this point, both producers’ suppliers had distantly consent about a need for stability in this sector, and that’s what everybody is pushing for. KEENE: Minister, I say this with great respect for your previous tenure at Exxon as well, but the idea of corruption within Nigerian oil is legendary. There’s been different litigation including an Italian court. Give us an update right now on you’re trying to clean up Nigerian oil even with the pressure to go from onshore development off to offshore development. What’s the state of sanctity of contract within Nigeria? KACHIKWU: Well, a contract is something we respect absolutely. My brother is a lawyer and is somebody who helps the president, superintendent advices him, keeping the contract is key. In terms of the corruption issues, you know that that is the base upon which he campaigned on and has continued to be one of his laudable achievements during his tenure. We have, at any point, where we’ve had visible evidence that corruption had taken place, would that be (inaudible) or do not, now, we have gone very bullishly on those. (Inaudible), there’re various litigations that are going on. Some of them are (inaudible) before we came into position. We are cooperating as much as we can to make sure the international agencies and countries are (inaudible) pushing for persecutions that have gone ahead and do what they need to do.

•Continues online at www.businessdayonline.com

Oando records N10.4bn profit in Q3 DIPO OLADEHINDE

he continued increase in oil prices and sales volumes, Nigeria’s exemption from the production cut by the Organization of Petroleum Exporting Countries (OPEC), capital discipline and reduced disruptions on production activities in the Niger Delta are contributing factors to the improved cash flows and impressive results posted by Oil and Gas companies operating in Nigeria in the third quarter of 2018. Underlining how far both majors and indigenous companies have come since oil prices plummeted in 2014, Oando PLC recently posted its nine months ended September 2018 results, with a profit of N10.4 billion, a 46 profit increase, compared with

N7.1 billion in the same period of 2017. The company has since recovered from the effects of the oil price crash, with this being its 8th consecutive profit since 2017 and its 3rd profit in 2018. Seplat’s profit-after-tax (PAT) stood at $91 million compared with $5 million in 2017; Total’s adjusted net income increased by 48 percent to $4 billion compared to same period in 2017 and was 11 percent higher than in Q1 2014 when oil prices were over US$100/bbl; while Eni made a net profit of 1.53 million euors in the third quarter of 2018. Oando’s 46 percent jump in yearon-year quarterly net profits beat market expectations. Despite being in the middle of an indirect shareholder dispute which has led to a yet to be

Continues on page 38

L-R: Funsho Odukoya, chief operations officer, RMB Nigeria; Seyi Soetan, senior relationship manager, RMB Nigeria; Temitayo Adegoke, general counsel, RMB Nigeria; Hector Okposo, senior relationship manager, RMB Nigeria, and Femi Fatobi, chief internal auditor, RMB Nigeria, during their investiture as honorary senior members of the Chartered Institute of Bankers of Nigeria (HCIB) in Lagos, recently.

Controversy trails renewal of defunct Chanchangi Airways Air Operating Certificate IFEOMA OKEKE

ontroversy is trailing the renewal of the Air Operating Certificate (AOC) of defunct Chachangi Airways by the Nigeria Civil Aviation Authority (NCAA). A letter dated 24th, January, 2017 signed by Sidi Abdullahi, NCAA director of operations and training, addressed to Chanchangi Airline to convey the renewed AOC was made available to BusinessDay. Also, the Air Operator Certificate signed by Usman Mukhtar, the director general of NCAA, dated February 5th, 2017 also made available to BusinessDay indicated the type of operations as passenger and cargo. However, stakeholders and operators in the aviation sector have raised various questions around how a defunct airline will be issued an AOC despite its huge debt profile. “Everyone knows that Chanchangi Airline no longer operates as an airline for many years now. How then did the NCAA renew the defunct airline’s AOC to operate as an airline? ” a NCAA source stated. “AOC is only issued or renewed by NCAA after months of rigorous inspections and audits to ensure that the airlinehasserviceableaircraftandameans to operate the aircraft safely. It is only given to airlines that have fulfilled the aviation regulation of the NCAA, and this includes having aircraft that can fly. “So the question is this: why would the NCAA renew this defunct airline’s AOC when it is very obvious to every-

body from time immemorial that this airline no longer exist?” the source said. According to the regulations of the NCAA Part 20 .1.1.4—(b) No person may operate an aircraft in commercial air transport operations which are not authorised by the terms and conditions of its AOC. The regulation on Part 20. 9.1.1.6 went on to state that (a) The authority may issue an AOC if, after investigation, the authority finds that the applicant— (1) Is a citizen of Nigeria ; (2) Has its principal place of business and its registered office, if any, located in Nigeria ; (3) Meets the applicable regulations and standards for the holder of an AOC ; (4) Is properly and adequately equipped for safe operations in commercial air transport and maintenance of the aircraft ; and (5) Holds the economic authority issued by Nigeria under the provisions of this regulation. The regulation also stated that the applicant will be denied an AOC if it does not have for scheduled operation, at least three Nigerian registered airworthy aircraft capable of servicing its approved schedule for an initial AOC issuance, for scheduled operation, at least two airworthy aircraft capable of servicing its approved schedule if it is already in operation. For non-scheduled operation, at least one Nigerian registered aircraft. JohnOjikutu,formermilitaryairport commandant at the Murtala MuhammedInternationalAirport,MMIA, toldBusinessDaythatwhatheexpected the NCAA to consider before renewing the airline’s licence is its debt profile. “Chachangi was one of the airlines

that got intervention fund. I will want to know what the financial health of the airline as at the time it went down. Has the airline fulfilled its obligations to its creditors such as the service providers, banks and the source/ financier of intervention funds? These should form the basis for re-issuing the licence to the airline. “The possibility is that they could be operating chartered flights. Most of these airlines could use their licence to operate Jeddah flight without operating domestic flight. If that airline is defunct, it is the responsibility of NCAA to ensure that it has cleared its debt,” Ojikutu added. He stated that the airline may be coming back to accumulate more debt. He explained that when an airline which is not economically healthy operates, there is every possibility that it will begin to cut corners, which could be detrimental to the safety of passengers. BusinessDay’s checks show that the airline’s debt to service providers has remained unpaid since the airline was grounded five years ago. However, efforts to reach the DG of NCAA through calls and messages proved futile as he neither picked his calls nor responded to messages. BusinessDay’s checks show that both the Mukhtar and Abdullahi once worked for Chanchangi Airline before joining the NCAA. In February 2017, President Buhari sacked all directors in NCAA and left behind four directors. Two out of these four untouched men are Mukhtar and Abdullahi.

MTN’s court case against CBN postponed to Dec. 4 DIPO OLADEHINDE & Odunayo Oyasiji

earing of applications in a case brought by MTN Nigeria Ltd., against the Central Bank of Nigeria (CBN) has been moved to Dec. 4, according to a ruling by Justice Saliu Saidu of the Lagos Federal High Court. Justice Saidu also ruled that the affidavit of service to Nigeria’s at-

…as AGF pulls no show ...CBN denies refunding N5.2 bn to banks torney general, against whom the mobile carrier has also brought a case, should be provided by then. Johannesburg-based MTN is disputing an order from the CBN that it transferred $8.1 billion of repatriated dividends back to Nigeria. It’s separately disputing a claim

from the attorney-general that it needs to pay about $2 billion in backdated taxes. Meanwhile there was no one in court to represent Abubakar Malami, Attorney General and Minister of

Continues on page 38

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COMMENT SMALL BUSINESS HANDBOOK

EMEKA OSUJI Dr Emeka Osuji School of Management and Social Sciences Pan Atlantic University Lagos. eosuji@pau.edu.ng @Emyosuji

have further comments to make on the theme of this year’s Nigerian Economic Summit (NES). In the instalment of last week, which focused on the title of the summit, we pointed out that poverty has become fully entrenched in the country, and sooner than later we may begin to see it as normal. Its deadly effects on people may begin to have little impact on our psyche; just the way we now react to the killing of fellow Nigerians with a shrug. At best we condemn the killings, pay tribute to the dead and console the living, but continue whatever we are doing, often without much sense of loss. We also noted that Nigeria is not lacking in prosperity. What it lacks is the will and capacity to manage prosperity for the good of all. The rampant lack of justice and equity in the country has found eloquent expression in the lopsided distribution of national prosperity. As a result, most Nigerians continue to play the observer in issues of prosperity and happiness in their country. Many years of consistently high rate of growth, which we experienced in the 2000s, did not benefit the majority of Nigerians. To move from poverty to prosperity, as the summit proposed, would require a paradigm shift in our

JUDE UZONWANNE Uzonwanne is an independent political analyst who periodically provides policy and strategy advice to various Nigerian governments.

t is time to put Agenda 63 on the table. Nigeria went into the post-independence period with a constitution that can be largely described as architected by its citizens. That constitution served the country’s purposes until 1963 when it was amended to strip away the residual authority held by the UK’s Privy Council, a step that while on the surface appeared appropriately nationalist, signalled the start of a self-interested political manipulation by the government of the day. That manipulative tendency continues to unfold with deadly consequences for Nigeria’s citizens and economy. Be that as it may, we do not know how things would have turned out since the military class put an end to that federal experiment in 1966 and have since written every constitution since then. Nigeria’s unitary constitutions, whether the 1979 or 1999 or its preceding portfolio of military decrees effectively decapitated a system of competitive regional economies that were emerging in the 1940s – 1960s. These strong regional governments were the basis on which Nigeria gained its independence from Great Britain in October 1960. By 1966, it was clear that each of the major

Wednesday 31 October 2018

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Governance and institutional failure as recipe for mass poverty (1) management and distribution of national resources. These two elements of the summit theme – poverty and prosperity – formed the focus of our comment last week. It will be nice to know how the summit articulates, in its usual summit report, the solutions to what I called, in an earlier contribution in this column, the challenge of distributional equity in Nigeria. We shall now make a few points on the issues of governance, which forms part of the other components of the said summit theme. The world is guided only by those who can sit down and think clearly; and these are not my words. It was the Vice President, my learned senior and professor, Yemi Osinbajo speaking recently. I think it is a point that needs to permeate the leadership strata of our country and a good input to the solution matrix of our problems if we accept that Nigeria needs people who wake up every morning thinking for her; planning for her future and not those of a section or group. Sectional champions always dominate our leadership landscape. Those who build the British Rail and such ground-breaking development engines did not focus on their clans and counties. They used national projects to guarantee national cohesion and unity. This ensures that prosperity is felt across the country. The summit provided a fertile ground for useful conversation that could make a difference in the lives of people, assuming we prioritize implementation and feedback. Nonetheless, a discussion of the topical issue of governance could not have come at a better time, as Nigeria prepares for an election, which some say will decide whether the people will “change the change” or stay with the “change”. Unfortunately for politicians, Nigerians have come to realize, and correctly

‘

Unfortunately for politicians, Nigerians have come to realize, and correctly too, that their primary problem is failure of governance, which is essentially and almost invariably a leadership question

’

too, that their primary problem is failure of governance, which is essentially and almost invariably a leadership question. Sometimes we pass the buck to followership for not doing enough to get themselves out of the clutches of bad leaders. Try as we may, leadership does not come from the rear, unless the leader chooses to be a good shepherd, as Nelson Mandela would recommend, who stays at the rear to let all the sheep pass, beginning with the most nimble and followed by the rest. Even then, leaders must lead while at the rear, and followers must follow even if they are in front. Doing otherwise is indiscipline or disobedience or intransigence. It could actually come down to outright insurrection, because the present crop of leaders in most Extractive Societies like ours, as Profs Acemoglu and Robinson would say, are not shepherds talk less of good ones. It is therefore fitting that the summit focused on making governance work for Nigerians. The concept of leadership from the rear has been promoted substantially at Harvard but simply relates to the chang-

ing relationship between employees and their employers. The quest for meaning and self-worth at work is driving employees to seek opportunity to contribute to policy. People want the opportunity to co-author their organization’s purpose and direction. We shall dwell on this subject sometime in the future but for now, we hold leaders, not followers, largely accountable for our failures. In all economies where government controls the commanding heights of the economy, determines the flow and direction of financial resources; and often times decides who gets what share of the national patrimony, governance is everything. Until the interest of those who control government and those of the productive forces of such societies converge (or share commonality if convergence is utopian), prosperity will not be shared. Nigeria is one of such economies where the central government gets involved with virtually every aspect of life in every part of the country, thereby stifling initiative and completion. Leadership failure in such societies is usually disastrous. That is how countries become headquarters of such evil as poverty, drug addiction, prostitution and insecurity, to mention a few. Governance, according to the World Peace Foundation, is the delivery of political goods, which begins with security of life and property. Good governance is in evidence when countries or nation-states provide high levels of critical political goods – security of life and property, infrastructure, education and other sources of well-being – in an effective manner to the people. It has long been established and documented by Rotberg and other respected writers in their collective works in the book

“When States Fail: Causes and Consequences”, that the basic reason for the existence of nation-states is “to provide a decentralized method of delivering public goods to those living within designated parameters; namely; their borders. Accordingly, it is by their levels of effective delivery of these crucial political goods that strong states are distinguished from weak ones. There are several governance measures and indicators, including Business Environment Risk Intelligence, Corruption Perception Index and Country Assessment in Accountability and Transparency, just to name a few. They all give indication of how nation-states perform in the delivery of the core responsibilities of government, including security, employment, transparency and accountability. Unfortunately, politicians do not want to hear anyone who makes an assessment of their work, because they are probably the only set of people in the world who are employed and remunerated without being held accountable for non-delivery or poor performance of their duties, at least in the developing world. This is more particularly so in countries where primordial sentiments, ethnicity and tribalism have helped to enthrone mediocrity and impunity. As a result most of them are still struggling to understand the elements of the first industrial revolution while the rest of the world are on the fourth industrial revolution. The failure of leadership is the cancer that has eaten up rich countries turning them to graveyards of the poor. Next we shall look at poverty and institutions that don’t work.

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Agenda 63: A guide to restructuring Nigeria regions had the leadership to intelligently exploit its resource position to drive wealth creation at a pace that suited the region in question. Today, while some of that choice remains in the constitution as a result of the concurrent legislative list e.g. agriculture, it is negated by an accompanying fiscal regime that confiscates wealth either via outright ownership of land and its mineral assets, or onerous taxes. The net outcome is political system that has made the rationale choice not to pull up its sleeves to create value. Few Nigerian states have any incentive to break out of that rational laziness. Why work hard or smart when if the federal centre will reapportion the federation’s tax, customs and mineral wealth and disperse it based on population data whose provenance remains an eternal point of contention? As a result, some of Nigeria’s 36 states rely on federal subventions for up to 95% of their budget requirements. Even though they could build other economic assets e.g. legal mining or IT services, many do not bother since the transaction costs of building an economy is materially higher than flying to Abuja to collect billions of Naira every month! Only a restructuring along the lines of the 1963 constitution can change the basic behavioural disincentive at the heart of the Nigerian federation. Building that competitive edge into a basic legal framework,

and fiscal policy will shift the locus of wealth creation away from the federal government back to regions and metropolitan areas where it rightly belongs. Thus, the only logical choice available to Nigeria today is to abolish the 36-state structure that represents 36 cost centres, and replace them with 6 as once wisely suggested by former Vice President Alex Ekwueme. Alternatively, 12 regions can emerge based on the old Gowon state structure. What matters most is that we transfer decision and property rights back to the regions. While the logic for giving ethnic groups, their own states is attractive to correct marginalization, perhaps the greatest form of marginalization is the structural handcuffs many are in today. Even if we do not abolish the states within the regions, by dismantling a system of revenue allocation based on population, a key source of tension in the political system will be eliminated. Each of the regions would receive the same share of federal revenues, but since they would keep the bulk of what they generate and pay royalties for maintaining the centre, it would neutralize concerns about one region being larger or smaller than others. The smart regions would quickly move to build more efficient governance systems, and therefore limit overhead costs, boosting their long-term balance sheet. Within the successor regions, another key change would need to occur. Today, the local government system is the last mile of government. The

legal borders of local governments are often artificial and fail to take into consideration the existence of cities and towns such as Enugu or Ibadan that are natural economic engines for their metropolitan areas. Instead the LGA system splits these cities so that no single person is accountable nor responsible for planning what Ibadan’s prosperity should be. Today’s system relies solely on the goodwill of LGA chairmen and the state government to have the foresight to get together and plan for Ibadan’s future. To date, nothing in the governance evidence suggests such collaborative planning activities are taking place. As a result, Ibadan which should be pursuing the equivalent of a bedroom and intellectual capital support strategy to Lagos has failed to unlock the wealth that it should generate given its distance from Lagos (~60 minutes by road). Ibadan could be the wealthy university and R&D city with some manufacturing and country estates that leverage Lagos and Ogun’s financial and manufacturing centres. The planned railroad is a step in the right direction, but it is still strategically siloed from the broader prosperity agenda of Ibadan. A more intentional play could quadruple the value of Ibadan’s real estate sector, as well as improve its tax base vis-à-vis Lagos. A similar tale can be told about cities in the East who are within a 120-minute distance from Enugu, Port Harcourt and Onitsha. Ditto Kaduna’s proxi-

mate cities, towns and villages. How ca n re st r u c tu r i ng b e achieved? A clear pathway exists in the 1999 Constitution i.e. the powers to proclaim an emergency. Legal counsel can provide more clear advice but by using that tool to simultaneously suspend the 1999 Constitution and call for a 1-day special session of the national and state assemblies to discuss the draft documents, Mr. President can start the ball rolling. The institutions would vote on a draft document that would be a refinement of the 1963 Constitution. Nigeria would now have 6 regions instead of 4, and retain the capitals as in 1963, as well as require every Nigerian city, town and village to be governed by a mayor and a council similar to what cities such as Enugu did before the military coup of 1966. Yes, new boundaries will need to be drawn for these entities. Each region will be led by a Premier and a bicameral legislature. As part of a 12-month transition step, each of the states folding into the regional parliament will send an equal number of delegates to the new regional parliament composed of the current state governor, deputy governor and speaker of the House. Note: The rest of this article continues in the online edition of Business Day @ https://businessdayonline.com

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COMMENT CHARACTER MATTERS WITH DAPS

DAPO AKANDE Graduate of the University of Surrey, UK, author of the acclaimed book: “The last fight: A personal journey to discovering values.” Contact: dapsakande25@gmail.com

rom day one, our masters (what we had to call our teachers) drummed it into our heads that we, pupils of public schools, represent the top 1% of the nation. Don’t mind the Brits. You know them now. Their own is always different. For some odd reason that I don’t have time to go into here, what they refer to as public schools are actually private schools. Their own free schools are called state schools or comprehensives. Anyway, almost as a mantra, they would repeatedly tell us we are the future leaders of the nation therefore our character must reflect such. In everything that we do, we should always remember that if we contravene school rules, not only will we face the consequences but far more importantly, we would be letting ourselves down too. After all, we’re supposed to make of better stuff. To whom much is given much is expected; that kind of thing. When I look back at it now, I realise just

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Education revealed... Part 1 how much those regular pep talks shaped me. Constantly, our masters would say to us ‘six formers’ then (16 to 18 year olds), that if we wanted to be treated like adults, we must first behave like adults. And to give them credit, that was exactly how it played out. You know oyinbo, they have less proclivity to be condescending towards you just because of your age. They will treat you according to the way you behave. If you behave like a responsible adult, they will treat you as such. If you behave like a spoilt brat, they will treat you accordingly. If your arrogance gets the better of you, they will quite happily put you in your place. No matter who you are. Reading reports in the newspapers of members of parliament (their national assembly) getting stopped by the police for breaking the speed limit, being compelled to take a breathalyser test to see if their alcohol consumption has exceeded the permitted limit to drive and subsequently receiving a hefty fine or even suspension of their drivers licence is not an uncommon phenomenon. So oyinbo is by no means perfect as the fallibility inherent to all humanity will certainly rear its head once in a while. The difference here though is, there’s a consequence; no matter who you are. As leaders, one is not just expected to uphold the law but one should always be expected to be held to a higher standard even when no one is watching. Definitely not a lower one which permits you to get away with anything and everything. This is only typical of a society where laws

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As leaders, one is not just expected to uphold the law but one should always be expected to be held to a higher standard even when no one is watching. Definitely not a lower one which permits you to get away with anything and everything

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are sacrosanct. Where the usefulness of laws are not limited to only times of witch-hunt or when traffic officials and law enforcement agencies on the road need someone to sink their teeth into, especially when Christmas is approaching! Fellow Lagosians, you know what I mean. Their laws apply equally to everyone. None is made to feel less or bigger than the other. Simply put, education ought to prepare one for service. This is what leadership at every level, starting from your home, your school, your workplace and ultimately in politics should be about. As our masters urged us to behave like adults so we can be treated as such, this could be extended to, “behave like a human being so you can be treated like one”. Some may invert this though and say, “treat me like a hu-

man being so I’ll be better motivated to behave like one”. I think there’s merit in this too. I don’t see many sane human beings cherishing the idea of being treated cannon fodder. Courted when you need their votes or their support concerning your interest but dispensable once that interest has been secured. Saluted when you want them to “shake body” but a “bloody civilian” when they have nothing to drop. In the long run, victims of such people may not easily appreciate the humanity in putting others first. Life is a journey, often perilous, which requires continuous education to guide us through. My late father, God bless his soul, told us he always thanked God whenever he learned something from his children. That’s when we were still children! Contrary to the Nigerian narrative, old men are not always right. This has often been used to preserve the status quo, where the young are kept out of decision making. Politics is a good case in point and how well is that going for us? Over the centuries many different positions have been put forward as to the purpose of education. And many of them, though distinctly different are right. Some say it’s for self-actualization – gaining knowledge that will help you to fulfil your potential. Others argue it’s to push the boundaries of knowledge to further develop our societies and the world. Yet some assert it’s to help us find solutions to the world’s problems; as yet incurable diseases such as many forms of cancer and even the worrying climate warming issue. Do you not find it a little ironic though that we urgently

pursue knowledge to solve the same problems our apparent knowledge created in the first place? Well, that’s just an aside but it’s food for thought. Still, some insist the whole purpose is to equip an individual with the ability to reason so he can make his own decisions. I love the way Plato defined education. He described it as that which “makes a man eagerly pursue the ideal perfection of citizenship and teaches him how rightly to rule and how to obey. This is the only education which upon our view deserves the name; that other sort of training, which aims at the acquisition of wealth or bodily strength or mere cleverness, apart from intelligence and justice is mean and illiberal and is not worthy to be called education at all.” (Rusk 1965:30) Thousands of years later, the American President, Theodore Roosevelt, in my opinion sealed this view when he famously said, “Educate the man in mind and not in morals and you educate a menace to society.” If you were to ask me the one word which springs to my mind whenever I hear “education”; if you were to ask me what it was our masters at school, relentlessly strived to instill in us through education. It’s none other than “character”. I’m one of those who strongly believes the Nigerian system as a whole and we the people place far too much emphasis on academics (as important as it is) and not enough on building up the total being, and the sorry state of our society quite clearly reflects that.

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Nigeria: Real estate asset pricing

ADENEKAN ADENIRAN Adeniran is Principal at FRISIA Partners (www.frisiapartners.com)

eal estate does not exist in a bubble. As capital allocation is not constrained, real estate as an investment asset class, must compare favourably with other classes of investment. For real estate to compare favourably, it must have a return on investment similar and comparable to other asset classes such as government bonds and company shares; and it must be priced appropriately with consideration given to relevant macro-economic indices in the given jurisdiction. In Nigeria, with inflation at c. 11% (and rising) as at August 2018, monetary policy rate/base rate at 14%; treasury bills yield between 10% to 12.6%; FGN bonds yield between 12.8% and 14.69%; and Nigerian government eurobonds yielding 7% to 8%, it is exceedingly difficult (if not impossible) for real

estate assets yielding between ‘say’ c. 5% and c. 10% to attract investment from retail or institutional investors especially given the alternative investment classes – primarily government securities. [The justification for investment in real estate (yielding between ‘say’ c. 5% and c. 10%) is capital growth, primarily through rent reviews/rent uplifts during the period of investment as opposed to yield compression. Capital growth would aid to give a total return (over the investment period) which could compare favourably with other investment asset classes.] Given the above yield differential, it seems to be the case that there exists a structural fault in real estate returns and pricing relative to macro-economic indices in Nigeria. To attempt to understand the issue of real estate pricing and, perhaps, the relative lack of institutional investment (other than regulatory limitations such as Regulation on Investment of Pension Fund Assets – April 2017) in Nigerian real estate as an asset class, one must consider the concepts of price, value and worth and view this triumvirate from a real estate perspective. Price, value and worth

Price is the amount of money or the consideration that has to be paid to acquire a given product. As long as the amount of money paid for a product represents its value, price is also a measure of value. As said by Warren Buffet, “Price is what you pay; value is what you get.” It follows therefore that price should not be too dissimilar from value – certainly, one should be within a reasonable margin of the other. After all, a purchaser does not want to pay a price that far exceeds value nor would a seller want to receive a price far lower than value. Theoretically, market price is the amount at which one transacts on an asset while market value is the true underlying value of an asset. The difference between price and value is usually as a result of inefficient markets i.e. lack of information, or situations where prevailing market prices are not reflective of true underlying market value. For market price to equal market value, the market must be efficient from an information perspective and rational expectations must prevail. One could conclude that price would hardly equal value as markets are not efficient and rational. From a real estate perspective, open market value (OMV) or value, according to International Valuation Standards is “the estimated

amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion”. Open Market Value determination or property valuation based on yield implies that the value of an asset is the net annual income from the asset multiplied by the inverse of the yield (where yield is the annualised return from the asset expressed as a percentage). Therefore, an asset with a yield of ‘say’ 5% would have its net annual rental income multiplied by 20 while an asset with a yield of ‘say’ 9% would have its annual income multiplied by 11.11 to determine its open market value. As well as yield, property valuation is also based on comparable evidence from the market. In finance, the value of an asset could be considered to be the lump sum payment made (today) for the benefit of the future cash flow accruing from the asset. This is essentially the DCF method of valuation. Given that price is the amount that one transacts on an asset, and it can be established as a matter of fact from market evidence, it follows that price would be equal to

value as described above once a transaction completes. This gives objectivity and acceptance to both price and value. Worth, whilst used, unfortunately, interchangeably with price and / or value, should not be mistaken for price or value. Worth is a subjective view of price or value; and it is the price or value to a particular entity or individual as opposed to the market. For example, an asset (‘say’ office premises) next to a manufacturing plant could be worth more to the owners of the manufacturing plant due to its proximity to the plant. The same asset would not be worth so much to any other tenant or potential owner. In this example, the worth to the owners of the manufacturing plant exceeds the value of the asset in the market. Similarly, due to the legal, planning and construction challenges faced by a residential developer, residential units developed on a (perhaps inherited) parcel of land could be considered to be worth a lot more than a willing buyer would pay. The worth ascribed to the asset should not be determined to be the value of the asset. To be continued tomorrow …

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Wednesday 31 October 2018

EDITORIAL PUBLISHER/CEO

Government must find solution to congestion at Apapa ports

EDITOR Anthony Osae-Brown

lthough the access roads to Apapa and Tin Can ports were originally projected to give access to 1,500 trucks, now ab out 5,000 trucks seek access to the ports ever y day, according to reports by the Lagos Chamber of Commerce and Industry (LCCI). The report says Nigeria loses N600 billion in customs revenue, $10 billion (N3.6trn) in non-oil export sector and N2.5 trillion in corporate earnings across various sectors on annual basis due to the poor state of Nigerian ports. The Nigerian ports are also being listed as one of the most inefficient and expensive ports in the world by global reports. One of such reports is the moverdb. com 2018 Overseas Cargo and Freight Costs template that shows that freight costs from the United States (Los Angeles & New York) to different port destinations of the world. The rates shows

Frank Aigbogun

DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua

that the Apapa p ort from New York is the most expensive destination among the c ountries include d in the template. For instance, it costs about $4, 982 to ship a 20 feet container from New York to Apapa, which is about twice the amount to ship a container of the same size to Cape Town, South Africa (at $2, 542). This is despite the fact that New York to Lagos is just 6,516 nautical miles and takes approximately 27 days for a ship to sail the distance while New York to Cape Town is 9,097 nautical miles and takes approximately 38 days to sail. Als o, the averag e turnaround time for ships at Apapa is estimated in excess of 30 days as against just two days for the most efficient ports globally. The LCCI report also reveals that 25 percent of cashew nuts exported from Lagos to Vietnam in 2017 either went bad or were downgraded because of delays at Lagos ports. From exporting up to 1,700 tons per

day, an exporter now exports between 100 to 250 tons. On the import circle, only 10 p ercent of cargo es are cleared within the set timeline of 48 hours while the majority of cargoes take between five to 20 days to clear. A clear sign of how inefficient and expensive the ports are, the number of government agencies at the ports has risen to twelve instead of eight, with each demanding inspection and associated fees. Sadly the solution to the problem of inefficiency and congestion in the ports is well known – the complete revitalisation of the sea, air and land ports in eastern Nigeria. These were viable ports in pre-independence Nigeria. However, post-independence Nigeria governments and subsequently government agencies discouraged the use of the eastern ports and concentrated virtually all shipments into and outside Nigeria at the Apapa port forcing all Nigerian importers and exporters into the Apapa port. When

pressures began to build up at the Apapa ports, the government later developed the Tin Can Island port, still within the Apapa axis to cope with the pressure on Apapa. Of course, the pressures increased and the Lagos ports could no longer cope. To make matters worse, the eastern ports, due to abandonment, had silted and become shallow and unable to admit big ship increasing the dependency on the Apapa ports. Therefore, any s olution to the ports that does not include the complete revitalisation and repositioning of the eastern ports will amount to shadow boxing. Thankfully, the Lagos state government has also made this point to the federal government and Nigerian Ports Authority (NPA). Once that is done, the NPA and the federal government can now concentrate on efforts to streamline ports operations to drastically cut down turnaround time to position Nigeria as a global business destination.

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Wednesday 31 October 2018

COMPANIES & MARKETS

DAY

Stakeholders seek food sufficiency to eradicate poverty

Pg. 15

C O M PA N Y N E W S A N A LY S I S A N D I N S I G H T

Guinness Nigeria profit rises 249% … pays out N4.03bn dividend ONYINYE NWACHUKWU, Abuja

uinness Nigeria Plc. has paid out a total dividend of N4.03 billion following the company’s impressive performance for year ended June 30, 2018. The declared dividend is some 318 percent over the N963.8 million paid out the previous financial year. The approval for dividend declared which translates to 184 kobo per share was given by the shareholders at the company’s 68th Annual General Meeting in Abuja. Babatunde Savage, Guinness Nigeria Chairman, Board of Directors said the company has again demonstrated business resilience, with performance which indicates commitment to good returns on their shareholders investments. Returning to profitability after a period of downturn, the company recorded a 31 percent improvement in operating profit in 2018 from N10.2 billion to N13.4 billion the previous year.

Revenue went up by 14 percent from N125.92 billion in June 2017 to N142.98 billion, while Profit After Tax (PAT) improved significantly by 249 percent to N6.7bn for the year ended 30th June 2018 compared to N1.9bn reported for the year ended 30th June, 2017. The Company’s financial statement further indicate that total comprehensive income for the year jumped 254 percent from N1.888 billion to N6.69 billion. Established in 1950 and listed on The Nigerian Stock Exchange in 1965, Guinness Nigeria boasts of a shareholder base of over 75,000 shareholders, and is also one of the foremost quoted companies in the country. “The Company’s performance for the year ended 30 June, 2018 shows impressive growth and resilience,” Savage said while addressing the shareholders at the AGM. Meanwhile, the company’s published third quarter 2018 statement to the Nigerian Stock Exchange and its shareholders also indicate that the profit before tax increased to N1.2

L-R: Maymunah Kadiri, founder/medical director, Pinnacle Medical Centre Ltd; Moses Awolola, deputy director (Pharmacy) Lagos StateMinistry of Health; Adenike Shobajo, vice president, Lagos Chamber of Commerce Industry (LCCI); Olajumoke Fashan, chairperson, LCCI Women Group, and Olajumoke Fashan, head of advocacy, training and Drop-In Centre, Freedom Foundation, during the 4th annual LCCI women Group Conference with the theme “Metal Wellness: Drug and Related Substance Abuse, Anger Management” in Lagos. Pic by Olawale Amoo

billion driven by lower finance charges as a result of the rights issue, more than offsetting operating profit decline. Profit after tax was recorded at N835.7 million against just N41 million same period of last year. Net sales however declined 6 percent in three months ended 30th Septem-

ber, 2018 primarily driven by increased competition in the value beer segment, which more than offset growth across the sector. Gross profit equally declined 12 percent within the three months pushed by continued inflationary pressure on the company’s raw material costs and vol-

MDXI, Asteroid partner to Ecobank unveils Rapid Transfer launch Internet Exchange Point Mobile Remittance App

e s t A f r i c a’s l a r g est data centre provider, MDXI, and global IXP platform provider, Asteroid, have partnered to launch a carrier-neutral Internet Exchange Point (IXP) for West Africa. The West African Internet Exchange (WAF-IX), is based on Asteroid’s lightweight design and will be located in MDXI’s Tier III Data Centre, in Lagos, Nigeria, West Africa’s biggest economic hub. Outlining the three major objectives for WAF-IX as accessibility, lower costs and reduced latency for Internet users in West Africa, product manager, MDXI/Peering Coordinator, WAF-IX, Vremudia Oghene-Ruemu stressed that the new Internet Exchange would complement national IXPs, improve regional traffic and ultimately foster the attainment of the digital economy across West Africa. “Given the size of its markets and status as home to some of Africa’s biggest economies, West Africa is uniquely positioned to scale up its digital

transformation efforts via Internet traffic growth. The West African Internet Exchange, hosted within our globally certified Data Centre will significantly improve traffic exchange and localization within West Africa, with benefits of reduced latency, improved speed and better quality of service to end users. WAF-IX will enable more Africa-focused global and local carriers take advantage of the region’s growing Internet penetration to enable services originating and terminating within the region”, he says. West African Internet Exchange will facilitate imp rov e d i nt e rc o n n e c t i o n , collaboration and peering between players with access to MDXI’s Tier III data centre, and will enable an ecosystem that allows customers connect to multiple networks, cloud and content providers. Using the lean and efficient Asteroid IXP platform, WAFIX will enable service providers operate more efficiently with the delivery of enhanced end-to-end network perfor-

SEYI JOHN SALAU

cobank follows tradition of leadership in digital banking in Africa has introducd a dedicated mobile remittance app Rapidtransfer. The Rapidtransfer app was unveiled by the managing director, Ecobank Nigeria, Patrick Akinwuntan at a commemorative dinner to thank and celebrate outgoing members of the Ecobank Nigeria Board and to welcome its newly appointed directors. Akinwuntan said: “Historically the cost for Nigerians in the diaspora to send funds home has been far too high, while the process itself has long been inefficient and burdensome. Customers often have to physically visit an agent and yet are left with little or no clarity as to when the funds will actually reach the intended recipient. Rapidtransfer removes all of these issues and its standout affordability will be a gamechanger in the way that Nigerians can send money to their loved ones.” At the dinner, Akinwuntan, who was officially welcomed into his new role as Managing

Director and Regional Executive of Ecobank Nigeria, and on to the Ecobank Nigeria Board of Directors said. “Many Nigerians work elsewhere in Africa, or further a field, and financially support their relatives back home,” he commented. “Rapidtransfer is a safe and secure low-cost remittance solution, which ultimately will put more money into the hands of the recipient. This will have a multiplier effect on the Nigerian economy by boosting demand and driving business growth.” As well as being intuitive, easy to navigate and multi-lingual with English, French, Spanish and Portuguese variants, the app provides simple and secure digital onboarding. Users can choose how and when funds are delivered to the intended beneficiary, with transparent foreign exchange rates prior to each transaction. Charges range from 0% to 3% depending on the options the customer selects. The Rapidtransfer mobile app will enable Nigerians anywhere to easily and instantly send money to bank accounts, mobile wallets and cash collection in – and across – 33 African countries and globally.

ume declines. At the AGM, Savage said that although the challenges in the Nigerian operating environment were yet to abate, the execution of the company’s strategy had helped deliver both top line growth and margin expansion while also increasing investments.

But commending the company’s impressive performance, some shareholders raised concerns on the costs, including for sales and finance. They pointed to the need to remove those costs that are particularly irrelevant and weigh on the company’s profitability.

Investment One launches online game portal

nvestment One Financial Services Limited (Investment One), a leading financial services group in Nigeria has launched its third season of the Virtual Investment Simulator (VIS) competition. The VIS is an online game portal that enables individuals interact with the dynamics of the equities market in a simulated environment as well as educate potential market participants. Investment One has organized two VIS competitions in the past with prizes for the winners and would repeat same with the Eagle Eye league which would run from November 2018 to January 2019. This is inline with their 10th year anniversary celebration. The purpose of this third VIS league, is to motivate prospective participants (made up

of potential investors, speculators, students, professionals, researchers and everyone from all works of life) to develop the art and science of investing by practically engaging them in making investment decisions without the risk of loss of real money in an online educative environment. During the League, each participantwould receive the sum of N10, 000,000 in virtual cash and has a trading limit of N2, 000,000 per day. At the end of the 3-month League, the top 3 virtual traders will be rewarded with real money in their stock trading account. The Eagle Eye league hosted by Investment One Financial Services begins on November 1st 2018 and ends January31st 2019. Individuals can sign up on the company’swebsite.

BUSINESS DAY

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Wednesday 31 October 2018

COMPANIES & MARKETS Nichole Finance boosts financial assets by 92% DAVID IBIDAPO

arely a month, Nichole Finance grew by 92 percent its financial asset from N117.4 million as at September to N225.9 million in October. The company began operation as a finance company with a capital required by the Central Bank of Nigeria (CBN) of N100 million on the 3rd of April 2018, however commenced awareness within the first 3 months of its operation. According to report, financial asset position of the company as at September accounted for 90.9 percent of total asset of N129.15 million. Currently, financial asset of the firm grew by 4.1 bps to 95.0 percent of total asset of N237.6 million. This is far above CBN’s regulatory requirement of 25 percent. Figures were presented during the launching of Nichole Finance Company ltd a subsidiary of Nichole Investment ltd on Tuesday the 24th of October 2018.

BusinessDay analysis of the financial position of the newly launched company which started operation barely seven months ago revealed that while the company has grown significantly its assets, liquidity position still remains strong with a loan to total asset ratio of 26 percent as at October 2018. According to Frederick Obasuyi, managing director/CEO Nichole Finance ltd, explained that “our loan cycle is for 3 months and because we trade with our customers loan recovery is possible; and when there is a slowdown, our staffs become a recovery staff and ensure recovery of loan within this period”. Speaking with BusinessDay, Desmond Omorodion, head of Credit and Marketing explained that, “one major area our firm focuses on is lending to medium, small scale enterprises at rate as low as 3 percent within the space of 3 months. “We are very much aware that banks currently are drawing back on loans to small businesses because

L-R: Kole Shetima, Africa director, MacArthur Foundation; Richard Akinola, human rights and pro democracy activist; Obialunanma Nnaobi, manager, Akin Fadeyi Foundation; Sunday Oduntan, executive director, Association of Nigeria Electricity Distributor; Gloria Esiaba, advisor MacArthur Entertainment Agency, and Wale Bamiro, representing director general, National Orientation Agency, during the media Launch of Corruption not in my Country (Season 2)and Never again Radio series by Akin Fadeyi Foundation and supported by MacArthur Foundation held in Lagos.

of the default risk involved, however, we are actively engaged in our customers businesses to ensure profitability, hence lowering the risk of default.

“Although we demand some level of collateral from our customers, we are more focused on the viability of the business or project and the cash flow of the busi-

Meristem Securities wins NSE Heritage Bank, Rivers to make arts, culture key earner to GDP growth 2018 ‘Bull Awards’ MICHEAL ANI

eristem Securities limited has emerged the winner of the 2018 Nigerian Stock Exchange ‘Bull awards’, as a result of the firm’s efforts in deepening the nation’s capital market and promoting financial inclusion. “Meristem securities through the help of its innovative solutions, developed platforms such as “Meritrade platform” which is the first online trading platform that has supported the constitution of trade across the Nigerian capital market”, Oluwafemi Onifade, acting head, trading business division, Nigerian Stock Exchange (NSE), said while presenting the award He noted that the NSE Bull Award was reserved for any stockbrokerage firm that leads in the ideas of transparency in the capital market, technology compliance and convergence, steady growth trajectory and excellent track records to mention just a few Receiving the award for the securities firm, Saheed Bashir, Group Head, business development, expressed the firm’s happiness in winning the award of ‘the digital broker of the year’. According to him, the award is a confirmation of the firm’s efforts for what it has put into the market “It has been a very long journey for us being on this track for 7 years. We are the first brokerage firm to launch online trade platform and that is Meritrade and our intention is to disrupt the market phase, by doing brokerage differently from the way we met it and with this award, it is a confirmation of the effort that we

have put in the market”. “Furthermore, it is a stamp of confidentiality and a job well done for us, telling the market that we are doing things rightly and making them believes in what we push out to them in terms of our system, our process, and our brand, he said. This is definitely going to spur us to do something much better going forward,” “We have a strategy in place as a firm which we are following up on. We are collaborating with universities across the country on how we can educate students on how they can learn and do real life trading through our Merigame app” Meristem Securities Limited is a Nigerian capital market conglomerate, regulated by the Securities and Exchange Commission (SEC) based in. The company has five subsidiaries; Meristem Stockbrokers, Meristem Wealth, Meristem Registrars and Probate Services, Meristem Capital and Meristem Trustees. Bashir noted that besides brokerage, the firm has a subsidiary that is called Meri registrars that have gone beyond the regulars but brought probate services into the market He further hinted that the award will spur them to disrupt the norms and craft out new and better ways of giving true value to its current customers and expand its drag-nets to pull in more customers to come enjoy the quality service which it offers “We continue to learn every day and continue to improve on what we do at the centre of our strategy, are the client that we try to understand what they need and, constantly re-invent our self to satisfy those needs”.

eritage Bank Plc affirmed that it will continue to partner River State Government in an effort to make art and culture a unifying factor and major earner to the contribution of Gross Domestic Product of the country. Ifie Sekibo, managing director/CEO of the bank made the pledge during the 2018 National Festival of Arts and Culture (NAFEST) at Sharks Stadium, Port Harcourt, which attracted 22 States across the country with the theme, “Nigeria: Our Festivals, Our Heritage.” He stated that Heritage Bank’s partnership with the state is informed with the understanding of the importance of Arts and culture as consistent sources of economic growth, during both good and difficult economic times. Sekibo explained: “The art and culture industry has become one of the major contributors to so many countries’ gross domestic products and Heritage Bank is committed to supporting it because it is part of Nigeria’s heritage.” According to him, Heritage Bank has continued to make efforts in supporting ideologies like this, using arts as a tool to promote cultural awareness and to help younger Nigerians form a strong sense of National identity and peaceful co-exitence. He assured that the bank would always be driven by cultural heritage, as the initiative aligns very much with the vision of the bank, which is to help partners create, preserve and transfer wealth across generations. Specifically, Sekibo stated that if government at all levels adopt the right arts and culture

policies and programs it increase economic development in attracting businesses, creating new jobs, increasing tax revenues and promoting tourism. However, the MD urged banks to support arts and culture through investments in programs that will promote economic development, jobs creation, and community revitalization at the three tiers of government. Earlier declaring the festival officially open, Governor of Rivers State, Nyesom Wike, who commended Heritage Bank and other sponsors said NAFEST provided a platform for the states to make the most of the nation’s culture, adding that culture empowers humanity by improving interpersonal relationships. “Over the years, NAFEST has become the veritable platform for the 36 States and the Federal Capital Territory to meet, showcase and make the most of our cultures and diversity,’’ he said He stated that the essence of the festival was to promote national peace, unity and cohesion. “Whether we agree or not, our diversity is what defines and binds us as a nation under the glorious sun. “Although our tribes and tongues may differ, we are a nation bound by a common destiny and firmly glued together by the spirit of brotherhood, cultural harmony, and inter-ethnic solidarity instead of discord, tribalism, nepotism and sectionalism,” the governor explained. According to him, NAFEST provides creative images and expressions to engage our leaders on the politics of nation-building, human rights, regional integration, inter-ethnic harmony, national peace and development.

ness”. Nichole finance company is licenced by CBN to operate within the middle tier of the financial system, with a focus on micro, small, me-

dium enterprises (MSMEs) segment. Nichole finance play complementary roles to banks, bridging financing gaps and meeting financial needs of target customers.

ACCA upgrade skills of Lagos state accountants on IPSAS DIPO OLADEHINDE

he Association of Certified Chartered Accountants (ACCA) has facilitated training on International Public Sector Accounting Standards (IPSAS) for staff of Lagos State Treasury Office which is expected to improve the quality of general purpose financial reporting by public sector entities, leading to better informed assessment of resource allocation. Tom Isibor, head of ACCA Nigeria, said at an IPSAS Implementation Workshop organised by ACCA for those staff that the key outcome of the training was to improve their capacity and capability which would enable them to implement IPSAS, especially on issues surrounding assets. The International Public Sector Accounting Standards (IPSAS), a set of accounting standards issued by the IPSAS Board for use by public sector entities around the world in the preparation of financial statements. “We were at the office of the Accountant General of the federation and office of the accountant general of Lagos State where top management of both departments have been put together to go through this workshop,” Isibor said. The head of ACCA Nigeria noted that Nigeria had started a journey on IPSAS implementation and the essence was to be able to achieve global standard which is what the workshop is all about and also ensure Nigeria is able to meet specific standard required of IPSAS implementation. “The message to participant is to be very involved and participatory to tap from the experience of the facilitator, the person that was brought in from Tanzanian and to be able to

also translate what they have learnt from their team members so that they can also become champions of IPSAS,” Isibor told BusinessDay. The ACCA chief admitted that the partnership with Lagos State and the Accountant General of the Federation would soon roll across the 36 states of the federation as the accounting body was already identifying with other states on how to train and equip their staff on modern accounting standards. Babajide Ibironke, chairman of Nigeria’sACCAadvisorycommittee, said ACCA was using its global network to look for resource persons on the topic of IPSAS which will assist in building capacity for Lagos state government staff particularly those charged with the responsibility of implementing international public sector accounting standards. “We brought a resource person from Tanzania to share with us the Tanzanian experience in the implementation of IPSAS and how we can take that up and leverage that can kind of experience to what we can do in Lagos State,” Ibironke said. The chairman of Nigeria’s ACCA advisory committee said the accounting body expected Lagos tate government staff to develop their accounting skills in terms of how they supported the government in this journey on the implementation of worldwide standards that everybody in the world was clamouring for. “What we currently have is when you budget an amount of money no one has question after the budget has been spent, but IPSAS, for instance, says that, if you want to present your financial statement as a government, you present not only what you have spent but want to be able to compare that to your budget against what you did last year,” the chairman said.

BUSINESS

Wednesday 31 October 2018

COMPANIES & MARKETS

DAY

Business Event

Stakeholders seek food sufficiency to eradicate poverty

Some Lagos farmers displaying their produce during the occasion

he rising global population has seen an attendant increase in the demand for food, which is a basic necessity of humanity. The recent increase in world hunger figures, after a period of decline, as observed by the Food and Agriculture Organisation (FAO), further paints a gloomy picture of the situation. FAO’s State of Food Security and Nutrition in the World Report estimates that 821 million people, about 1 in 9 people in the world, are undernourished. It notes that “conflict, extreme weather events linked to climate change, economic slowdown, among other known factors, are reversing progress made in the fight against hunger and malnutrition.” These concerns reverberated on October 16 during the 2018 World Food Day celebration, prompting the global agency to raise an alarm and enjoin all players in the agricultural sector, including the government, farmers, agricultural associations, the private sector, and others, to unite and strengthen their efforts in uprooting hunger and malnutrition and “get back on track.” The theme of this year’s World Food Day – ‘Our actions, are our future. A zero hunger world by 2030 is possible, – clearly expresses FAO’s belief and determination to bring this menace to an end in the nearest future. In its charge to its global partners, FAO said “World Food Day will be an opportunity for zero hunger leaders and key global players to remind the world that zero hunger is still possible if we can come together and take account of lessons learned, best practices and all evidence available.” Notably, the occasion was marked all over the world, with local, national and global anti-hunger groups holding ceremonies and events to commemorate it. Nigeria was not left out as it joined the global community in taking action against hunger and reiterating its commitment towards the cause. The Lagos State government for example, in collaboration

with the British American Tobacco Nigeria Foundation (BATNF) and Stanbic IBTC Bank organized the World Food Day Lagos Farm Fair. The event had in attendance various stakeholders but most importantly, smallholder farmers and actors along the agricultural value chain. The event helped create a business platform for farmers to sell their goods and encourage them to increase their income by moving from subsistence to commercial agriculture. The Lagos State Government was led by Akinwunmi Ambode, represented by the Secretary to the State Government, Tunji Bello; Head of Service, Mrs Folasade Adesoye; and Commissioner for Agriculture, Mr Oluwatoyin Suara. Other key guests at the event were the sector director to the Senior Special Adviser to the President on Sustainable Development Goals (SDGs), Mr Yahaya Hamza, and representatives of the British American Tobacco (BATN) Foundation, Stanbic IBTC and Dangote. In a keynote address, the Lagos State Commissioner for Agriculture, Mr Suara said that the fair was the grand finale of activities scheduled to mark the World Food Day. He noted that the Agriculture ministry “has pursued the agricultural sector policy through programmes and projects such as the state programme for food security, production of quality cassava, estate initiatives on piggery, poultry, fish, vegetable and arable crops that have remarkably impacted on food security, job creation, poverty reduction as well as the wellbeing of the farmers and fisher folks in the state.” Earlier in an opening address, the Executive Director, BAT Nigeria Foundation, Abimbola Okoya, emphasized the role of smallholder farmers in food security and economic development and the huge challenges they are confronted with in realizing these objectives. “Seventy per cent of the nation’s farm produce are cultivated by smallholder farmers who grow subsistence or cash crops and rely almost exclusively on family labour. The

scale and rudimentary method of farming makes it difficult for these farmers to access credit facilities to upscale their production or compete in the modern food value chain. With poor access to infrastructure and transportation, inputs and markets, and low volumes of marketable surplus, they are one of the most vulnerable groups in the value chain,” she noted. Speaking further, Okoya expressed optimism that the partnership between the BATN Foundation and the Lagos State government and Stanbic IBTC Bank in organizing the Fair, under the ‘Wealth is Here,’ initiative would create market linkage for smallholder farmers. “It is expected that the fair will provide a platform to expose farmers to opportunities in the city without the financial burden or risks involved and public access to fresh farm produce.” The Head, Consumer Client Coverage, Corporate and Investing Banking, Stanbic IBTC, Nnenna Okoro, in her address, commended the Lagos State government and the BATN Foundation for organizing the event, noting that it would help create the connections and partnerships capable of enriching the agricultural sector and boosting development. While highlighting the role of agriculture in Internally Generated Revenue (IGR) and the importance the bank accords to it, she said that the bank has demonstrated support for the sector by investing N50 billion, making it one of the largest investments so far for Nigeria in partnership with the Nigeria Incentive-based risk-sharing System for Agricultural Lending (NIRSAL). The high point of the occasion was a march past by various agricultural associations in the private sector and government establishments, as well as farmers supported by BAT Nigeria Foundation. It would be recalled that BAT Nigeria Foundation, since inception in 2002, has invested about N1.5 billion in establishing over 200 community projects across the country with focus on promoting sustainable agriculture which facilitates improved harvesting, capacity building and innovative approaches to farming. The Foundation has also partnered and strengthened the capacity of over 44 government and private institutions to boost the lives of over 25,000 rural smallholder farmers nationwide. The occasion afforded it the opportunity to join other stakeholders to create awareness on food security and lend its voice to the call to action to eradicate global hunger. With private partnership engagement like this, the needed boost for the agricultural industry to thrive is clearly in motion.

L-R: Lanre Bakare, CEO, Factoring & Supply Chain Finance Ltd, with Peter Mulroy, Secretary General, Factors Chain International, FCI, during his advocacy visit to Lagos recently.

L-R: Maria Shadeko, brand manager, Legend Extra Stout NB Plc; Emmanuel Oriakhi, marketing director NB Plc, and Yeni Kuti, at Felabration With Legend 2018

Remco van Mook, Asteroid CEO, (l), with Vremudia Oghene-Ruemu, product manager, MDXI/Peering Coordinator, WAF-IX, at the MDXI Data Centre.

Traders waiting to access the TraderMoni initiative of the federal government at Sokoto Central Market.

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2019: If elected as President, I’ll end medical tourism - Mailafia OWEDE AGBAJILEKE, Abuja

he presidential candidate of the African Democratic Congress (ADC), Obadiah Mailafia, has promised to end medical tourism if elected as President in 2019. The former Deputy Governor of the Central Bank of Nigeria (CBN) also assured that he would not step his feet outside the chores of Nigeria in the first three months after assuming office. He stated this at a press conference in Abuja. While promising to ensure that all public officials do not spend taxpayers’ money on medical tourism, Mailafia assured that he would build world-class hospitals to checkmate the trend. According to the ex-CBN Deputy Governor: “I won’t steal your money and go and keep it in foreign bank account. I live in Europe for more than half of my life. It is boring going there and I promise

Obadiah Mailafia

you for the first three months of my administration, I will not step my foot outside this country. “And because I don’t plan to

2019: Why INEC should be allowed to conduct credible elections - Gambari SIKIRAT SHEHU, Ilorin

brahim Gambari (Prof), Chancellor of Kwara State University and Pro-Chancellor of Bayero University, Kano has urged government at all levels to allow the Independent National Electoral Commission (INEC) to conduct a free and fair elections in 2019. Gambari, opined that the 2019 elections should be a game -changer for good governance as Nigerians need to see a restructured country where the people’s energies are efficiently tapped and run for overall national wealth creation. According to the former Nigerian Ambassador to the United Nations, Nigerians must realize the fact that there is no other civilized method of expressing preferences for politicians seeking elective offices than utilizing the democratic process. Gambari, who spoke on the topic, “Education for Peace, Democracy and Development”, at the 34th Conviction ceremony of University of Ilorin, pointed out that for Nigeria to properly chart an enviable course of development, there should be serious programme of political education for our people on their rights and obligations to the State. He added that for a meaningful growth of good governance and

democracy, there is evidently the need to develop and strengthen the institutions of democracy, including all arms of government, political parties, civil society organizations, security agencies and the press. “The government should allow the Independent National Electoral Commission to conduct a free and fair elections in 2019 and beyond. The 2019 elections should be a game-changer that must be credible and peaceful. “Nigerians want to see nonselective intensification of anticorruption battle on all fronts with thorough investigation and conviction which serve as credible deterrence. They want to celebrate the end of the BokoHaram and an end to insurgency. “They want to see an improved economy where there is job creation and wealth creation, they want to see a fiscal regime that firms up the naira against other currencies through effective control of the oil economy and a well -diversified economy culture. “As former UN Secretary General, Kofi Annan said in his report, in larger freedom, there will be no peace and no development without people exercising their freedom to choose the government of their preferences and respect for human rights in any country,” he explained.

fall ill, I don’t ever imagine going abroad for any medical treatment. With $500 million, we can build a world-class hospital. The

President, Vice President and everybody in government should receive treatment in Nigeria”. Medical experts say Nigeria loses over $1 billion annually to medical tourism. President Muhammadu Buhari has been accused of reneging on a promise to end medical tourism by seeking treatment in the United Kingdom. To Mailafia, “This is scandalous. It doesn’t make us to look like people that have sense”. On the plan by the Coalition of United Political Parties (CUPP) to pick a consensus presidential candidate, the ADC Presidential standard bearer was upbeat that he would be selected. CUPP is a coalition of 40 political parties including ADC. Describing the two leading presidential candidates: AtikuAbubakar of PDP and MuhammaduBuhari of APC as ‘recycled leaders’, the retired banker-turned politician made a case for ‘digital leadership mindset’ which he said he represents.

“I know who the CUPP will pick. I think they are going to pick me. Don’t get me wrong, I respect Atiku. He loves this country. He has done a lot. But I have to be very honest with you. What is the difference between a liberal Fulani man from Adamawa and a conservative Fulani man from Katsina? They are almost in the same age bracket. I have nothing against Fulani. I suspect I have Fulani blood in me as well. But I am saying that they belong to a generation. “And we need a digital leadership mindset. To be honest with you, I represent the hope for a new Nigeria. And I believe they will settle on me because there is going to be a big debate. People will be asking, what is the real difference between the two? So, I respect them, they are our elders, our seniors in this business but I represent the hope of the younger generation. “If you recycle all these politicians, this country will go backwards instead of going forward,” he said.

Poverty eradication, key to SDGs success - SSAP INNOCENT ODOH, Abuja

o successfully deliver on the targets of the Sustainable Development Goals (SDGs), conscious and strategic efforts must be made by leaders at public and private sectors to systematically address the perennial challenges of extreme poverty. The call was made by the Senior Special Assistant to the President on Sustainable Development Goals, Adejoke Orelope-Adefulire in her message to mark the International Day for the Eradication of Poverty. A statement issued by the media

Adejoke Orelope-Adefulire

officer to the Presidential aide, Desmond Utonwen, noted that Orelope-Adefulure urged stakeholders to endeavour to take steps and put modalities in place to rid the society of forces and practices that hinder the reduction of poverty, adding that ideals that promote social inclusion, social justice, wealth creation, sustained growth and human capacity development should continuously remain at the centrepiece of the national life. Princess Orelope-Adefulire noted that in the overall quest of the government to build a future that is desired by all, strategic efforts have

been made by the Buhari Administration to alleviate poverty, foster economic growth and empower the youth and women. In particular, she maintained that huge investment made by the government in Social Intervention Programme is a clear testimony to the commitment of the government to deal decisively with the challenge of extreme poverty. She added that this is in line with the global thinking for elites to come together with those furthest behind to build an inclusive world of universal respect for human rights and dignity, the statement said. Globally, October 17 is set aside to galvanise efforts towards the eradication of poverty with a belief that the fundamental connection between extreme poverty and human rights, and that people living in poverty are disproportionately affected by many human rights violations. The global community believes that government policies alone cannot create the social inclusion that is fundamental to reaching those left furthest behind and overcoming poverty in all its dimensions. The commemoration of October 17 each year, when people living in poverty take the floor and share their experiences, demonstrates how the world can achieve greater social inclusion by enabling people from all walks of life to come together to respect the human rights and dignity of the downtrodden.

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Politics & Policy

APC governorship candidates in 2019: Chances, challenges (1) with PDP and strong candidates of other parties like former Minister of Information, Labaran Maku.

JAMES KWEN, Abuja

head of the March 2 governorship election in 29 out of the 36 states the ruling All Progressives Congress (APC) has nominated the following candidates for the guber poll. These include all the first term governors elected on APC platform except Akinwunmi Ambode of Lagos State. BusinessDay briefly profiles the aspirants. Abdullahi Umar Ganduje – Kano State Ganduje was born on December 25, 1949, a former Lecturer at the Bayero University Kano. He is the current Governor of Kano State since 2015. He previously served as deputy governor twice between 1999 to 2003 and 2011 to 2015 to Rabiu Musa Kwankwaso. Ganduje was returned unopposed as the governorship candidate of APC. As a serving governor Ganduje is politically on ground is reported to have executed reasonable projects which can earn him second term but his political battle with his former boss, Kwankwaso and the recent dollar scandal surrounding could pose serious threat to his reelection bid. Mohammed Abubakar – Bauchi State Mohammed Abubakar who was born on 11 December 1956 is the present governor of Bauchi state. He began his career in the Civil Service where he rose through the ranks to become the Bauchi State Attorney General and Commissioner for Justice. He ran for public office as Governor of Bauchi State in 2015 under the platform of the then newly formed APC and won the election. The Governor won his party’s ticket for a second term in a keenly contested primaries. Abubakar as a serving governor have both party structures and state machinery to secure a second term but his political battle with the Speaker of House of Representatives, YakubuDogara may make his reelection herculean task. Simon Lalong – Plateau State Simon Lalong was born 5 May 1963 in Shendam Local government area of Plateau State. A lawyer and politician, Lalong is the present governor of Plateau State who was elected in 2015 on the platform of APC and had served for seven years as Speaker of the Plateau State House of Assembly. He was unopposed in the APC governorship primary election and now flies the party’s ticket for the March 2, 2019 governorship election in Plateau State. The reelection of Lalong would have been an easy ride with the over 70 years old Jeremiah Useni, governorship candidate of the Peoples Democratic Party, PDP as his main rival, however, the incessant herdsmen attacks on farmers in Plateau and the perceived lukewarm response of the APC led Federal Government to the pogrom which has dwindled APC popularity in the state could be a serious challenge to him. Nasir El-rufai– Kaduna State Nasir Ahmad El-rufai was born Feb-

Ganduje

Sanwo-Olu

Sani Bello

ruary 16, 1960 and is the incumbent Governor of Kaduna State who is also the former Director General of the Bureau of Public Enterprises, the head privatisation agency in Nigeria. He was the Minister of the Federal Capital Territory, Abuja from 16 July 2003 to 29 May 2007 and was elected governor of Kaduna State in 2015. El-rufai who is seeking second term of office was chosen as consensus candidate during the recently held APC governorship primary election. He would have easily gotten the second term if performance was the only yardstick but the ethno - religious crisis, herders/farmers crisis during his administration and the political face off which chased the likes of Senator Shehu Sani out of APC could count against him.

pose some challenge.

was Commissioner of Health to the immediate past Governor, Senator Aliyu Wammako. Aliyu was elected APC governorship standard bearer in the recently conducted primaries. His chances are based on the perceived popularity of APC and Buhari in the North Western state, Sokoto and the backing of Wamako who commands political large political followership. However, defeating his boss, Tambuwal who is seeking reelection on the platform of PDP is not an easy task.

Mohammed Badaru Abubakar – Jigawa State Mohammed Badaru Abubakar, born 29 September 1962 was elected governor of Jigawa State in April 2015 on the platform of APC. Badaru is a renowned accountant and accomplished industrialist with very high penchant for prudence, a tendency which earned him the name, ‘ Calculator’. He was secured the second term ticket of APC after defeating other contestants and is set for the reelection battle. Badaru’s reelection could have been a work over as he is reported to be popular among the people with his economic policies and is not owing salaries but the constraint is how to wage the political war ahead with PDP which is commanded by the immediate past Governor Sule Lamido who also attracts large political followership. AbubakarAtikuBagudu – Kebbi State AtikuBagudu was born 26 December 1961 is the first term Governor of Kebbi State who was also also elected Senator for the Kebbi Central District of in a by-election in 2009 and was reelected in the April 2011 national elections in the PDP) platform. He became APC gubernatorial candidate in 2015 general elections and was returned elected. Bagudu was adopted as a consensus candidate in the last APC governorship primary election and unlike others of his colleagues, he enjoyed the support of his members in the National Assembly. Reelection for Bagudu would not have been a challenge as he enjoyed goodwill across the state but the recent call for power shift from Gwandu Emirate which governed the state since 1999 and the emergence of Senator Isah Galauda as PDP governorship candidate from Argungu Emirate

Aminu Bello Masari – Katsina State AminuMasari, born 29 May 1950 is the current Governor of Katsina State who was elected in 2015. He was the speaker of the Federal House of Representatives between 2003 and 2007. Masari cling his second term ticket after defeating AbubakarFuntua and GarbaDankane during the APC governorship primary election. His second term bid would have been settled even before election as he is still climbing on the back of President MuhammaduBuhari as in 2015 but the rising acceptability of PDP in Katsina due to the political sagacity of former Governor ShehuShema calls for concern as far the governorship election is concerned. Abubakar Sani Bello – Niger State Abubakar Bello who was born on 17 December 1967 is an Economist and private sector worker. He is the current Governor of Niger State who was elected in 2015 on the platform of APC and is seeking second on the ticket of the same party which won in tight contest. Second term for Bello shouldn’t have been a hard thing considering his family background as the son of the popular former Military Governor of Kano State, Sani Bello, the pedigree which gave him first term but the crisis that precipitated APC primaries in Niger, the rivalry from former Governor Babangida Aliyu and the PDP as well as the misgivings of owners of Niger state such as former Military President Ibrahim Babangida over APC government could be hurdles. Bindow Umar Jubrilla Bindow Umar Jubrill, born 16 June, 1963 is renowned businessman who was elected Governor of Adamawa State in 2015 and was earlier Adamawa North Senator. He won the hotly contested APC governorship ticket after defeating for Chairman, Economic and Financial Crimes Commission(EFCC), NuhuRibadu and President Buhari in law, Mahmoud Halilu. As a sitting Governor with the control of state apparatus, Bindow reelection wouldn’t have been a headache but the emergence of his erstwhile political leader, AtikuAbubakar as the Presidential Candidate of the main opposition PDP and Atiku been an indigene of Adamawa makes his second term bid an uphill task. Ahmed Aliyu – Sokoto State Ahmed Aliyu who was born January 1, 1970 is the present Deputy Governor of Sokoto State under Governor Aminu Tambuwal and

Babagana Umara-zulum – Borno State Born in August 1969, Babagana Umara-zulum is a Professor of Engineering and has lectured at the foremost University of Maiduguri. He was appointed Commissioner for Reconstruction, Rehabilitation and Resettlement. Umara-zulum was elected APC governorship candidate for Borno State out of the 30 aspirants that vied for the same ticket. As the anointed candidate of the outgoing Governor Kashim Shettima and the fact that Borno is an APC dominated state Umara-zulum would have easily take charge as the next Borno state but if his 29 co-contestants join forces with any opposition party, particularly the PDP it will not be a work over for him. Mai Mala Buni – Yobe State Mai Mala Buni, a seasoned administrator is the National Secretary of the ruling APC and was elected the governorship candidate of the party in the recently held primaries. Buni as a national party official and grassroot politician believed to be anointed by the incumbent Governor Ibrahim Gaidam stand the chances of becoming the next Governor of Yobe State more so that APC dominates the state but the anger by some of the aspirants for the ticket is a call for concern. AbubakarAbdullhaiSule – Nasarawa Abubakar Sule was born on December 26, 1959. He is an engineer who had worked with international firms and was until his nomination as the APC Governorship Candidate for Nasarawa State the Managing Director of Dangote Sugar. Though a relatively new entrant into politics, Sule would have been sure of occupying the Nasarawa State Government House as he is the favoured candidate of the outgoing Governor, Tanko Almakura but the opposition led by Senator Abdullahi Adamu, a former Governor of the State against his nomination if spilled into the general elections would limit his chances also that he is contending

Emmanuel Jimme – Benue State Emmanuel Jime was born on June 20, 1962 and is a lawyer by profession. Jime was Speaker of the Benue State House of Assembly and was elected two times as Member of the Federal House of Representatives. He first contested for APC Governorship ticket in 2014 but was not successful following the adoption of Samuel Ortom as the consensus candidate. President Buhari appointed him the Managing Director of Nigerian Export Processing Zones, the position he held until he was selected as APC consensus governorship candidate for Benue State. Jime chances hinged on the inability of the Governor Ortom to pay salaries and Benue been a predominantly civil service state any governor that defaulted on salaries become enemy of the state. Be that as it may, Jime’s association with Buhari whose kinsmen Fulani have unleashed terror on Benue farmers has the onerous task of convincing the people that he is not Buhari and Fulani tool to reverse the anti open grazing law as alleged. Babajide Sanwo–Olu – Lagos State Babajide Sanwo–Olu was born June 25, 1965 and is Surveyor and Human resource expert. Sanwo-Olu is the managing director/CEO of the Lagos State Development and Property Corporation (LSDPC). He defeated the current Governor of Lagos State, Akinwunmi Ambode to cling the APC governorship ticket. Sanwo-Olu stands the chances of winning the March 2 governorship election in Lagos with the backing of Bola Tinubu, the Jagaban, but the recent dwindling of acceptability of Tinubu and the rising profile of PDP in Lagos could work against him. Tonye Cole – Rivers State Tonye Cole, born January 15, 1967 is an architect who has worked with international and local firms. He is political associate of the former Governor of Rivers State and Minister of Transportation, Rotimi Amaechi. He emerged the governorship candidate of APC in the controversial primaries that also produced Senator Magnus Abe as the parallel candidate. Cole depends on Amaechi for his guber ambition but with Governor Nyesom Wike strongly in the contest and his rejection by some APC stakeholders make his ambition unrealistic. Uche Ogah – Abia State Uche Ogah was born 22 December 1969 and is a Nigerian oil magnate, entrepreneur, investor and philanthropist. Ogah is the President of Master Energy Group, a conglomerate with over 15 subsidiaries and interests across a variety of industries. He was elected as the APC Governorship Candidate for Abia State in a keenly contested primary election. Ogah chances are dependent on the support base of former Governor Uzo Kalu who is the leader of APC in Abia but with the PDP on ground and Governor OkezieIkpeazu in the race his chances are slim.

Wednesday 31 October 2018

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Politics & Policy

I have the political will to make Nigeria work - PPC Presidential candidate

Presidential candidate of the Providence People’s Congress (PPC), Victor Okhai, says he has the political will to transform Nigeria and make the country work for the people. He says his agenda will be to diversify the economy by creating industrial hubs, improving infrastructure and agriculture. In this interview with JOHN OSADOLOR, INNOCENT ODOH and EDU ATTING, the Edo State-born public intellectual points out that Nigeria urgently needs fiscal restructuring to allow components parts of the country to exploit their natural and human resources, adding that when he becomes president, he will initiate measures to restructure Nigeria into a proper federation. Excerpts: Is your party a member of the Coalition of United Political Parties (CUPP), if not, why? y party, the Providence People’s Congress (PPC) is not a member of the coalition. I certainly would not have even associated with any party that is a member of the CUPP and I will tell you why. First, I came in to this because I wanted to run for the office of the President. I am not gambling neither I am getting into this race like an experiment, I have always known that I was going to this for over 30 years unlike a lot of people who just got into the game now. So, for me, there is no time to beat about the bush. For me the coalition is simply people gathering together to endorse a PDP candidate and nothing else and the Vice President’s slot certainly cannot come out of any of the other members because it is already set. So all these coalition members are going to collapse into the PDP. I am running to win and not an experiment, so why would l line up behind them? If I wanted an appointment or if I wanted to be a political trader and at the end of the day be satisfied with a ministerial or board appointment, then I can join the coalition but that is not what want. I am out there to create a disruption in the system. It may be true that not many people have heard my name and the question will be where are you coming from, what pedigree do you have and all that? And I say “simply watch my space”. We have to wait and see but I am out to cause a major political disruption in the system. I am in the race to win, it is not an experiment.

be helped to convert their skills into more respectable things instead of doing yahoo, yahoo.

What kind of disruption do you want to bring? A disruption is obviously something like an innovation that upsets the run of the mill or the regular state of affairs. In politics as it has been practiced in this country, there are certain things that have been taken as normal. For instance, the first question people ask me is what part of the country are you from, then they will go ahead and say don’t you know that this has been zoned to a particular part of the country? But I ask, if it has been zoned to a particular candidate from another part of the country how is that binding on me as a Nigerian? Is it constitutional? So as far as I am concerned I cannot be moved by some fallacy and some imposition of zoning by certain group of people, I am not interest in all of that. I am a Nigerian and at my age I have decided to run for that office, I don’t have time to wait. We keep mouthing that we want to change Nigeria, we cannot do that just by sitting down, and we cannot do that by listening to what people are saying that it is not yet time. Some have said why don’t you

Okhai

go to the local government area, and I feel insulted by that. I feel competent to run Nigeria and I feel I am better qualified than those running this country. Getting into that place the narrative is going to change, the ideas are going to be revolutionary no doubts about and Nigerians will see the Third Force they have been looking for. I represent that voice, that champion that Nigerians are looking. In terms of the finance and structure what is your strength? In terms of finance I am not a politician but a person in politics. And as a person in politics there are certain things that should be private to me. What I can say to people is that Nigerians are going to invest in his project, like I said Nigerians are looking for a champion. The oppressed people in the North East are looking for a voice, the people of the Middle Belt, South east, Southsouth are looking for a voice. Even ElZakzaky people are looking for a voice. Nigerians generally are looking for a champion and I represent that. I am going to be that voice which all other groups will coalesce behind. I am the coalition that Nigerians are looking for. I am not joining any coalition Nigerians will form a coalition to back me up in this project. So in terms of financing, Nigerians will back up this project, in terms of structure Nigerian will stand up and represent this movement in their various constituencies. Judging by the Not-Too-Young-toRun Law, what would you say is your support base in relation to the youth? When we talk about the Not- TooYoung –To- Run, I think we should look at it from different perspectives. Apart from the age side I think we should probably be talking about NotToo-New -To -Run. Interms of support base I am in an industry where I have interacted so much. I am a journalist

and a film maker, so the level of interaction that I have had and the class of people that I deal with are obviously in that category. I have organized a film festival that was targeted at the young people. For a very long time I have had to deal with youth at various levels, so I don’t have a problem interacting with them. So, by the time we launch out fully I think it will become immediately obvious that I am the candidate that the young people are looking for. But what is more important is that most of the candidates don’t know what the time is saying. But I am one person who knows and understands the times and modern business. In terms of IT, I am as current as tomorrow’s newspaper and current in terms of digital technology. And in any case what I have in mind is about running a green and digital economy- two things that are very critical. If you look at App for instance with a single App can provide hundreds of jobs. I think that the new ABC should be codding for our young kids from kindergarten, they should learn how to code by the time they are 12 and they should be producing Apps by the time they are 16 and producing millionaire in dollars. That is the future that I envisage for our young people, so we need to equip them. There are people moving with their phones and what they are trading in is crypto currency or forex which is legitimate business but the police will accost them and call them 419. Because there is no properly articulated program for this young people they are being treated like common criminals. If you create tech hubs all over the country and make sure there is power, there is high-speed internet, create an environment where they can work and collaborate with one another and also teach them entrepreneurial skills they will become more productive. Nobody wanted to be hunted like a rabbit down the road. These young people should

Your party may not be that popular so what are you doing to sell yourself and the party as we go into the campaigns from November 18? If you look at what is happening, we are different and by virtue of where I am coming from, I believe more in planning. I can spend 90% of my time planning and 10% time for implementation. What we have been doing all the while is making sure of grassroots penetration and I can tell you authoritatively that we are in the 36 states of the federation. By the time we activate, when we go out for the campaign these are the people that will bring the crowd, it won’t be any rented crowd. What we are doing now is to concentrate on the grassroots mobilization, reaching out to people and increasing our membership drive. We are moving to the grassroots and we are also going to do social media engagement. So by the time that we activate everybody will hear about this PPC. We have not heard of any implosion in your party, how did you manage that? There is freedom of association in our constitution and you cannot say to anybody don’t join or join this party. The only thing is that there are certain principles that we abide by. PPC is a party whose ideology is quite different from others. Integrity is very important for this party. If you go to our website you will see that, no godfatharism, no money bags, no rituals and we are serious about that. So when you come in there if you are of the old school you will be uncomfortable because you cannot come there and flaunt money. So if it was about money or godfather I would probably not have emerged as presidential candidate. The process in PPC is transparent. Our election was by Option A4 for our primaries. So people who are not comfortable with these three things that I mentioned cannot fit in. If you do not win as the president, how will you relate with the president and what will be your position in terms of service to Nigeria? First of all, I am not contemplating not winning, not winning is not an option for me. I am in this to win otherwise I will be part of the coalition. However, time and chance happen and God may ordain a bit of shift in time, and so if that happens, I have always been a patriot, I am professional I always have what I do. So in whatever position that I find myself I will give my best like I have always done for this country. As a citizen we owe allegiance first to our country and support for those in power as well. As an individual I don’t have any problem with that and I expect the other candidates to extend

that hand of fellowship to me as well. I expect Atiku to accept defeat in good faith, I expect Buhari to accept defeat in good faith as well as the other candidates when I emerge as the winner and I am being sworn in on May 29, 2019. The political economy of Nigeria is anchored on systems and structures that have hindered its development. What would you initiate to ensure that the political economy works for the people? I don t believe that the people in government do not know the solution to our problems. We know in theory how things should be fixed, what is lacking is the will to do what is right. I have the will to implement what is right. I give an example, everyone has been talking about power in this country. Everyone knows that to fix power all you need to do to activate the sector is to take it out of the Exclusive List, which the legislature has passed a bill to that effect it. After all what is the incentive for me to produce power and you immediately take it and put it into the national grid, I cannot even benefit from it. I can produce enough power to take care of myself and others and then after producing you begin to give me two hours of power that is not proper. What is lacking is the political will to do the right thing. For instance we are a consumption nation, no right thinking government would want cheap money from crude oil, or just sell it raw agricultural products like that and then make quick money. For instance for every one cocoa bean or one dollar of cocoa that we export, when it comes back as chocolate and other products, it is coming back as twenty or thirty dollars because of the value addition. So even if we start in a crude way, why don’t we process our cocoa to chocolate or to beverages here? Our oranges can also be processed here. Go to Alibbab.com you will see simple juicy equipment for 1000 dollars, 500 dollars, 1500 dollars. Some for packaging and things like that. Take these things to the Benue belt to process the oranges in that belt, transform the raw materials, create industrial hubs and empower people. About 90% of the product is lost in transportation so why don’t we create these industrial hubs around the country. These are the things that I will do. From the raw material base to the processing points the transport will be very short to have minimal wastage. But more importantly, there are other ancillary industries such as processing, packaging, bottling, printing that will be created. Is it difficult for our people to fathom this or just that Nigerian leaders simply don’t have the will to do it?. I give you another example. There can a marriage between the leather industry in Kano and the shoe and bag making industry in Aba.

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Can Nigeria regain cotton status through biotech? Stories by JOSEPHINE OKOJIE

igeria has recently released two varieties of biotech cotton (Bt cotton), MRC 7377BG11 and MRC7361BG11 in commercial quantity with the aim of boosting production of the crop. The Bt varieties are expected to bring succour to cotton farmers by increasing their yield per hectare from an average of 450kg per hectare to 4.2 per hectare and address issues of diseases and quality of the Nigerian cotton. According to Alex Akpa, director-general, Biotechnology Development Agency (NABDA) during the release, the new Bt seed is resistant to bollworm complex and highly tolerant to suckling insect pest with fibre length of 30 to 30.5milmeters and fibre strength of 26.5 and 27 grams/tenacity and micronaire strength 3.9 to 4.1 as well as boosting cotton production in the country. Akpa noted that the adoption of the Bt cotton in the country has a wider implication for the socioeconomic development of Nigeria, as moribund textile industries have the hope of a new lease of life as farmers increase production of the crop. The country’s cotton industry is fast sliding towards extinction on account of the use of low quality seeds and a shrinking local market, despite the incentives of an alluring $3 trillion global industry. Experts have attributed the country’s low cotton quality and quantity as among the factors responsible for the collapse of some textile businesses in the country. Data from the Ministr y of Industry, Trade and Investment shows that between 1980 and 2016, about 145 companies operating in the textile sector had shut

down, due to policy somersaults, poor research and development (R&D), shortage of raw material, smuggling and poor power supply, among others. With the adoption of high yielding cotton varieties, farmers who have consequently shifted to growing other crops since cotton production became less attractive might return to farming the crop, experts said. “With climate change affecting agriculture, I think there is need for intervention and that intervention should come from technology such as Bt cotton. The yield potential of Bt cotton are far higher than what we are currently getting,” Anibe Achimugu, president, National Cotton Association of Nigeria (NACOTAN) told BusinessDay in a telephone interview. “This will be a major improvement in yield and income for the farmers. All we need is to educate farmers adequately about Bt cotton through extension

agents,” Achimugu said. He called for farmers’ sensitisation and continuous education on the technology in Nigeria. Nigeria’s cotton production is put at 51,000 metric tonnes on 253,000 hectare, while global cotton consumption is put at 24 million metric tonnes, according to International Cotton Advisory Committee (ICAC) 2016 data. What BT Cotton means? Traditional cotton hybrid seeds are a result of cross-pollination of two different but related plants but Bt cotton is created by genetically altering the cotton genome to e x p re ss a m i c ro b ia l p ro te i n from the Bacterium Bacillus Thuringiensis. To d a y , t o p p r o d u c e r s and suppliers of cotton to the global market have adopted Bt cotton varieties to boost their productivity. It w a s f i r s t a p p rov e d f o r

commercial use in the United States of America (USA) in 1995 and in 1997, China, a top global cotton producer adopted BT cotton. In 2002 India, the second largest producer of the crop adopted BT cotton varieties and in 2011 surpassed China’s production. In Niger ia, the two newly re l e a s e d va r i e t i e s a re h o m e grown and were developed by Mahyco Nigeria Pvt Limited, in collaboration with the Institute for Agricultural Research, Ahmadu Bello University, Zaria. Controversies surrounding BT Cotton There have been controversies surrounding Bt cotton since its introduction in India, the world’s second largest producers of the crop and Burkina Faso, Africa’s top cotton grower. Over the past three years, reports have emerged from the Indian dailies of the pink bollworm

pest invasion becoming immune to Bollgard II – a genetically modified cotton strain introduced by Monsanto, a US agro chemical company. This compelled farmers to use more chemicals on the crops than required and forcing some to abandon the variety. Similarly, Monsanto introduced Bollgard II to farmers in Burkina Faso and the farmers agreed to a trial and the country introduced seeds with a genetically modified gene in 2008. T h e re s u l t i n g c o t t o n w a s pest-free, and the harvest more abundant. But there was a problem. While the bug-resistant genes produced more volume, the high quality, for which the country was known and patronized globally, fell. This forced a lot of smallholder cotton farmers to abandon the varieties and eventually, the government had to ban them. But experts have attributed the failure of Bt cotton varieties in these countries to farmers inability to adhere to protocols that were required in growing cotton. They emphasise the need for farmers education on the technology and the adoption of good agricultural practices in the production of the crop. “I researched the Indian and Burkina Faso cases and realise that is was failure of implementation of necessary protocols required. Farmers believed falsely that it is magic seed that you just plant and allow it to grow but that is not the case,” Achimugu said. “Bt cotton requires planting and follow ing the necessar y agronomy practices required for conventional seeds. It only requires less chemical application because there are strains in the seeds that are supposed to fight against pest and diseases,” he added.

NAZAP condemns poaching, illegal trading of endangered animals …inaugurates wildlife advocacy group …appoints new executives

he National Association of Zoological Gardens and Wildlife Parks (NAZAP) have condemned the poaching and illegal trading of all endangered wildlife animals in the country which is fast driving some of Nigeria’s wildlife into extinction. NAZAP says poaching and illegal trading of wildlife is a serious criminal offence that is threating the existence of wildlife in the country. The association made this know

at the concluding session of its annual general meeting held in Abuja recently. “The alarming increase in the rate of poaching of endangered species in Nigeria is worrisome. An average Nigerian lacks the basic understanding about the importance of nature to human existence,” said Francis Abioye, president, NAZAP. “O u r e n v i ro n m e n t i s o u r life support. Our environment is made up of flora and fauna. Unfortunately, we are unfriendly

with these friends that support our lives. “There is an urgent need for us to protect nature so that nature can protect us,” Abioye said. He added that NAZAP has inaugurated a wildlife advocacy group to drive public awareness of the importance of these animals to both Nigeria and global ecosystem. The lack of public understanding of the importance of wildlife species on the biodiversity web has fuelled the hunting and killing of millions of these animals, the

association says. NA Z AP also called on the Federal Government to build the capacities of security agencies and parastatals and equip them with the needed tools to safe guard the environment, humans and animals in the ecosystem. Nigeria is blessed with a rich and unique array of ecosystem and invariably a great variety of wildlife species. The country’s wildlife supports over a thousand fauna species that are fast going into extinction because of the high

rate of poaching and illegal trade, the association noted. Also, the group has appointed n e w e xe c u t i v e s t o s t e e r t h e leadership of the association for the 2018/2019 period. Francis Abioye, general manager, Imo Zoological Gardens, Owerri emerged as NAZAP new president, Oladipo Bali, manager, Su mu Wi l d l i f e Pa rk , Bau c h i was appointed as the first vice president and Prince Sakiru Raji managing director of Omu Resort Lagos as national secretary.

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Expensive freight limits Nigeria’s agric export potential - experts IFEOMA OKEKE

espite the country’s diversification and export drive, Nigeria still has one of the most expensive freight cost compared to its African peers, experts say. The experts who spoke at the maiden summit of the Nigeria A g r i c u l tu ra l E x p o r t e r G rou p (NAEG) say the development has continued to limit the country’s export potentials. They said the major challenge for agricultural produce exporters were the obnoxious freight charges which make them less competitive than their counterparts. John Okakpu, host and custodian of the Nigeria Agricultural Exporter Group (NAEG) in his keynote speech, said it costs an average of $35,000 to export agricultural produce in Nigeria, as against Ghana, where charges are as minimal as $2,500. This, Okakpu said, has made it almost impossible for Nigerian exporters to compete in the global

market. “It is an untapped huge industry. We need a surgical approach to this problem and that is why I set up this group. There are so many things every nation on earth is doing that Nigeria is not doing and until we do that, we are wasting our time,”

he said. He added that the industry had huge potential and would greatly contribute to the nation’s agenda of diversifying the economy. “The agricultural produce export industry has a potential to bring in 250billion dollars in revenue in the

What it takes to own a poultry farm JOSEPHINE OKOJIE

oultry production is the aspect of livestock farming that presents one of the finest opportunities for potential entrepreneurs and investors to make significant profits in a short period, if well setup and managed. Currently, Nigeria, Africa biggest economy needs more than a million metric tonnes of poultry products annually to meet local demand. Official figures show that local farmers are only able to produce about 300,000 metric tonnes, leaving a wide gap of more than 1.2 million metric tonnes unmet. This has made smuggling of poultry products; especially chicken and turkey a big business. As a result, government placed a ban on the importation of poultry products. But most of the bans placed on poultry products have not been effective and have made no real impact on actual foreign imports.

Imported poultry products, especially chicken and turkey, have been identified as causative agents in Non- Communicable Diseases (NCDs) and antibiotic resistance. Some of these health conditions include hypertension, kidney disease, and cancer. This has made the demand for fresh chicken products rise, especially from Nigeria’s growing middle class which constitutes about 60 percent of the total population. According to industry estimates, Nigeria’s poultry industry is estimated at over N80 billion ($600 million) and is comprised of approximately 165 million birds. Apart from chicken production, investors and agro entrepreneurs can go into egg production as well. With the Nigerian population of over 180 million people, the market for poultry eggs is rather unimaginable. Neighbouring West, East and Northern African countries also depend on poultry eggs from Nigeria for consumption. This

implies that the market is very huge with good return on investment. With the recent Federal Government school feeding initiative, the market for poultry table eggs is widening daily. The cost of setting up a poultry farm depends on the size of the farm and the number of birds intended to start production with. For a poultry investment of between 200 and 500 birds, the potential investor requires between two and five million. The investor has to first identify the aspect of production desired to start with, either egg production or meat production. The next step is to obtain day old chicks from reputable hatcheries. The small chicks can be either naturally or artificially brooded. If artificially brooded, small chicks must be placed in a separate house from laying chickens and it is necessary to protect the chicks from predators, diseases and cold. This stage of brooding lasts for eight weeks. In the first four weeks of life, small chicks need to be housed in a brooding box first before transferred to the main pen house. Bird domestication involves feeding with very good feed, supply of clean water and keeping the farm clean always by way of regular disposal of their wastes, disinfecting the pens and restriction of foreign bodies from entering into the pens. The essential inputs are feeds and vaccines. Investors are always advised to consult agricultural experts’ and consultants in the process of planning such project.

next ten years.” John Isemede, consultant of the United Nations Industrial Development Organisation (UNIDO) said “unstable government policies had adverse effects on the exportability of the country as there is little or no legitimate support for

exporters.” Isemede also said that the government is more focused on imports than exports, as many agencies export produce would have to go through causes delay in the whole exportation process. “Export in this part of the world is only an attempt to sell. There is a serious need for research i n ou r g ov e r n m e nt ag e n c i e s and universities to enable the exportation of agricultural produce become profitable. The situation we have found ourselves in is not good enough to attract foreign direct investments and something has to be done to change that narrative,” says Isemede. Abdulkareem Keita, managing director, Dangote Farms, says that the Dangote group is into agriculture because it has discovered that agriculture is the main economic stay in the country. Keita said there is a need for the stakeholders in the sector to continually train themselves, adding that one of the greatest drawbacks is government intervention and somersaulting policies.

Salako canvasses more support for local agric enterprises to boost productivity JOSEPHINE OKOJIE

olawole Salako, a professor and vice- chancellor of the Federal University of Agriculture, Abeokuta (FUNAAB), has called for more support for Small and Medium Scale Enterprises (SME) operators in the agricultural sector to boost food production in Nigeria. According to Salako, if local agric enterprises are adequately empowered, they have the capability to feed Nigerians. Making the statement recently at the Special Session Cassava Adding Value for Africa Phase 2 (C:AVA 2) during the Nigerian Institute of Food Science and Technology (NIFST) 42nd Conference and Annual General Meeting, Salako said that through research activities of the University, SMEs operators in the country have evolved into producing varieties of food products particularly from cassava to feed Nigerians. “If the government can promote agric SMEs particularly by making sure that their products can sell, productivity will increase, meaning Nigerians can feed Nigerians,” he said in a press statement made available to BusinessDay. “We are involved in production, processing and presenting cassava on the table in different forms. So what this is all about is to tell Nigerians that we are not sleeping,” he further said. Speaking on the contributions of the institution in providing food

for the country, Salako said “we are highly involved in intensive and economic production of some agricultural commodities, particularly cassava. We are also involved in oil palm production and horticultural products. “We have translated all these to some products. You may not see them in raw form but we have our cashew nuts that we sell, we have the Cassava Processing Industry for garri and fufu, we have a bakery for production of bread, we have a unit for honey production and some other things that we are involved in.” The vice chancellor, who revealed that the university is now operating on a bigger scale, said “now, we have started expanding gradually. in March, we opened a cassava processing factory, bigger than what we had before and with that, we have improved on the scale at which we process cassava, FUNAAB is highly involved in teaching, not just in research but even in production for food security”. Salako also solicited for renewed support by the Federal Government for cassava bread in the country and said the university’s scientists, who were originally involved in the conceptualisation of cassava bread are available and willing to offer their services. “We will appeal to the Federal Government to, encourage our scientists because we can do it right in FUNAAB and I want to tell anybody who cares to hear that if you give us money, you get value for your money”.

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L-R: Olumodeji Damilola of the Lagos State Polytechnic Insurance Dept, first price winner; Onyeneke Chukwuemeka, from Imo State University Insurance Department, second price winner; and Asunlegan Babatunde, from Imo State University Insurance Department, third price winner at the CHI Essay Competition Award and as part of the company’s contribution to the overall insurance industry awareness creation in Nigeria.

Stories by Modestus Anaesoronye

he number of uninsured population against the total population in Nigeria underscores the huge insurance gap in Nigeria. The implication is that many have not been able to benefit from the benefits of insurance, in terms of providing them with the necessary protection to explore new business opportunities or provide support for families and groups to attain economic stability and growth. With insurance penetration in Nigeria, still less than one percent despite the country’s population over 180 million, underscores the huge untapped potential and why many foreign investors including those from Europe and America are seeking to have footing in the local market. The National Insurance Commission (NAICOM) said insurance industry needs a strong collaboration towards reducing insurance especially in the areas of natural

catastrophes; Cyber crimes/risks; healthcare; pensions and emerging risks. Pius Agboola, director inspectorate, NAICOM, who said this at the Risk Frontiers West Africa 2018 in Lagos, identified some areas where there are still gaps to be filed by insurers. These areas, according to him, include natural catastrophes; Cyber crimes/risks; healthcare; pensions and emerging risks. He said that the NAICOM has taken steps to bridge these gaps through the introduction of microinsurance; Takaful insurance licenses; Bancassurance partnership with conventional banks while with microfinance banks is in progress; partnership with relevant agencies and state governments on compulsory insurances implementation is in progress. Other steps, according to him, are distribution channels which are being expanded; coordination with relevant government agencies for effective insurance of government assets and partnership with relevant government agency (NIRSAL) on agriculture index insurance. He said the commission has engendered partnership with the

operators on awareness creation through the medium of Insurers’ Committee; partnered foreign development agencies for sponsorship and reinforced its zonal/ branch offices on insurance education at their domain. Agboola stated that the regulator is also encouraging specialization; strengthening insurer’s capacity; improving insurance penetration; attracting foreign investment and encouraging healthy competitions. Lloyd’s of London said in a release recently that in order to close the insurance protection gap the that capital market investment, channeled through insurancelinked instruments, is going to be a key tool to help achieve this. Lloyd’s notes that efforts to close the disaster protection gap are not going well, with an estimated $163 billion of assets left underinsured in the world today and this gap having only closed by less than 3 percent in the last six years. You’d think that Lloyd’s would be extolling the virtues of its marketplace and traditional insurance and reinsurance syndicates, as the mechanism for closing these gaps.

But actually, even the world’s oldest insurance market is aware that without the support of the capital market the task of narrowing this gap is going to be incredibly slow and that borrowing concepts from financial market structures and insurance-linked securities (ILS) is likely to have greater effect in a shorter period of time. Insurance penetration rates remain significantly higher in developed nations compared to in emerging economies, but the insurance industry on its own is not making the headway required to meaningfully close this gap, it appears. As a result, research from Lloyd’s, alongside the Centre for Global Disaster Protection, Risk Management Solutions (RMS) and Vivid Economics, lays out some details on four financial instruments that the group say could be used to incentivize investment in resilience. All four are more akin to capital markets tools than insurance or reinsurance, borrowing heavily from some of the concepts developed in the insurance-linked securities (ILS) and development finance markets. The instruments the report describes are: insurance-linked loans (infrastructure loans with an insurance component; resilience impact bonds (a type of impact or social bond, but specifically for resilience); resilience bonds (the catastrophe bond like resilience bond concept that has been broadly discussed for the last few years); and resilience service company (ReSCos) (a funding mechanism that would be linked with insurance). While all four are insurancelinked, none of these would really require a traditional insurer or reinsurer to be able to get them off the ground and in fact may even be more efficiently delivered as pure capital market instruments. Lloyd’s did of course also explain the important role that risk financing can play, by providing liquidity immediately after a disaster strikes, protecting government capital and buffering taxpayers from the loss.

everal times it has become issue of argument as to who needs insurance protection most. Is it the poor or the rich?. The truth is that everybody needs insurance, but the poor needs it most. A rich man that has plenty of cars in his garage may not feel it so much when one of them is stolen and he can afford to buy another one to replace it without sleepless night. This is not the same with the poor or one that is managing. If the wind blows of the roof of the poor man’s house, he may not be able to replace it unless people come to his rescue. If his only car is stolen, he may not be able to buy another one in the next six months. With these, it becomes clearer that the poor who may not have a reserve cash to replace lost assets when it happens truly needs insurance protection most. Experts say insurance is for everyone as longer as you have dependants, meaning that whether you are rich or poor, and as longer as you will not be there at a certain time to provide for your dependants, then you need insurance. So, one way or the other, we all need life insurance for either our self or for our dependants. So the first assessment test to actually know where you belong in this divide is to do a risk profile of yourself and your family, and this can be better done with the help of a personal finance consultant. It is also called health check in insurance, and this enables you ascertain once risk profile and what possible insurance products will suit the situation. According to experts, the important thing is to first determine whether you need life insurance, which kind is best for you and carefully calculate how much you need. If you have dependents to protect and don’t have enough savings, you definitely need insurance. Then if you want to protect your family against the destruction of your business or estate after your death, whole life or universal life insurance has to be considered. But if your main concern is to protect your family against a loss of your income, term insurance is the way to go.

2015

Industry collaborations key to reducing insurance gap in Nigeria

Why the poor needs insurance most?

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Pension Today

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Saving for pensions more pressing, as cultural transition deepens risk

ince the beginning of twentieth century and now, it has become obvious that dependence on children for old age care, as common with African culture is becoming less significant. This is pointing to a significant change in culture as a result of socio cultural and economic changes that has been largely influenced by civilization and cosmopolitan influences. The reason, being not because the children no longer have feelings for their old parents, but because they would have to also face their own challenges of survival in an environment that is becoming highly competitive and unfriendly by the time. The trend today underpins why people in active working life must begin to save in other to take care of their life at old age in form of pension savings, so that there will be less pressure and dependence on the children for basic needs in retirement.

The introduction of Contributory Pension Scheme in Nigeria through the Pension Reform Act 2004 as amended in 2014, no doubt is one of the best things that could have happened to Nigeria at this time

L-R: Kabir A. Tijjani, executive director; Umar Sanda Mairami, managing director/CEO; Kemi Oluwashina, executive director and Aliyu Mohammed Ali, head Corporate Communications at a press conference in Lagos

Earlier before the past three centuries, it was common for parents to have as many children as they can, as a fallback position in retirement, as well as for immediate benefits of direct labour for farming. This was the time of our grandparents. These held sway at that time, as there was little influence of civilization, so children remained in the villages and supported their parents from one generation to another. But with civilization and influence of Western education, there was the new trend to live the villages

for cosmopolitan life and economic activities, which saw children leaving their old parents to seek for better means of survival in the cities and overseas. Over time in history, children have left their parents and in search of greener pastures got new orientations and so begin to care less for the extended family setting, and with tightening economic situation everywhere the ability to provide as much for the older people began to decline. This trend is not going to get better in the longterm future, so suggests

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Diamond Pension Fund Custodian Limited 1A, Tiamiyu Savage Street, Victoria Island, Lagos State. Tel: 01-4613753, 2713680, 2713954 Fax: 01-2713955 Email: info@diamondpfc.com Website: www.diamondpfc.com

why embracing a pension plan is inevitable for anyone that wants to have peace at old age. The introduction of Contributory Pension Scheme in Nigeria through the Pension Reform Act 2004 as amended in 2014, no doubt is one of the best things that could have happened to Nigeria at this time. It remains the best savings arrangement for employees in the public and private sector in Nigeria, having been made compulsory for active working persons. Umar Mairami, managing director/CEO, Premium

Pensions Limited speaking on the need to embrace the Contributory Pension Scheme during a press conference in Lagos, said “The African culture is changing, and it is important that we change with the trend.” Mairami stated “That your children no longer care for you may not be deliberate, but because they will have to address their own challenges”. The Premium Pension boss emphasized the need for everyone to embrace savings for retirement, saying “If you have not started savings today, start now because it’s never too late”.

“I sincerely call on every Nigerian, to embrace the Contributory Pension Scheme; understand the scheme and join before the journey gets too fast, because it pays to have something to fall back on retirement, Mairami said. For those who have already joined the scheme and waiting for their retirement time, he urged them to keep tab with their Pension Fund Administrators, and ensure they do the necessary documentations well ahead of their retirement date so that they will have a smooth process of retirement. The clearly stated objectives of the CPS are: to (a) ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his or her retirement benefits as and when due. It is also to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age. The Pension Reform establishes a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the Public Service of the Federation, Federal Capital Territory and the Private Sector. In other words, the CPS promises every employee minimal basic comfort in retirement, thereby reducing dependency in old age. But this cannot be achieved without the employee working consciously towards it. Therefore, if you desire to retire happily, if you truly wish to retire into the good life after a long working career, you need to plan for it.

This section is created to increase awarness and deepen knowledge about the contributory pension scheme. If you have enquiries or contributions, send to this e-mail: diamondpfcbusday@yahoo.com

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Ghana’s Enterprise targets Nigerian insurance market with digital capabilities Stories by Modestus Anaesoronye

he drive to explore the Nigerian insurance market’s population potential is gaining momentum, with Ghana Enterprise Group’s last week’s announcement to deploy digital capabilities in the local market. The company plans to attract and enhance customer value by acquiring digital capabilities, deploying mobile apps, customer relationship management systems, universal payment among other strategies. The group will focus on delivering excellent services to policyholders and contributors likewise seeking a high standard of service delivery and ensuring consistency in achieving set standard across all subsidiaries and branches. Customer’s preference according to the CEO would be paramount across all business within the group, quoting Keli Gadzekpo, chief executive officer of Enterprise Group. Nigeria has over 180 million populations with majority in the middle class, but having less than one percent insurance penetration in relation to the GDP Ghana Ventures Africa report, says the Ghana’s pioneering insur-

ance company has revealed plans to enter the Nigerian insurance market. Enterprise Insurance is the largest private insurance company in Ghana and is currently the highest ranked general insurance company in the club 100 listing. Enterprise Group comprises Enterprise insurance Company, Enterprise life, Enterprise Trustee Limited, Enterprise properties and Enterprise funeral services. The group recorded a total net income of GHc543 million last year with its assets totalling GHc 1 billion. This year, Enterprise group announced a pre-tax profit of GHc90.4 million and earnings per share of GHcc0.0397 with a net premium growth of 29 per cent compared to 20.4 per cent in 2016 and profit growth of 27. 9 per cent at the close of business on 31st December 2017. With the expansion imminent, Enterprise group would compete with already established insurance firms in Nigeria likewise contributing its quota to the Nigerian insurance industry. The company plans to attract and enhance customer value by acquiring digital capabilities, deploying mobile apps, customer relationship management systems, universal payment platform as well as active engagement with customers on various media platforms. “Our dream is to enter the Ni-

R-L: Glory Etaduovie, managing director; Jonathan Zwingina, chairman; and Femi Onoru, company secretary, all of IEI- Anchor Pension Managers Limited, after Its 6th Annual General Meeting in Abuja.

gerian market very soon. We are making progress on that we have the money, and very soon we will finish the transaction and let the public know about it,” said Keli Gadzekpo, Chief Executive Officer, Enterprise group while speaking on their expansion into Nigeria. “The Group is expecting a strong entry with the Life insurance business, then the rest will follow

Premium Pension sustains leadership position with growth in key indices

ension Fund Administrator (PFA), Premium Pension Limited says it will sustain its leadership position as major player in the industry, while not resting on its oars to continue to reinvigorate its systems and operations. Umar Sanda Mairami, managing director/ CEO, Premium Pension Ltd made the disclosure during a media interaction in Lagos. He said focus the new management of the company under his leadership since assumption of office in January this years was on 3 key areas - driving operational excellence through adoption of Quality Management Standards, improving customer experience across all interaction platforms and consolidating investment returns within defined acceptable risk. All of these objectives he stated are to ensure that the company stays committed to delighting its customers. On the performance of the company since the first nine months of the 2018, Mairami said Premium Pension recorded a 4.96 percent growth in RSA num-

bers, an improvement from total industry trend of 4.5 percent, while our. Its asset under management (AUM) grew by 13.7 percent, a significant improvement from industry figures over the period. “This speaks to our commitment to being an industry leader, not only in growth of RSA numbers but in investment performance.” “We were therefore delighted to see our oldest and largest RSA Fund II reported in the online press, recently, as the best performing RSA Fund II in the Industry, year to September 2018. That Fund was also the first to attain a N4.00 unit price, within the industry, and this performance corresponds to an annual average return of 12 percent, since inception in 2006, the CEO said. Mairami further stated that in a drive to ensure we continue to improve our efficiency levels and invariably customer experience, we adopted two International Organization for Standardization (ISO) management systems, specifically ISO 9001:2015 Quality Management System (QMS) and ISO 27001:2013 Information

Security Management System (ISMS). “We were recently recertified for the later and currently in the final stages of getting certified for the former. These projects were implemented simultaneously with our new, fully integrated and customer-centric Core Business Application.” All of these initiatives are being embarked upon to differentiate ourselves using technology - easy-to-use multi interaction platforms for our customers -and improve the customer journey with us, he said. Speaking to its strength in the industry, he said Premium Pension accounted for over 10 percent of total industry retirees on Programmed Withdrawal and have paid out over N86 billion in lump sum and programmed withdrawal benefits, since inception, representing 18 percent of total amount paid by the industry, in this regard. “Our emphasis is ensuring the payment process is as seamless as possible, for our customers, and with necessary risk controls and we will continue to ensure this is the case.”

later,” he added The group will focus on delivering excellent services to policyholders and contributors likewise seeking a high standard of service delivery and ensuring consistency in achieving set standard across all subsidiaries and branches. Customer’s preference according to the CEO would be paramount across all business within the

group. Keli said, “We believe that people drive the execution of our strategy, and therefore ensure that we create the required environment embedded in the right culture and engage them throughout their life-cycle within the business.” Enterprise Insurance is the first insurance company to be listed on the Ghana Stock Exchange.

IEI-Anchor Pensions achieves greater efficiency on increased infrastructure

EI-Anchor Pension Managers Limited conscious efforts to persistently grow investment in infrastructure has increased the Company’s customer services efficiency, and now impacting increasingly on growth. Jonathan Zwingina, chairman of the Company who disclosed this during its 6th Annual General Meeting in Abuja said the firm became more efficient due to structural and technological infrastructure deliberately put in place to ensure efficiency and customer satisfaction. According to him, the resilience of your company is not in doubt as it continued to grow despite the steep competition in the pension industry. Zwingina stated that assets under management grew by 17 percent from N58 billion in 2016 to N68 billion in 2017. “Opportunities were seized and maximized. The spirit of this growth has been achieved thus far with the help of the management team guided by the Board. The efforts of our employees cannot also be overlooked. They have remained committed and dedicated to building the company, the chairman stated. Glory Etaduovie, managing director/CEO of the Company said the company’s theme for 2017 “Get the Edge” shaped its activities during the review year and impacted positively on its performance. “ It enabled us to identify our

competitive edge and differentiate our delivery channels and processes.” “During the year under review, our company experienced growth in several areas, including Assets under Management (AUM). He said the gross revenue increased from N544million in 2016 to N661million in 2017 – a 22 percent growth; while Retirement Savings Accounts generation also increased from 10,000 generated in 2016 to 12,394opended in 2017 , a 24 percent growth in generation levels. Alsi its RSA Fund Unit price grew from N1.9411 in 2016 to N2.2124 in 2017, a growth of 13.98 percent, while Retiree Fund Unit price grew from N2.2331 to N2.5615, indicating a growth of 14.71 percent during the year under review. “However, there was a drop in our Profit before Tax, which moved from N116million in 2016 to N45million in 2017. Profit after Tax also fell from N81million in 2016 to N1.4million in 2017. This was due to capital reinjection, addition to our branch network, facelift of existing branches and outlets to meet with competitors and our Regulators standards. Our staff size also increased from 83 in 2016 to 150 in 2017.” Going in the future into 2018, he said “we intend to engrave our presence in the market by further reinforcing our reach, visibility, niche, market and competitive edge.

BUSINESS DAY

Wednesday 31 October 2018

SHIPPING

LOGISTICS

MARITIME e-COMMERCE

Maritime security: Why Nigeria must safeguard $8bn shipping-side of oil, gas business Stories by UZOAMAKA ANAGOR-EWUZIE

oncerns about the safety and security of the Nigerian maritime domain have been dominating discussions in the sector on account of the importance of safety to the development of the shipping industry. Bu s i n e s s D ay u n d e rstands that Gulf of Guinea, which houses Nigerian waters, is rated as a high risk area for vessels calling seaports in West Africa with international cargos. As a result, vessel owners charge war risk insurance premium on cargos coming to Nigerian ports and other ports in the region. Most vessels also come into the region with armed escort for the protection of the cargos and the cabin crew onboard. Hadiza Bala Usman, managing director of the Nigerian Ports Authority (NPA) said the war risk insurance premium has translated to high cost of cargo importation into the nation’s

L-R: Kyari Bukar, lead judge, The Next Titan; Ubi Franklin, guest/celebrity Judge; Mide Kunle-Akinlaja, executive producer, The Next Titan; Adewale Adetayo, general manager, SIFAX Haulage & Logistics Company/guest judge and Chris Parks, judge, The Next Titan during a special boardroom session for SIFAX Group’s task where the contestants were asked to come up with innovative solutions to solve Nigeria’s logistics challenges.

seaports, as importers who pay such premium likewise pass on the added cost to the end users. Statistics shows that Nigeria’s shipping business holds huge potential as the maritime component of the country’s oil and gas

industry alone is worth an estimated $8 billion. Pundits believe that for shipping to effectively contribute to the development of Nigeria’s economy there is urgent need to curb and combat these illegal maritime activities in our waters,

W/African countries losing $2bn annually from illegal fishing – GGC boss

hile other countries and regions are reaping the benefits of the blue economy, countries in the West African region are estimated to be losing about $2 billion annually from illegal fishing, said Florentina Adenike Ukonga, executive secretary of the Gulf of Guinea Commission (GGC). Ukonga disclosed this in Lagos on Monday at the opening ceremony of a twoday Gulf of Guinea Conference themed, ‘The Blue Economy in the Interest of Food Security in the Gulf of Guinea,’ said that the coastal sector in the region has remained underdeveloped and poorly governed, thereby enabling other forces from outside the continent to benefit more from it. She expressed worries as the Food and Agriculture Organisation (FAO) of the United Nations, has estimated that about 57 percent of fish stocks are fully exploited while another 30

percent are over exploited. According to Ukonga, World Bank reported in 2016 that fish stocks are further exploited by illegal, unreported and unregulated fishing, which is estimated to be 11 to 26 million tonnes of fish annually or $10 to $22 million in unlawful or undocumented revenue. “There is strong evidence that major ocean assets have been in steady decline for many years, many of the living marine resources are in serious decline as a result of human activities at sea. Alarmingly, there have not been any serious sustainable practices to deal with this serious threat. “The Blue Economy is already faltering and not delivering anything like its full potential, at a time when pollution is on the increase and the need for food and resources from the ocean is also increasing. It has been projected that the population will continue to increase, which requires us to do more for the ocean

sustainability in order to have food on our table,” Ukonga advised. Ukonga believes that fishing business in the region can be developed to the level that no importation of frozen marine living resources from outside the GOG region will be necessary to meet local consumption needs. He added that such can only become possible when living marine resources in the region are properly developed, harnessed and controlled. In his welcome address, Dakukuk Peterside, director general of the Nigerian Maritime Administration and Safety Agency (NIMASA) expressed delight that members of the GOG were now thinking of how to expand and develop the blue economy. He advised participating countries to hasten up in the utilisation of their water resources for economic expansion, diversification and development.

as these crimes continue to constitute impediments to economic development. Rotimi Amaechi, Minister of Transportation, said that as long as these crimes continue in the Nigerian maritime domain, the benefits of better shipping will continue

to be elusive. “The importance of ensuring a safe maritime domain cannot be over emphasised. A safe, secure and efficient shipping industry will surely revitalise and diversify the economy of Nigeria away from crude oil exploration to a maritime hub. Therefore, the promotion of sustainable shipping and sustainable maritime development will stimulate the development of new technologies and innovation, agile maritime security platforms and the development of maritime infrastructure,” Amaechi said. Amaechi said concerted efforts were being made by the present administration to strengthen the institutional capabilities of agencies responsible for providing maritime security in Nigeria and around the Gulf of Guinea region and that the Federal Executive Council (FEC) recently approved the procurement of new security architecture for the Nigerian Maritime Administration and Safety Agency (NIMASA).

According to him, the approval involves the acquisition of new platforms and other logistics required to enable the agency perform its statutory function of securing Nigerian waters in conjunction with the Nigerian Navy. Boss Mustapha, secretary to the Government of the Federation (SGF) said that the maritime industry must be protected to attract foreign investors and also preserve Nigeria’s territorial integrity. “The maritime industry in Nigeria and indeed globally, has come under siege by criminal elements who orchestrate acts of piracy, sea robbery and armed proliferation in the Gulf of Guinea and within Nigeria’s territorial waters,” he said. He said due to these challenges, the gains recorded through dredging, amnesty and port concession exercises in Nigeria nosedived, compelling some foreign shipping companies to enter Nigeria’s territorial waters with armed security personnel on board.

Commercial boat operators list challenges of operating on Lagos waterways …As Peterside calls for customer-focused service

agos Commercial Private Boat District, an arm of the Maritime Workers Union of Nigeria (MWUN), has identified some of the challenges limiting its members from carrying out their businesses effectively on Lagos waterways. Top among these challenges are lack of conducive operating and safe environment; existence of wreckages on waterways; poor installation of navigational safety buoy lights to aid night voyage, and the harassment of members by security agents on the waterways. Others include unavailability of boat fuel refilling stations on the waterways in Lagos state; inability to train and retrain boat operators and lack of government assistance in acquiring standard safe modern boats for waterway transportation. Speaking in Lagos last week during the Customer Service Week 2018 organised by the Nigerian Maritime Administration and Safety Agency (NIMASA) with the theme, “Excellence Happens Here,” Abdul Erodje, representative of the president-general

of MWUN, said that the high cost of boats and boat anchors, outboard motor engines and standard life jackets, among others, also affect the operations of boat operators. Erodje appealed to NIMASA to cushion their operational challenges by enabling the operators to have access to the Cabotage Vessel Financing Fund (CVFF). Mindful that the CVFF is designated for indigenous ship owners, Erodje urged NIMASA to plough “a small percentage of the CVFF” to enhance waterways transportation in Lagos State and nationwide. According to Erodje, this will solve some of the challenges and serve as NIMASA’s local content development, and “with proper management, will enable local operators to acquire standard boats to provide internationally accepted inland waterways transportation services.” Meanwhile, Dakukuk Peterside, the director-general of NIMASA, also called for customer-focused business transactions since “businesses exists because of the customer.”

Peterside, who was represented by Aishatu Jidda, head, Legal Services of NIMASA, noted that “customers have to be retained to sustain the business.” According to him, “the relationship is maintained by providing quality or excellent service at all times, because customers will only expend their hard-earned resources on satisfaction derived from what they buy.” Peterside explained that the Customer Consultative Forum (CCF), which was instituted in NIMASA through Service Compact with all Nigerians (SERVICOM), has facilitated discussions on the highlights, constraints and successes of businesses and organisations in their interface with the agency’s regulatory role. Abiodun Olusegun, head, SERVICOM unit of NIMASA, said the agency highly regards robust engagement with stakeholders in its regulatory and promotional activities. He urged boat operators to always contact the agency’s SERVICOM office for intervention on issues affecting their operations.

BUSINESS DAY

Wednesday 31 October 2018

C002D5556

BUSINESS DAY

Transnet tests world’s longest manganese production train Page 31

Impact of technology on global travel industry

Emirates win MEA ‘Airline of the Year Award’ Page 30

Page 30

Railways to use ‘green’ composite sleepers instead of wooden sleepers Page 31

Concerns mount over auto-market aftermath Abuja Motorfair …As Toyota, Mitsubishi, Ford, GAC, Tata, BAW, JAC register presence gerians and local business owners considering the challenges of doing business within the local market. She reiterated her commitment providing in Nigerians with products that meets world standards, at the most competitive prices for a more meaningful and enjoyable life. Tata Africa Services, a once sprawling dealership that stormed the Nigerian market with renewed vigour and later slipped off registered a surprise presence, while Elizade Autoland which holds the JAC model line-up dealership rights

Stories by MIKE OCHONMA

he are very strong indications that, this is not the best of times for Nigeria’s automotive industry as the sector has continued to nosedive with every successive year and the purchasing power of both the middle class and those at the lower end of the ladder taking dip. Few years ago, new vehicles imported into the country accounted for over 50,000 units, while presently the figure had ridiculously dropped to an abysmal 10,000 units or even less in a country with an estimated 200 million people. Out of this 200 million, very few live in opulence with an many impoverished middle class that finds it increasingly difficult to purchase a second hand vehicle popularly reffered in local parlance as ‘Tokunbo’ For those people included government officials and corporate institutions that visited the just concluded 19th Abuja Motorfair held inside the Old Parade ground within the federal capital territory, the scenario as exemplified by the insignificant number of very few franchise owners that put up their vehicles on display says it all. Unlike previous editions of the Abuja Motorfair where visitors used the opportunity to negotiate for insurance packages and auto financing schemes from banks, there was no single bank that took part in the fair. At the last count, automotive franchise owners that participated at the event included Toyota Nigeria Limited (TNL); a very loyal company that one would describe as the most consistent participant and strong backbone of the annual event. As part of its marketing strategies, the company which boats itself

as the franchisee with the most preferred auto brand among the buying public in the local market today used the opportunity the present the new generation Toyota Camry to the buying public. Speaking exclusively to our reporter last Monday Bukunola Ogunnusi, public relations manager of Toyota Nigeria Limited, disclosed that, thid year’s exhibition provided another opportunity for them to bring all the Toyota models under one roof for visitors and prospective buyers to once again have a feel and taste of that superior quality that is synonymous with the local market leader participation. As part of channels of bonding with the market, the management of Toyota Nigeria Limited on Thursday evening played host to select very special VIPs, some of who trooped inside a uniquely carved out ambience at the extreme end of the large arena during which period Kunle Ade-Ojo, managing director of TNL took out quality time to educate each and every enthusiastic guests

of what stands the all-new Toyota Camry out of competition. Others that participated fully are Massilia Motors Nigeria Limited. The much rejuvenated car dealership with Thomas Pelletier as the managing director eigned on to the motorfair with the new sizzling Mitsubishi Eclipse Cross compact SUV as its top-most priority. The display of the new trendsetting sport utility vehicle by Massilia Motors; the automotive subsidiary of CFAO group is coming barely two weeks of the new vehicle to the motoring journalists inside the dealership’s upgraded showroom in Ijora, Lagos Among other franchise owners that lifted the rating of the one week event was the Coscharis automotive group. The company which parades different brands of vehicles ranging from the high, middle and low-end brands used the platform to showcase its Ford models including the compact sedan passenger cars to the luxury SUVs. Coscharis Motors launched

new Ford EcoSport during the event. Also during the exhibition, CIG Motors Limited sole importers of GAC brand of vehicles renewed its aggressive stance in bringing the Chinese product range closer to the garages of most car buyers. At the event, Vice-president Yemi Osibanjo represented by Jelani Aliyu, director-general, National Automotive Design and Development Council (NADDC) while declaring the event open formally launched its flagship luxury GS8. In a speech delivered by Diana Chen, Chairman/CEO of CIG Motors extolled the resilience of Ni-

came to the event to tell the market that, it remains one of the fastest growing Chinese brands that is still searching for bigger visibility. Apart from the heavy duty JCB Tractors and machinery equipments from the CFAO group, Transit Support Services Limited (TSSL), had on display the BAW commercial passenger buses at the fair ground, while representatives from the Nigeria Automotive Design and Development Council (NADDC) where on hand to educate visitors on some of the interventions it is making to stimulate and attract interest ffrom prospective investors into the country’s automotive sector.

Uber launches safety toolkit for riders, drivers

ber is rolling out a safety toolkit for riders and drivers across 38 countries, including South Africa. Over the next few weeks, it will be rolled out to the millions of riders, drivers and delivery partners using the app. Since launching the app, Uber has allowed users to report any issues to a safety team. With the introduction of new safety features, the company aims to double down on safety. The toolkit’s features in-

clude: an emergency button, which allows you to connect directly to private emergency services and security response when needed through a thirdparty private security supplier; trusted contacts, which enables riders to designate five friends or family members as

“trusted contacts”. With a single tap, share their trip information; a safety centre, which helps you find information on some of the key existing safety tools in the app; and speed alerts, which warn both drivers and delivery partners to maintain a safe speed within the posted speed limits. There will be a phased rollout of these safety features; not all riders, drivers and delivery partners will have access to the features immediately.

L-R: Daina Chen, chairperson/chief executive, CIG Motors Nigeria Limited in a warm handshake with Aliyu Jelani, director-general, Nigeria Automotive Design & Development Council (NADDC) after the unveiling of the GAC GS8 SUV by the later during the just concluded 19th Abuja Motorfair at Old Parade Ground, Abuja, while Ifeanyi Agwu,MD/CEO of BKG Exhibitions, organisers of the event looks on..

30 BUSINESS DAY

Wednesday 31 October 2018

C002D5556

MTRAVEL odern

Impact of technology on global travel industry …As internet device connectivity improving

Marriott accelerates expansion plans across Africa

Stories by MIKE OCHONMA mikeochonma@gmail.com

rom the Africa Hotel Investment Forum (AHIF 2018) in Nairobi, Kenya, Marriott International announced rapid expansion plans across Africa. Strong demand for selectservice brands and conversion opportunities are driving the momentum of growth for the company, amplified by five new hotel signings. Analysts say, the new signings will further consolidate Marriott International’s presence in Ghana, Kenya, Morocco and South Africa and mark the company’s entry into Mozambique. The signings put Marriott International on track to increase its portfolio by 50 per cent with over 200 hotels and 38,000 rooms by 2023 estimated to generate 12,000 new job opportunities. Ma r r i o t t I n t e r n a t i o n a l ’s planned growth reinforces its commitment to Africa and underscores the substantial emphasis that countries across Africa are placing on the travel and tourism sector. The company estimates that, the five new projects signed will drive investment of over $250 million by the property owners and will generate substantial economic activity. “Marriott International’s acquisition of Protea Hotels followed by the acquisition of Starwood Hotels & Resorts Worldwide has given an impetus to our organic growth on the continent. “Today we are seeing strong owner interest in our brands, backed by our combined loyalty program, the collective strength of our global platform and our highly-experienced, local teams,” said Alex Kyriakidis, president and managing director, Middle East and Africa, Marriott International. “African economies have sustained unprecedented rates of growth, which have mainly been driven by a strong domestic demand, improved macroeconomic management and increased political stability. “The continent is still under capacity as far as branded hotel supply is concerned, presenting us with a fantastic opportunity to grow our brands and enhance our footprint,” he added. Today, Marriott International is present in 21 countries on the African continent: Algeria, Djibouti, Egypt, Ethiopia, Gabon, Ghana, Guinea, Kenya, Malawi, Mali, Mauritius, Morocco, Namibia, Nigeria, Rwanda, Seychelles, South Africa, Tanzania, Tunisia, Uganda and Zambia. The company is set to expand into new markets including Benin, Botswana, Ivory Coast, Mauritania, Mozambique and Senegal.

new study reveals the impact of technology on travel intention, selection and timing. If you are one of the hundreds of millions people worldwide who will fly this year, your travel choices and selections are being influenced by the connected economy. Whether you are a smart and well-informed travel planner, a “relaxed nomad” ready to roam without stress or strife, or a deal-seeker on a budget, technology is transforming your travel experience, findings show, in a way that makes it even more accessible and frequent. According to new research; entitled “What’s Changing the Way You Travel Today” undertaken by the CMO Council’s GeoBranding Center and AIG Travel, today’s diverse leisure travelers are smarter, more informed and better prepared than ever before. Beliefs, values and interests are influencing where, how and why people travel. Further to this, technology and service innovations are making it easier and cheaper to discover, reach and enjoy travel destinations. While deals, specials and promotions are driving desire and action, visually enriched and personalized digital content channels are making travel experiences more alluring and exciting. The research, centered around a survey of more than 2,000 leisure travelers by Pollfish this summer, yielded some notable statistics. Nearly half of those polled say the Internet and device connectivity makes travel better. A further 42% believe technol-

ogy innovations and advancements across all modes of travel have improved the experience, and 38 % say these tech advancements have helped them find deals, discounts and destinations more easily. More than 51% of travelers surveyed say great deals and discounts are what prompt them to make a travel booking. Easier, do-it-yourself travel planning is also a major factor for 32% of travelers. Other influences are referrals from family and friends (29%), exciting images or video (21%), and interesting stories or articles (21%). “We’re in the thick of a monstrous growth in global travel,” notes Donovan Neale-May, executive director of the Chief Marketing Officer (CMO) Council, which operates the GeoBranding Center. When asked to identify the top travel planning innovations and developments in recent years, 49 percent of those surveyed pointed to online travel booking sites and booking assurances, including insurance coverage. An equal per-

cent highlighted deal or discount availability. Other marketing strategies and inducements that also rated highly by respondents included; loyalty programs with upgrades, privileges, and travel benefits (34 percent), new ways to discover, source and receive personalized travel deals (33 percent) and promotional incentives and options (28 percent). Factors most influencing travel choices tended to be more about passions, self-interests and destination appeal, rather than travel issues or concerns. These include special interests, hobbies and diversions (43%), security, stability and friendliness of destination (36%), adventure, recreation or sports pursuits (30%) culture and history of the local people (29%) and destination geography and diversity (29%). Surprisingly, only 15% relied on their social media networks to help shape their travel choices, and just 8% pointed to political ethics, human rights practices or prejudices

in travel locales as a consideration when choosing travel destinations. When asked to characterize the type of traveler they were, most respondents selected more informed, relaxed and deal-seeking to best describe their approach to travel. Most prevalent travel types included smart, well-informed planner (31%), relaxed nomad easygoing and flexible (25%) deal seeker on a budget (22%). According to Jeff Rutledge, CEO at AIG Travel “Advancements in technology have revolutionized the way consumers can now customize travel to better suit individual trip preferences and budget, including how travel insurance is researched and purchased,”. “As consumers take more control over their travel booking process, all members of the travel industry must step up to deliver a seamless booking experience which, for the travel insurance segment specifically, means guiding travelers to the right products and services for their particular trip.” He stated.

Emirates win MEA ‘Airline of the Year Award’

mirates, the world’s largest international airline, have won the Aviation 100 ‘Middle East & Africa Airline of the Year’, awarded by Airline Economics magazine. The Aviation 100 awards recognize aviation’s most outstanding performers in the last 12 months. The awards were held during the Airline Economics Growth Frontiers Dubai 2018 conference gala dinner. Emirates and its financing partners also won ‘Deal of the Year for Innovation’, which resulted from a leasing transaction of five Airbus A380s. Winners of the Aviation 100 awards are decided by an industry-wide survey, a rigorous vetting process and editorial consideration. The Emirates Aviation 100 ‘Airline of the Year’ accolade was won based on the airline’s financial and revenue per passenger kilometers (RPK) performance, aircraft orders, as well as network and fleet expansion activity. In the 2017-18 financial year, Emirates increased its revenue to US$25.2 billion, and posting

a profit of US$762 million. The airline carried more than 58 million passengers and 2.6 million tonnes of cargo. In 2017, Emirates also clocked in 289 million scheduled passenger kilometres flown (RPKMs). Emirates has progressively grown its network and today flies to over 160 destinations across 86 countries and territories, in addition to entering into several strategic partnerships, including an extensive codeshare with FlyDubai. Today, the codeshare partnership offers a combined network of over 200 unique destinations. At the 2017 Dubai Airshow, the airline announced a US $15.1 billion agreement for 40 Boeing

787-10 Dreamliners, with delivery commencing in 2022. In early 2018, Emirates reinforced its commitment to the Airbus A380 programme with a US $16 billion deal for an additional 36 aircraft. The airline remains the world’s largest operator of the Boeing 777 and A380. In the last twelve months, the airline revealed its new Boeing 777-300ER game-changing fully enclosed 40 square feet private suites. The new B777 First Class private suites showcased the latest in cutting-edge onboard technologies, including a NASA inspired ‘zero-gravity’ seating position, ‘virtual windows’ for middle aisle

suites, and a personal video-call s e r v i c e, a l o n g with unique lighting and climate control features. The Emirates Boeing 777200LR fleet also underwent a renovation with a new Business Class cabin featuring a configuration with wider seats in a 2-2-2 layout. Emirates’ new A380 OnBoard Lounge has also debuted with a revamped look, more seating options, mood lighting, and other technological features. Emirates customers enjoy regionally inspired dishes, and an abundance of entertainment options with the industry’s most comprehensive in-flight entertainment system, ice. The 14-time “best in-flight entertainment system” at the Skytrax awards offers an unparalleled 3,500 channels in over 40 languages, including close to 900 movies from around the world.

Wednesday 31 October 2018

C002D5556

BUSINESS DAY

Local and global rail news as it breaks

Railways to use ‘green’ composite sleepers instead of wooden sleepers MIKE OCHONMA

n a move to become more eco-friendly, the Indian Railways has decided replace wooden sleepers with composite sleepers that are not only lighter, but also stronger. Composite sleepers were first used by the Railways in the Muradabad division in 2003. They have an edge compared with the strength of wooden and channel sleepers. Comprising a mixture of steel and fibre plastic, Railways preferred them over wooden sleepers because of environmental issues that cropped up over the cutting of trees. According to a railway official, no complaint has been received till date about the use of these sleepers, which were deployed on a bigger scale from 2016 in over 10 zones. The official also pointed out, that composite sleeper, comprising a mixture of steel and fibre plastic, costs more as compared to the other sleepers. “The cost of a composite sleeper is about Rs 25,000, whereas a channel sleeper costs about Rs 7,000,” he said, adding that cost is the big factor. “This decision has been taken in the wake of a Supreme Court order imposing restrictions on cutting

trees. If successful, all wooden sleepers will be replaced with composite sleepers.” In June 2016, the Railway Board Executive Director (Track), in a letter to all the zonal offices, said that the Research, Designs and Standards Organisation (RDSO) was planning to replace wooden sleepers with those made of composite material. It would initially be tried on bridges. The primary function of a sleeper is to grip the rail to the gauge and to distribute the rail load to ballast with acceptable induced pressure. Pavwan Droliaa, Manag-

ing Director of Asterix Reinforced Limited, which deals in manufacturing of composite materials, said that fibre-reinforced foamed urethane (FFU) composite sleepers are made of rigid polyurethane reinforced with glass fibre. “As a lightweight, highstrength, environmentfriendly product, FFU composite is a cost-effective alternative to timber or concrete,” he said. Droliaa said that synthetic sleepers are currently widely used on different types of rail transport systems, particularly on switches, turnouts, bridges

or viaduct and other projects in high-speed railway and metro railway construction across the globe. He noted that, initially, the green and sustainable element is what attracts people, but people now realise its durability is beneficial because there’s no maintenance with this product once it’s installed. “It doesn’t have to be repainted, re-oiled, re-sanded... and it will last between two and three times longer than timber. Generally it is a much lower cost over that period of time; that is what appeals to councils and park authorities.”

Britain to retain EU rail standards after Brexit

ritain will continue to abide by European Union (EU) rail standards and protocols after it leaves the EU, even in the event of a ‘no deal’ Brexit, according to a statement issued by the Railway Safety and Standards Board (RSSB). “Regardless of whether the government strikes a deal with the EU or not, the legal requirements designed to promote common safety and technical principles across all EU railways will still need to be met by UK rail companies and suppliers,” RSSB states. This means European Technical Specifications for Interoperability (TSIs) will continue to apply during the transition period if Britain reaches a deal with the EU. If no deal is reached, TSIs will be adapted as domestic legislation, published as National Technical Specification Notices by the Secretary of State for Transport. RSSB says Network Rail and other main line infrastructure firms, rail freight operators, rolling stock leasing companies and suppliers should plan to continue using relevant cross-industry standards after Britain’s formal withdrawal from the EU, which is due to take place on March 29 2019. European standards

are only affected by EU membership if they are referred to in EU directives. According to RSSB, this only affects less than 20% of applicable standards. The application of European standards from CEN, CENELEC and ETSI, as well as international standards such as ISO, IEC and ITU, is unaffected by Britain’s departure from the EU. The current government’s policy is to maintain regulatory alignment with the EU for goods, which means there is unlikely to be any shortterm-divergence from EUderived requirements such as TSIs. “We have been working very closely with the Department for Transport over the past year to ensure that requirements derived from the EU framework are legally fit for purpose for application in Britain with workable solutions in place, even in a potential ‘no deal’ scenario,” says RSSB standards director, Tom Lee. “We want to ensure that day one post-Brexit, the British standards framework is suitably aligned to the EU for immediate continuity and is legally robust, whilst providing for possible future divergence, if beneficial’’. He stated.

Transnet tests world’s longest manganese production train

ransnet Freight R e i l ( T F R ) ha s successfully run a 375-wagon manganese train over a distance of around 861 km from Sishen to Saldanha Bay. This formed part of the testing of the 4-km long train, which will, once in operation, be a production train with the highest number of wagons in the world, and the longest manganese train in the world, with the highest volumes carried per train as well. This project is in line with TFR’s business objective of applying the heavy haul operating, maintenance, design, construction and best practice principles on general freight opera-

tions, and Transnet’s strategy of migrating traffic from road to rail. The project will maximise the manganese volumes railed between the mines in Hozatel through Sishen to Saldanha. TFR

iron-ore and manganese business unit GM Russel Baatjies explained that there was an option of increasing TFR’s manganese rail capacity to respond to customer demand by upgrading the

existing railway feeder lines and building new rolling stock. “That option would have cost us significant capital. The project team was challenged to explore the use of tech-

nology through Industry 4.0 solutions, to achieve the same objective at minimum cost.” Applying distributed power technology to increase the train length to 375 wagons will reduce

capital requirements by over 90% of the initial estimate. This is another breakthrough for the heavy haul railway industry. Rio Tinto, in Australia, recently started with the implementation of driverless trains on its ironore railway system. “The collaboration on technical research and sharing of best practice by heavy haul operations worldwide will surely keep pushing the operations, safety and rail capacity envelope to new levels through the application of breakthrough technology,” commented International Heavy Haul Association chairperson and TFR GM Brian Monakali.

32 BUSINESS DAY Financial Inclusion

& INNOVATION

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Wednesday 31 October 2018

Supported by:

OPINION

Is the payment service bank a hybrid for M-pesa? OMULI IWERE

Chart of the week

s an attorney dealing with FinTech companies who are i n t e re s t e d i n bridging the financial gap in Nigeria, I was very intrigued when I learnt that on the 5th of October 2018, the Central Bank of Nigeria (CBN) released a proposed guideline for a new Bank to be called a “Payment Service Bank” (PSB). In the course of my work, I have supported clients in their applications for CBN licences such as Microfinance Bank Licence, Payment Solution Service Provider Licence, Mobile Money Operator Licence and Banking Agent Licence. My first impression on hearing about this new Bank was……Yes!!! this seems like a new stream of revenue for me. It may seem too early to write an article on a proposed draft, but I beg to differ as the final guideline on Value Added Services Framework released by the Nigerian Communication Commission in 2018, after several stakeholder’s consultation is very similar to its original draft. My initial review of the proposed document called “Guidelines for Licencing and Regulation of Payment Service Banks” left me rather confused on where the PSB sits in the hierarchy of Banks, and if a PSB is the best option to breach the ongoing financial inclusion discourse between the telecommunication companies and Banks, as Nigeria strives to keep away from the M-Pesa model of financial inclusion. M-PESA AS A TOOL FOR FINANCIAL INCLUSION Several articles have been written on M-Pesa, and it is currently regarded as a global model for financial inclusion. M-Pesa, which is a mobile money transfer service was launched in Kenya by a company called Safaricom in 2007, and its software application allows people without bank accounts to send money via mobile messaging to contacts on their phone, or even to pay for goods and services such as groceries or a taxi fare. Uptake for the service grew rapidly in the first year to 2 million users, and by 2014 MPesa processed transactions amounting to almost 7% of the total national payments (NPS) throughput value and two-thirds of total

NPS throughput volume in Kenya . In 2017, during the 10 -year anniversary of M-Pesa, CNN reported that that the company now has about 30 million users in 10 countries and the system processed around 6 billion transactions in 2016 at a peak rate of 529 per second . What is worthy of note, is that M-Pesa facilitates the remittance of cash between users via a combination of its software and a GSM provider, thereby bypassing the banks software. It also relies on an agent network structure which currently comprises of about 287,400 agents for deposit and collection of cash without the hassle of waiting in a banking hall queue. It has been argued that M-Pesa cannot work effectively in a country where there is an existing Government central switch such as the Nigeria Inter Bank Settlement System (NIBSS) in Nigeria, or where the banks have largely captured both urban and rural areas. This may be the reason the technology was never introduced to Nigeria, and may have also resulted in its failure in South Africa where the banks have captured the rural areas and Vodaphone had to work with Nedbank to launch the product . PAYMENT SERVICE BANK AS A TOOL FOR FINANCIAL INCLUSION The Central Bank of Nigeria has never hidden its displeasure on the issue of virtual currencies, however, when it comes to the issue of the telecommunication companies providing financial services to the public, there is only a perceived reluctance to allow such services. This may be seen as a legitimate concern for CBN as the Nigerian Communication Commission (NCC) and the CBN have different levels

of Know Your Customer (KYC), Consumer Protection Framework, Regulatory Framework and risk mitigation strategies, and surely creates a conflict of interest where the NCC is allowed to take on the financial monitoring role of CBN. CBN in its National Financial Inclusion Strategy defines financial inclusion as “…when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at an affordable cost.” These services may include payments, savings, loans, insurance, and pension products. CBN stated that in 2010, 46.3% of adults were unbanked, hence CBN outlined a strategy under its National Financial Inclusion Strategy to bring the figure of unbanked adults down to 20% in 2020. The PSB is largely a Digital Bank capable of receiving and transferring cash between individuals and small businesses and also maintains savings accounts. It will be largely technology driven as it will be based in rural areas with a main office, but with various coordinating centres to coordinate the activities of its banking agents. The PSB will have the ability to issue electronic wallets, debit and pre-funded cards, and electronically make payments/ remit cash between banks for services rendered, as it will be connected or utilize a corresponding bank which is connected to NIBBS. The draft guidelines provide that the founders of a PSB shall be Banking Agents, Te l e c o m m u n i c a t i o n Companies (Telcos) through a subsidiary, Retail Chains (Supermarkets), and Mobile Money Operators (MMO). It also stipulates that the paidup share capital of the PSB shall be N5,000,000,000 (Five Billion Naira), but the bank

will not be allowed to grant loans, advances, guarantees or underwrite insurances. It does seem as though there are several similarities between M-Pesa and PSB, however, one cannot miss out the fact that while MPesa sits outside the banking network, the PSB sits within the banking network and will be directly regulated by the Central Bank of Nigeria. So, can we say the PSB is a hybrid of M-Pesa which removes any worries regarding customer’s money sitting outside the purview of CBN and not insured by the NDIC? ANALYSIS Could it be that in an attempt to pacify the perceived tension between the Telcos and the banks on the introduction of the Telcos as players in the financial space, the CBN came up with a structure that allows the Telcos to play in the financial space as a bank and under the similar rules as the other banks? Can we also say that in trying to achieve this, CBN unknowingly or maybe knowingly, created an exclusivity for Telcos to play in the Financial Sector to the detriment of FinTech companies? Currently, there are three (3) categories of banks in Nigeria, namely; Commercial, Merchant, and Specialised Banks. The hierarchy of these banks are determined by their paid-up share capital requirements. The requirement for Commercial Banks are N10,000,000,000 (Ten Billion), N25,000,000,000 (Twenty-Five Billion), and N50,000,000,000 (Fifty Billion Naira) depending on the class; Merchant Banks require N15,000,000,000 (Fifteen Billion Naira); and Specialised Banks which includes Microfinance Banks, Mortgage Banks, Non-Interest Banks and Investment and Development Banks,

have varying paid- up share capital requirements which begins from N20,000,000 to N100,000,000 (Twenty Million to One Hundred Million Naira). It is rather strange that the PSB is the only bank wherein the exact field of the promoters have been stipulated in the guidelines. All other banks can be founded by individuals or companies from any sector. Why then did the CBN feel the need to restrict the founders of a PSB to Bank Agents, MMO, Retail Supermarket and Telcos? Is this because their expertise is necessary for the operation of a PSB? Since the PSB is technology driven and all four proposed founders are involved in promoting the sales of products via technology, I am inclined to agree that they have the requisite experience, however, it will be a struggle for an MMO or a Bank Agent to raise the N5,000,000,000 (Five Billion Naira) paid-up share capital as proposed by the CBN as these are largely start-up companies. So, in anticipation of additional revenue from bank card charges, card maintenance fees, and transaction charges (which the MMO and Bank Agents already share with Commercial Banks), the MMO and Bank Agents are required to maintain a minimum paid-up capital of N5,000,000,000 (Five Billion Naira). One wonders if this is a viable option for the MMO and the Bank Agents, and I guess only time will tell. Big Retail Supermarkets such as Shoprite, and the Telcos will likely be able to raise and maintain the required paid-up capital, however, what are the odds of the retail supermarkets moving to rural areas in Nigeria away from their strategic market? It is obvious that this is only a no-brainer for the Telcos, as their business already takes them to rural areas to provide telecommunication services to people in the rural areas. However, one question that remains unanswered is what industry the Telco subsidiary will be involved in, and will the subsidiary be registered as a Banking Agent, an MMO or a Retail Supermarket, since those where the areas specified for promoters? If it was a dream for an MMO or Bank Agent to one day grow into a bank, does the PSB make this dream any closer? I dare to answer in the negative, as the paid-up share capital requirement is

prohibitive and still does not allow the PSB to grant loans or invest in any other product than that of CBN, which reduces the ability for the bank to generate substantial revenue, other than the bank charges/fees mentioned above. It is obvious that the only promoter who gains from this current arrangement would be the Telcos by using USSD or text messages as part of their payment solution. This will lead to a new revenue stream from airtime purchases as customers in the rural areas will have to top-up in order to transact. This would undermine the other listed promoters as their technology will most likely be centred around the use of USSD and text messages, to the advantage of the Telcos. Therefore, the Telcos are bound to win whether they are a promoter or infrastructure provider, but CBN has an obligation to present a level playing field for all promoters in its pursuit of financial inclusion, as the more the players, the faster CBN can achieve its 20% unbanked target. I propose that the Telcos should be designated as infrastructure partners and earn revenue off transactions, while CBN licensed companies such as Bank Agents, PSSPs , FinTechs and other existing players in the ecosystem should have the mandate to provide solutions/platforms targeted at rural areas using the Telco’s infrastructure. Lastly, one struggles with how to place the PSB within the hierarchy of banks in Nigeria, largely because it has a minimum paid-up share capital requirement which is less than that of a Merchant Bank but more than that of a Specialised Bank. Does this mean a PSB will seat above the Specialised Banks, and if this is the case, why does the PSB not have the ability to carry out basic functions which are available to Specialised Banks? The paid-up share capital requirement for the PSB and the restrictions on who its promoters can be makes it undesirable as a bank, and is considered as a bottleneck to prevent applications from other relevant players in the industry. CONCLUSION The PSB is not like the current Specialised Banks, as the PSB has higher minimum paid-up share capital Continues on page 33

Wednesday 31 October 2018

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Financial Inclusion

BUSINESS DAY

& INNOVATION NSIP and financial inclusion Supported by:

OGHO OKITI

he National Social Investment Programmes (NSIP) launched by the Buhari-led government, is perhaps one of the most deliberate, and a departure from previous government policies on social protection, especially its cash transfer element. As the strategic framework of the programme suggests, it aims to drive down poverty through capacity building, investment, and direct cash support. But it is the element of direct cash support that is clearly a departure from previous government, and provides the clearest indication of this administration’s policies towards the notion of the expansion of the State, and the capacity of the State to allocate resources. While it is still too early to judge if these policies are the start of a long-term social protection policies, given the failure of past social protection concepts, or they will be short lived, it provides a basis for the understanding of issues around social protection and financial inclusion. The thought is important to the extent that the current policies are ad hoc, in the sense that the conception, administration, and implementation are domiciled in the office of

the Vice President and can be terminated any time, the beneficiaries are a fraction of those that would qualify under a comprehensive national policy, and most importantly, there is no legal framework guiding the policies going forward, and therefore, not institutionalised. For the purpose of this piece, what is important is whether we can make tentative conclusions on the implications of a social protection programme for what is considered an indirect objective – financial inclusion. As it has been established before, those that are financially excluded, defined here as simply having a bank account, is most likely to be poor,

unemployed, uneducated beyond the primary level, from the poorest 20% household, have poor housing and living in the rural areas. Where such persons are employed, they are most likely to be self-employed, involved in subsistent agriculture or trading or such other personto-person menial services. Not surprising, these are the people also targeted for social protection, including requiring cash support in order to combat the poverty they face. Nonetheless, it has always been very difficult to achieve the twin ambition of increasing social protection quickly, and improving the scale of financial inclusion. Some of the underlying

Agent banking as an opportunity for increasing access to financial services ENDURANCE OKAFOR

he Enhancing Financial Innovation & Access (EFInA) organisation sees opportunities in agent networks which it says when explored can increase Nigerians’ access to financial services. This was disclosed in the recent research by the Lagosbased financial inclusion body, titled; Article on Exploring Opportunities for Increasing the Development of agent Networks in Nigeria. “In order to achieve universal access to financial services, Agency banking serves as veritable channel for distributing financial products and services that are too hard to reach areas in a cost effective manner,” EFInA cited in the research that was made available to BusinessDay. Meanwhile, the research by EFInA was conducted at a time when there is still deliberation on the model and sector that can best drive Nigeria’s financial inclusion. The Africa’s most populous nation has an exclusion rate of about 41.6 percent, which represents about 40.1

million of the country’s total adult population who do not have access to financial services and products. Although the Central Bank of Nigeria (CBN) aims to include about 80 percent of the country’s population by the year 2020. However, the impediments to achieving the set target are ascribed by the apex bank to economic constraints, insecurity issues in the northern part of Nigeria, obsolete strategies, among others. “Financial exclusion leads to loss of opportunities, retarded economic growth and increased poverty levels. A well-developed financial system accessible to all triggers saving culture, investment decisions, uptake of technological innovation and in the long-run, economic growth. Therefore, financial inclusion is instrumental in bridging the gap between the included and excluded; the rich and the low income,” EFInA explained in its research. Meanwhile, the financial inclusion agency disclosed in its recent research article that the basic functions of agent networks are: Account opening, Cash-In and Cash-Out

services while the secondary functions are Transfers and Bill payments. Other possible functions are Micro pension, Microinsurance, BVN enrollment, Identity registrationsVoters ID, National ID etc. Furthermore, it cited that Agent Networks can help address the barriers to the roll-out of conventional (nonagent) access points, which includes: High fixed costs of dedicated physical infrastructure in remote locations, high operational costs (e.g. high security, staff salaries, high speed internet connectivity, 24hrs electricity etc), limited market size leading to conventional access points being loss-making beyond a certain point. “Rolling out agent networks has potential of reducing the cost of distributing financial products/services, as: Agent costs are spread/ shared across other business activities of the agents, Agent costs are largely variable costs than fixed costs, hence less hampered by low transactions volumes and it is fast and easy to set up, and thus minimises the capital expenditure of expansion.” EFInA said.

critical questions that are often considered include: who are the people involved or identified or beneficiaries? What is the scale of the policy? What is the size of this fraction, compared to the whole? What is the level of existing infrastructure for this purpose? How does this existing infrastructure help or constrain the programmes? Given existing infrastructure and identified beneficiaries, what is the cost of delivery of social protection programme and its cash flow element? And finally, how we balance the costs and benefits associated with the policy? It is on the last question of balancing the costs of financial inclusion component

and the benefits of ramping up social protection that are many developing countries combined policy dilemma. In a typical developed economy, implementing or furthering an existing social protection policy does not attract the kind of problems it does in a country like Nigeria. The identities are easily made, the existing infrastructure system is usually adequate and the beneficiaries are usually already financially inclusive. In Nigeria, however, a programme such as NSIP, in relation to financial inclusion, would be how to balance the wait it takes to fully identify those that need the protection the most, ensure they are financially included – often impossible within a very short period of time give time and infrastructure deficiencies, and the costs of these to both the beneficiaries and the government. Consequently, it is now given that some of the beneficiaries of these programmes, including NSIP, receive their support in “cash”. The observation is that the problems associated with the provision of social protection is the high level of transaction costs, compared to developed economies. Ironically, transaction costs are also the constraining factor in the escalation of financial inclusion. Indeed, this discussion

is not new. Mark Pickens, David Porteous and Sarah Rotman Parker, over a decade ago had examined the implications of Government to Persons” (G2P) payments in financial inclusion. They argued that G2P provides a platform for extending financial inclusion in many developing countries. They also concluded that less than 25% of G2P payments were made into a financially inclusive account, thus preventing a store of value function for recipients, and limiting the impact of such payments on their development. The reason the ratio of social protection payments to financially inclusive accounts are low is due to the required initial costs of scaling up financial inclusion before social protection payments are made. In conclusion, therefore, it has been demonstrated that while the beneficiaries are often similar, incorporating a financial inclusion component in social protection objectives can provide very limited success. But as a policy objective, new ways that lowers the costs, including promoting aggressively digital payment solution is critical. So also are detailed monitoring, evaluation and the “storing” of progress, thus ensuring a balance and improvement over time is critical to both sets of objectives.

Is the payment service bank ... Continued from page 32

requirements but less functionality and opportunity to make money, which calls its “banking-hood” into question as it does little to help its owners and customers since it is not able to advance loans. However, it is a far cry from the M-Pesa model, since it sits within the banking infrastructure and will not be available to Telcos as a direct product. However, there is a major similarity, since the Telcos will be involved and the promoters are most likely to use a Telco led technology in provision of the services in rural areas. As much as one appreciates the efforts of the CBN at arriving at this draft guideline, as it removes any perceived issues relating to the unwillingness of the CBN to include the Telcos as players in the financial sector, the framework must be examined holistically in order to ensure that it is fair to all promoters. In the context of the PSB and taking into consideration that any platform used in rural areas will include the use of USSD or

text messages, the Telcos will be better off as infrastructure partners who earn revenue off transactions, while CBN licensed companies such as Bank Agents, PSSP, FinTechs and other existing players in the ecosystem should have the mandate to provide solutions/platforms targeted at rural areas using the Telco’s infrastructure Mr. Olusola Teniola, President of the Association of Telecommunications Companies of Nigeria in his discussion with CNBC Africa on 9th October 2018, confirmed that the proposed PSB is great news for the Telcos, however, no other promoter has openly shown the same enthusiasm about the current framework as I believe the minimum paid-up share capital requirement has to be reduced significantly for a wider range of promoters to get involved. Also, the use of the word “bank” makes the framework undesirable when compared to other existing bank structures. I believe that if it must remain a bank, then the PSB should be permitted to give out loan facilities in order to justify the proposed mini-

mum paid-up share capital of N5,000,000,000 (Five Billion Naira). Otherwise, what would be the yard stick for such minimum paid-up share capital when the funds saved in the e-wallets and bank accounts can only be transferred on the request of the account holder? One may highlight the issue of liquidation of the PSB as a concern, but is that not what the Nigerian Deposit Insurance Corporation (NDIC) caters for? Surely, the PSB is unique and not a hybrid of the MPesa model, but it must be able to assimilate the current promoters and players in the field, in order to avoid the perceived notion that this structure has just been created to pacify the Telcos, to the exception of the other promoters. Please note that the “Guidelines for Licencing and Regulation of Payment Service Banks in Nigeria” is a proposed draft which was released on 5th October 2018 by CBN and I encourage all concerned parties to review the document and contribute to the discussion.

BUSINESS DAY

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Tax Issues

Wednesday 31 October 2018

Getting Tax Right – A guided approach for Small and Medium Enterprises (SMEs) and growing businesses UZO OBIENU, TOBI DAVID & SAMUEL ADEWUMI Introduction

he Nigerian tax environment is changing fast! The instability of oil prices and the resultant dip in government revenue has seen government (at the federal and state levels) place unprecedented emphasis on increasing revenue generated from tax and expanding the tax net to include individuals and companies not previously captured. In addition, governments and regulators in other parts of the world have placed significant emphasis on tracing global tax footprints, tax compliance, transparency, morality and reporting. The implication of the above is that business owners are being forced to take tax matters more seriously and pay more than lip service to tax matters. In particular, SMEs that may have previously thought themselves to be invisible to the tax authorities or outside the radar of the tax authorities are very quickly realizing that this is not quite the case! However, while bigger companies may find it relatively easy to get their acts together, SMEs, which are only just coming to terms with the changing realities, may face quite an uphill task in putting in place, the necessary elements that would guarantee their success in getting tax right. Besides having limited resources to commit to tax compliance or planning, there is the lack of understanding of the technicalities and best practices in doing this. This article seeks to provide insight on how SMEs can get started in designing a personalized tax management model that will enable them achieve success in getting their taxes right. It considers the questions SMEs need to answer to do this, and provides effective and workable strategies which SMEs can adopt. The key to getting tax right Usually, the responsibility to ‘get tax right’ rests with the tax function, or in the case of small and growing businesses, the finance function. The ability of any of these functions to get tax right would generally depend on their commitment towards implementing an effective tax operating model that specifies the way things will work. Implementing such a model will depend on: • A clear definition of the organization’s tax objectives • A defined strategy of how the objectives will be achieved; and •An effective tax operating model that will drive the achievement of the tax objectives Getting tax right will also require, at least, a fair knowledge of the various taxes applicable in Nigeria, and the modus operandi of the tax administrators. Defining tax objectives: What do we want to achieve? The starting point of implementing an effective tax operating model is defining the tax objectives which the model must aim to achieve. This helps to provide direction to the tax function (or finance function) as it

defines what the team will be working towards achieving. These objectives must satisfy the legal requirements, industry-specific requirements and specific objectives that the organization considers important to its business. While these objectives may vary from one organization to the other, they would typically include the following: •Tax compliance, •Accurate and complete tax accounting and reporting, •Proactive tax planning that optimizes tax costs •Enhancing shareholder value, and •Controlling and managing risks Depending on where a business is in its growth cycle, organizations will typically consider one or two objectives. However, to really get the most of tax, organizations must consider a complete blend of these objectives. For example, some tax incentives are only available to companies which are in their first few years of business. Not having a

and should be accompanied with a plan on how it will be communicated to all stakeholders, to avoid deviation. However, it is also important to understand that as the organization grows and goes through each phase in its development cycle1, its SWOT, business objectives and overall strategy may also change. A periodic review of the tax strategy will therefore be necessary to ensure that the requisite attention is paid to tax. An effective tax operating model: What systems/ structures should we put in place to achieve this? A sound operating model is the engine that drives the achievement of objectives. It also defines how the organization will organize its resources in the execution of the strategy. Any success or failure will, therefore, depend on how well this is put together. In broad terms, four key elements are important to put this together: •Governance framework In simple terms, governance encapsulates the organizational culture and attitude towards tax.

framework, which includes tax planning at the early stages of business, may well mean that such opportunities will be lost. A defined strategy: How will we achieve this? Whether for big or small companies or for marketing, business growth or tax purposes, the place of strategy cannot be overemphasized. A defined strategy helps organizations identify their strengths, weaknesses, opportunities and threats and how they will carefully integrate these to achieve defined objectives. Therefore, a strategy for achieving defined tax objectives is certainly not out of place – and is certainly a good starting point for small and growing businesses. In defining a tax strategy, small businesses will need to consider their SWOT (Strengths, Weaknesses, Opportunities and Threats) – with a tax lens, as well as their risk appetite from a tax perspective. In doing a SWOT analysis, elements, such as people (the number and expertise of available people); available enablers/ technology, industry norms, opportunities for collaboration, etc. should be considered. A good tax strategy should align with the overall business strategy

It encompasses the organizational principles (policies) that the organization would stick to in achieving its objectives. A sound governance framework would be one that also proactively identifies risks and has in place, the necessary controls to mitigate such risks. It is therefore important for organizations to take the time to define the policies that would govern how they fulfil their day-to-day obligations. Such policies should address the following, amongst others: •Timelines for meeting statutory tax obligations •Supervisory/ oversight measures that will ensure accuracy, completeness of tax numbers •Guiding principles to be followed during tax planning and reporting •Guiding principles to be followed in taking tax risks •Effective processes (and responsibility matrix) Effective and efficient processes give businesses the confidence that tax liabilities are accurately computed and settled in compliance with provisions of the law. It defines the end-to-end, step by step approach to be taken in dealing with the various tax activities

and identifying who does what. In defining such step-by-step outline, it is important to ensure that there are sufficient controls that would guarantee accuracy, completeness, timeliness, correctness and effectively guards against any fraud. At the same time, they must not be too lengthy as such bureaucracy could hinder growth. People People are the bedrock of any organizational design. Depending on the stage of growth, an organization may not have a full-fledged tax unit that handles all of its tax affairs. Instead, it may rely on its finance/ admin team for this. Irrespective of what stage an organization is in, it is important to ensure the following: •Getting a team together: It is important that there is a right mix of skills and capabilities on the team. Where there is no tax professional on the team, efforts need to be made to ensure that the available team members have the required tax knowledge/ experience. •Training: The tax landscape is constantly changing and only periodic training programs can help ensure that the tax team is abreast of these changes and are well equipped to deliver the tax objectives. The need for training is further heightened where there are no tax professionals in the team •Performance Management: The popular saying ‘whatever isn’t measured doesn’t get done’ best puts this in perspective. Too often, we find that the KPIs of the tax team do not sufficiently include metrics that measure the achievement of the tax objectives. SMEs need to ensure that the tax team is measured against the tax objectives. Where there is no dedicated tax team, the KPIs of the finance team must include elements that measure the achievement of the tax objectives. Finally on the subject of people, a need for constant review of the above elements, which make for an effective tax workforce, is important, especially as the organization grows. •Enablers Enablers are the elements which aid the effectiveness and efficiency of the operating model. Technology is, perhaps, the chief enabler. Adopting [the right] technology would help ensure that work is done effectively and efficiently. Particularly, technology could be adopted to assist with the accuracy of tax numbers, tax reporting, tax data storage and tax compliance monitoring. Affordable technology may be sought off- the-shelf or custom built to suit the organization’s peculiar needs. It would also be helpful to ensure that the organization’s enterprise resource planning application and/ or accounting software is sensitized for tax purposes. Seeing it through Putting these pieces together may be quite an uphill task for SMEs as their resources are often tightly constrained. However, SMEs can employ their peculiarities and distinctiveness in innovating around these elements to design and implement models that enable them achieve their objectives. We have relied on our experience with SMEs in suggesting a few strategies that

can be adopted in pooling the various important elements: •Outsource/Collaborate if you can Outsourcing is a viable option to overcome limitations. Businesses can outsource one or more of the activities of the tax function to professionals. This would assist to free up time and other limited resources. Another form of outsourcing is collaboration. Organizations can identify sister/ partner organizations they can share resources with to achieve their tax objectives. In both instances, it will be important to ensure the quality of the resources being shared – whether tax professionals or technology. •Periodic review As the organization grows, business objectives and strategy may change and more resources may become available. As this happens, it will be helpful for organizations to periodically review their tax objectives, strategy and entire tax operating model to ensure continued relevance and consistency with their growth objectives and business strategy. •Consider periodic external review One area that may be very beneficial for SMEs is that of periodic external review – especially where there is no in-house tax unit or where the tax activities are not outsourced to a tax professional services firm. Tax professionals may be engaged from time to time to evaluate the level of tax compliance and/or the effectiveness of the organization’s tax management framework. This would be extremely helpful in highlighting any gap that may be causing tax leakages and identifying areas that the organization still needs to improve on. •Join a community SMEs can also derive significant value from available tax fora – some of which are driven by reputable tax professional firms. Such communities provide access to ‘stay-awake’ issues in the tax space, insights on how other organizations have been able to deal with tax challenges, as well as strategies to managing other stakeholders such as the tax authorities. It may also be helpful to be a part of an industry group or a Chamber of Commerce as those communities often help to champion challenges being faced by its members. Conclusion All too often, small and growing businesses think that they can get by successfully without having structures that define their operations – especially for taxes. Studies have shown that this lack of structure is one of the key reasons SMEs do not last beyond five years. However, SMEs in Nigeria can change that narrative and it all begins with a single step – starting now. As the general saying goes; the journey of a thousand miles begins with one step. Uzo Obienu is a Senior Manager in the Energy and Natural Resources Tax unit and the Tax Lead for KPMG Enterprise Practice, while Tobi David and Samuel Adewumi are both Senior Consultants in the Tax Practice of KPMG in Nigeria.

Wednesday 31 October 2018

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BUSINESS DAY

36 BUSINESS DAY

Wednesday 31 October 2018

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INSIGHT

Business school education: Have we reached peak MBA JONATHAN MOULES AND ANDREW JACK, FT

t its peak, the University of Iowa’s Tippie College of Business enrolled 240 20-something high achievers each year on its core MBA programme. Today, the flagship public research university, with one of the oldest and highestranked US business schools, is down to its last 35 students. When this cohort submits their final dissertations in May, the two-year course will close, 57 years after it was launched as the university’s flagship business masters qualification. It is the end of an era for Tippie’s dean, Sarah Fisher Gardial, who had the unenviable job of announcing the course’s closure 14 months ago. Tippie’s dean, Sarah Fisher Gardial, had the unenviable job of announcing the closure of her institution’s MBA course 14 months ago The surprise move — at the time, Tippie was ranked 84th in the FT’s global list of top MBA programmes — sparked anger from students, faculty staff and alumni. Those who had completed the qualification appeared most upset, outraged at what they saw as a sudden devaluation in what was for them a considerable investment, both in terms of tuition costs and time away from the workplace. “Social media blew up on us,” Ms Gardial says about the hundreds of former Tippie students that took to Twitter and Facebook to vent their anger. “It was an emotional [reaction] with them that we could not fix.” The closure of such a highly regarded course suggests that those rising up through the ranks have lost some faith in the qualification, put off by the time commitment and expense of studying for a degree whose tuition fees now run into six figures at most top US business schools. Many are opting instead for shorter courses that cost less money or decide not to study for an MBA at all. Few have gone as far as Tippie, but there is an expectation that others will also close their programmes in the coming years. Some leading universities, such as King’s College London, have opened business schools without an MBA option, claiming that their corporate advisers no longer see a need for such a qualification. The fate of the MBA has a significance beyond its importance commercially to a business school, according to Ms Gardial, who says Tippie’s core two-year MBA was losing $1.5m a year when the decision to close it was made. “It was a difficult decision for me because the MBA is very close to my heart,” Ms Gardial says, noting that her first management role in academia was running the full-time MBA course at

Tippie’s dean, Sarah Fisher Gardial

the University of Tennessee. “But that is not a good enough reason to keep it going.” The Pappajohn Business Building at the Tippie College of Business, University of Iowa The first MBA, devised at Harvard Business School as a generalist management degree, dates back to 1908. It combined classes in “quant” subjects, such as finance and accounting, with courses in soft skills, including leadership, entrepreneurship and communication. The first curriculum was based on Frederick Winslow Taylor’s principles of scientific management and quickly gained traction, with the number of students taking the course at Harvard rising from 80 in 1908 to 1,070 by 1930. It was adopted by other fledgling business schools across the US, making the MBA a staging post for many in search of the American dream. But for the past four years, interest in the full-time MBA course has been on the decline in the country of its birth. Highly ranked schools in other countries are taking note. Graduates from the Leonard N Stern School of Business during their commencement ceremony at Yankee Stadium in New York © AP “I think the MBA has peaked,” says Arnoud De Meyer, former dean of Insead, Europe’s highest ranked school, and now president of Singapore Management University. “There were a few very good years in the US in the 1980s. Then with the emergence of European MBAs there was an explosion of the good, the bad and the ugly. Now we have a bit of rationalisation.” This year 70 per cent of US schools with full-time MBA degrees reported declines in applications for their two-year programmes, according to figures compiled by the Graduate Management Admissions Council. That was offset by growth of 8.9 per cent in business school applica-

tions in the Asia Pacific region, a 7.7 per cent rise in Canada and a 3.2 per cent increase among institutions in Europe. Sangeet Chowfla, GMAC’s president and chief executive, puts a positive spin on the numbers, by saying that the overall demand for graduate management education was now “stable”. But like-for-like comparisons by GMAC showed a 0.02 per cent decline year on year, with 52 per cent of programmes reporting declining application volumes. The deans of US business schools had blamed previous declines in the MBA market overall on a “flight to quality”, in which students, keen to find the best return on their total course costs — which run to over $200,000 for the two-year programme at Stanford Graduate School of Management, for instance — limited their interest to a few highly ranked schools. But the 2018 figures showed that demand for MBA places also fell at first-tier institutions, such as Harvard, Duke University’s Fuqua School of Business and University of California Berkeley’s Haas School of Business. Huntsman Hall at Wharton Business School in Philadelphia Some have even blamed the fall-off in numbers on Donald Trump’s presidency and the impression that the US is closing its door on overseas students, which make up a significant proportion of many MBA cohorts. But the problem predates the current White House administration. Bill Boulding, dean of Fuqua, where MBA applications are down 6 per cent this year, says it would be “too strong” to pin the decline on Mr Trump. While not dismissing the impact of the president’s anti-immigrant rhetoric he believes a bigger factor has been the longer-term tightening in work visas for foreign students, many of whom are now choosing to

apply to schools in Canada, Australia and Europe. “That has been building over a number of years,” Mr Boulding says, adding that he expects other lower-tier US schools to close their MBA programmes in the future. Demand for traditional MBAs is not weakening because people view the teaching as less relevant, Mr Boulding insists. The issue, he says, is that people now have many ways to gain these skills, either by taking online degrees or specialist business masters qualifications. Geoffrey Garrett, dean of the Wharton School at the University of Pennsylvania, talks of a “bifurcation” in the MBA market. For the best business school brands, students are still prepared to pay a premium for the experience, and face-to-face learning is likely to go up on the courses they run, Mr Garrett says. At the other end, cost and convenience will be more and more important. “We’re doubling down with a two-year residential MBA, but the geographically challenged [those in remote locations], cash strapped schools are moving online,” Mr Garrett says. Another factor in the US is the booming economy — gross domestic product grew by an annualised 3.5 per cent in the third quarter — and when the jobs market improves people are less willing to put careers on hold to return to full-time study, fearing that they might miss out on promotions. Stacy Blackman, who has run an MBA admissions advice service since 2001, believes that for the top tier of US institutions this year’s declines are part of a cycle from which they will recover. But she is less optimistic for lower ranked schools. “Quality will always win out,” she says. “The MBA market for lowerranked programmes may be reaching saturation.” Deans of business schools with

the strongest global brands remain bullish. “If I was the age of our students, I would definitely do an MBA,” says Glenn Hubbard, dean of Columbia Business School. He defends his institution’s twoyear full-time MBA, which costs $110,978 in the first 12 months, excluding study tours and student club events, according to the school. “There is a huge opportunity cost to doing an MBA,” Mr Hubbard says. “People are not buying products but ideas and solutions.” The University of Illinois’s business school, which was seeing only modest demand for full-time MBAs, has launched a $22,000 iMBA course. “[While] global demand has declined quite a bit, the number of programmes and alternative specialised masters has risen,” says Jeffrey Brown, the business school’s dean. “Outside the top 20 schools there are very few experiencing any growth.” Ted Snyder, a professor at Yale School of Management, is more blunt, arguing that proliferation has “screwed up” the sector. “Why do we need 10,000 business schools in the world?” Yet he is cautious about a definitive turning point in MBAs, saying he started talking about a shake-up in management education over a decade ago. “It’s a slow shake-up, if there is such a thing,” Mr Snyder adds. “There is pressure coming from below with the second tier really more and more aggressive with price discounting.” Adam Palmer had quit his job as a research associate at Dupont and was two days into the MBA programme at Tippie last August when he and his classmates were told by the course organiser that his cohort would be the last. “It felt like our world had been taken out from underneath us,” the 28-year-old says. Mr Palmer had only applied to business school at the prompting of his uncle and had turned down another institution to take his place at Tippie. “For the next couple of months, the thought that I should have taken that other offer crossed my mind four or five times a day,” he says. “We wanted the school to make sure that companies were still coming to campus.” Despite the uncertainty about what the demise of the Tippie MBA will mean for his future job prospects and his need to pay off debt of about $30,000, Mr Palmer does not regret his decision to go to business school. He secured an internship at CVS Health, the US pharmacy chain, in the summer and is hopeful about making a career switch into data analytics after graduation. Yet for a growing number of Americans considering the best route to get ahead in business, the story of Tippie could just reinforce a growing sense that the traditional full-time MBA is no longer the way to do it.

Wednesday 31 October 2018

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NEWS High initial cost of inputs retards solar power utilisation in Nigeria STEPHEN ONYEKWELU & CYNTHIA IKWUETOGHU

ff-grid and solar home systems can improve access to electricity but Nigerians avoid solar power utilisation because of the high cost of initial capital outlay required. The cost of purchasing a solar power system varies by the capacity of each component, and also the location. A 200-watt solar panel costs between N38,000 - N95,000, while 300 watt costs between N62,000 -N200,000. Although, the initial cost of purchase is high, benefits derived from using a solar system such as low operational cost, reduced, no electricity bills for consumers and solar panels durability of 30 years with minimal maintenance cost are factors worth considering. “The cost is too high and I cannot afford it. It is a very good solution for the electricity challenge in Nigeria, but if only solar companies can reduce their prices,” John Okafor, a Lagos-based businessman, said. This was a similar complain received from eight out of 10 people who would want to purchase

solar panels but may not have the capacity. However, BusinessDay’s analysis shows that with an average of N12,000 spent on fuel for a big generator monthly, about N144,000 is used yearly. This excludes other generator maintenance cost, which will include cost of changing generator oil and other service costs. At the end of one year, over N300,000 is spent on a generator. This excludes electricity bills for a year. According to the World Bank, nearly 1.5 billion people are estimated to lack electricity supply in the world, half are in Africa. Nigeria alone is estimated to have over 90 million people living without electricity supply. This is potential market for solar home systems. Yet, Nigeria is endowed with solar power, which is energy derived from the sun with an average sunlight of eight hours daily, and more hours in the northern parts using photovoltaic (PV) cells or solar cells in a solar panel. Yet, few homes and offices make use of solar power system while majority see it as a dream. The components of solar

power system include solar panel, power inverter, deep cycle batteries, solar charge controller, and cables, fuses and meter. “I spend about N12,000 monthly to purchase fuel for my generator because of the light issue in my area (Egbeda, Lagos),” David Okoro, an Egbeda-based businessman, said. Solar panels may be expensive to install and maintain, especially for the battery, as it entails a change of battery after a period of time; or a change of distilled water in the battery (for lead-acid batteries) and so it is tagged as “for the rich” as they possess the ability to purchase. BusinessDay’s research shows that the high cost of installing a solar power is mostly due to the 10 percent duty tariff imposed on solar panels by the Nigerian Customs Service, which the government initially approved to be duty free. From 1999 to 2015, Nigeria spent N2.7 trillion to improve power supply in the country, Godknows Igali, former minister of Federal Ministry of Power, said in a statement.

BUSINESS DAY

38 BUSINESS DAY NEWS FG faces N5trn revenue shortfall in... Continued from page 1

ture takes a haircut, lower than

planned revenues could leave the country with a record budget deficit of N6.9 trillion, three times higher than the projected N1.9 trillion deficit and 82 percent higher than an actual deficit of N3.8 trillion in 2017. Two straight years of lower than planned revenues in 2016 and 2017 pushed the government’s fiscal deficit to worrying levels and a third straight year of weak revenues may now be on the cards. In 2016, the government budgeted N3 trillion but earned only 56 percent, with revenues of N1.7 trillion. In 2017, actual revenue of N2.7 trillion was only 54 percent of a N5 trillion target, according to data from the Budget Office. The government turned to borrowing to cushion the revenue shortfall, which was largely driven by weak oil revenues in 2016 and under performing non-oil receipts in 2017, and has signalled intentions to continue on the path of more borrowing despite warnings from the international and local community over the sustainability of the country’s rising debt stock. In a three -year spending plan, called the Medium Term Expendi-

ture Framework (MTEF), the Federal government targets fresh borrowing of N8 trillion between 2018 and 2021. That would take the federal government’s total debt to N26 trillion by 2021, about a third of 2017 GDP. The debt stock could be higher if the government’s over ambitious revenue projections through those years are not met as has been the case in the past. “In the last two years, actual revenues have underperformed the target set by the government while expenditure has been rising and that has been funded by debt,” said Kyari Bukar, the former chairman of private sector think tank, the Nigerian Economic Summit Group. “That is worrying given that there is little economic sense in borrowing to pay salaries and cover overhead costs while little investments have been made to address infrastructural challenges that can boost productivity and economic growth,” Bukar said. The Federal government’s debt stock rose 73 percent to N18.9 trillion as at the end of June 2018 from N10.9 trillion at the end of 2015, according to data obtained from the Debt Management Office (DMO). The country’s total debt, including the domestic debt of states, was N22.3 trillion at end

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June 2018, 76.9 percent higher than the N12.6 trillion debt stock in 2015. Debt finance is being used to good effect in some developing countries to fund infrastructure, whereas in Nigeria’s case, debt is often incurred to fund recurrent expenditure, casting doubts over the government’s ability to repay its debt. Between 2015 and 2018, actual recurrent expenditure averaged 83.75 percent while capital expenditure averaged 16.25 percent, according to data tracked by BusinessDay. In 2017, actual capital expenditure as a percentage of GDP was 22 percent, which was lower than the 29 percent budgeted, while recurrent expenditure was 78 percent, higher than the 71 percent budgeted. Channelling cash to recurrent expenses has not spurred economic growth, which went from 2.5 percent in 2015 to a contraction of 1.6 percent in 2016, then a marginal growth of 0.83 percent in 2017 followed, before a 1.5 percent expansion in the first half of 2018, according to official data. In the Federal government’s MTEF document, GDP growth was cut to 3.01 percent in 2018 from an assumption of 4.5 percent made in the Economic Recovery and Growth Plan (ERGP). Capital expenditure as a percentage of government expenditure will decline from 34 percent in 2018 to 25

percent by 2021 while recurrent expenditure is expected to rise from 66 percent in 2018 to 75 percent by 2021. This implies that much of the new borrowings the government plans to make in that period will be used for recurrent spending from overhead costs to paying workers’ salaries. Although government officials say the rising debt stock is not a problem, analysts have raised concerns over low revenues and the fact that the borrowings are not being channelled into infrastructure from rail to power. “Our debt to revenue ratio is over 60 percent but unfortunately, we are hiding our heads in the sand like the ostrich, hoping things will pass but they can escalate,” Bukar added. Nigeria’s debt to revenue ratio hit a seven year high of 69 percent in 2017, almost quadruple of the 14 percent of revenue that went to servicing debt in 2010. In that period, government revenue has declined 10 percent to N2.7 trillion in 2017 from N2.96 trillion in 2010. Compared to record revenues of N3.5 trillion achieved in 2013, government’s revenue is down 23 percent largelydrivenbyaslumpinoilearnings. Non-oil earnings have increased in that period, rising 40 percent to N1.3 trillion in 2017 from N889 billion in 2010. Compared to 2016, non-oil revenues have slumped 33 percent in 2017 from N1.87 trillion. However, a true reflection of the state of the country’s revenue is visible in its revenue to GDP ratio which has gone from 5.4 percent in 2010 to

Wednesday 31 October 2018

2.3 percent in 2017. While the current administration has often admitted the need to boost revenues and leverage private capital in meeting its infrastructural needs, signs of implementation are scarce. Take privatisation for example. The government has only raised N5 billion since 2016 in privatisation proceeds. The MTEF contains projections to raise N306 billion in 2018, but ten months down the line, not a penny has been raised. Some say the government is not willing to allow the private sector take charge of the economy and selling state assets, some of which are unproductive, is akin to selling off a crown jewel to greedy business men. “The current government believes they can run the economy by themselves and do not need private capital,” one business leader said on condition of anonymity. “I was shocked to hear a minister say at the 24th Nigerian Economic Summit say that the government had little need for private capital in addressing its infrastructural challenges,” the person said. In a sign that government resources are inadequate to sufficiently grease the wheels of Africa’s largest economy, the government’s 2018 budget of N9.1 trillion is less than 10 percent of GDP. “We need to make a choice whether we want a controlled economy or a free economy that goes all out for private capital,” Bismarck Rewane, CEO of advisory firm, Financial Derivatives Company said.

Oando records N10.4bn profit in Q3... Continued from page 2

concluded SEC forensic audit, the company recorded a 32 percent increase in its turnover to N505.1 billion from N383.5 billion in comparative period of 2017, driven by higher commodity prices; while its gross profit grew by 9 percent to N77.6 billion from N71.2 billion in 2017. Speaking on the company’s financials, Adewale Tinubu said; “Today’s positive result is further evidence of the progress made by Oando in 2018 driven by our continued focus on execution and operational efficiency, supported by

buoyant commodity prices.” Thanks to good operational efficiency, these results confirm Oando’s ability to take full advantage of the improved macro environment to deliver on key corporate imperatives of increased revenues and profit to create value for her shareholders. As the year draws closer to an end the management of Oando must be applauded for their dedication to keeping the company on course by delivering yet another consecutive quarter of strong financial performance.

•Continues online at www.businessdayonline.com

MTN’s court case against CBN postponed... Continued from page 2

Microfinance banks to lose 70% of directors... Continued from page 1

The new code of corporate governance pegged the tenure of the managing director and chief executive of microfinance banks at 10 years. One of the operators, who spoke with BussinessDay last night by phone, said the new development would see 60 to 70 percent of directors of microfinance banks retiring in one year. The operator who did not want his name mentioned said there is no need to apply this tenure to MFBs for now, considering that the sub-sector is old enough for the directors to develop succession plans. Furthermore, the operator said that these directors used five years out of the said 10 years to learn the skills for running a microfinance bank, which is seen as a specialised bank. The CBN in 2005 introduced the Microfinance Policy and Regulatory Framework to support the development of the sub-sector. However, by 2014, some of the licensed Microfinance Banks (MFBs) had become insolvent, a development largely attributed to poor governance practices and gross insider abuses. The code of corporate governance for microfinance banks states that the 10-year tenure shall be

broken down into periods not exceeding five years at a time and that any person who has served as MD/ CEO for the maximum tenure of ten years in an MFB shall not qualify for appointment in any capacity in the same MFB or its subsidiaries until after a period of three years after the expiration of his tenure as MD/CEO. Also, the CBN pegged the minimum and maximum number of directors on the boards of MFBs at five and seven for Unit MFBs; five and nine for State MFBs; and seven and twelve for National MFBs, respectively. In order to discourage government from having majority shareholding in MFBs, the new code of corporate governance stated that government direct and indirect equity holding in any MFB shall be divested to private investors within a maximum period of five years from the date of investment and limited to 10 percent. For existing investment above five years, the MFB shall within two years from the commencement of this Code comply with this provision. “Except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities and/or their subsidiaries shall own controlling

interest in more than one MFB”. The same 10-year tenure for directors also apply to Development Finance Institutions (DFIs). However, the number of Directors on the Board of a DFI shall be a minimum of seven and a maximum of eleven or in accordance with the Act establishing the institution. In terms of equity ownership, the code of corporate governance for DFIs states that except for DFIs established by an enabling Act, an equity holding of five percent and above by any investor shall be subject to CBN’s prior approval. Where such shares are acquired throughthecapitalmarket,theDFIshall apply for a no objection letter from the CBN immediately after the acquisition. The CBN also released the code of corporate governance for Bureau De Change (BDC), where the size of the Board of any BDC shall be limited to a minimum of three and a maximum of five. The code states that the tenure of the MD/CEO of the BDC shall be in accordance with the terms of engagement for a tenure of five years’ renewable every five years’ subject to CBN approval. Furthermore, the code states that no government, ministry, department or agency shall have direct and or indirect equity holding in any BDC.

Justice, when MTN opened its case against his office and the CBN, before Justice Saliu Seidu of the Federal High Court, Ikoyi Judicial Division. Wole Olanipekun, Fabian Ajogwu SAN, Adeniyi Adegbonmire SAN and Olabode Olanipekun SAN with other lawyers appeared for MTN, while Seyi Sowemimo SAN, Ademola Akinrele SAN and other lawyers entered appearance for the CBN, which is the first defendant. But the Attorney General of the Federation was not represented by any lawyer. Sowemimo SAN, the CBN lawyer informed the Court that the 2nd defendant (AGF) is yet to file any process in reaction to the processes already served on them. Olanipekuninformedthecourtthat thematterisformention.Heconfirmed to the court that CBN has reacted to the statement of claim filed by MTN by filing a statement of defence and counterclaim. He further informed the court that they have also filed a reply. He noted that there is also a motion on notice dated September 10, 2018 for interlocutory injunction to be granted againstCBNandAGFinfavourofMTN. He also confirmed that the AGF has not reacted to any of the processes. Olanipekun also informed the court that one Gafar from the office of the AGF called him two days ago to

ask if the matter will be heard today. He said that is an indication that the AGF’s office was aware that the matter is scheduled. But Sowemimo, the CBN lawyer, while confirming the status of the matter said they have filed a memorandum of conditional appearance on behalf of CBN. He also confirmed that a preliminary objection was filed asking the court to dismiss the matter. He noted that they have nonetheless filed a statement of defence and counterclaim. He also said that they have responded to the application for interlocutory injunction filed by MTN. He submitted that the court should give priority to their preliminary objection to dismiss the matter. But Olanipekun told the court that theyhaverespondedtothepreliminary objection and that they are ready for any application the court wants to take. MTN Group Ltd on Monday reported sales ahead of targets in the third quarter, showing its ability to grow the business even with a major regulatory spat that’s rocked the shares of Africa’s largest wireless carrier. The Johannesburg-based company increased sales by 10 percent from a year earlier -- above a medium-term target of upper-singledigit growth -- and added 2.5 million subscribers, to reach 225.4 million.

•Continues online at www.businessdayonline.com

Wednesday 31 October 2018

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Pomp as Dim Ubulu Ihejiofor Community presents Obi as Eze-elect

or the people of Dim Ubulu Ihejiofor Autonomous Community in Oru West local Government of Imo State, October 16, 2018, was a historic day, as they presented Prince Goodluck Obi to Ogbuehi Paulinus Udemba Obi, chairman of the local government, as their first Eze-elect. The event, which was marked with ceremony, attracted members of the Eze in–council, the community development association, the youths, the women and the elderly, who stormed the local government secretariat at Mgbidi with traditional dancers and other traditional materials. It was indeed colourful. The occasion climaxed with Chief Eugene Enwerem, the president general of the autonomous community, telling Udemba Obi that his people had agreed that Prince Obi would be their Monarch. He said the community chose Prince Obi based on his track record on humanitarian works and good governance in his area of calling. The community, he stressed, believed that, as their Eze, Prince Obi, an activist and philanthropist, would bring the area to limelight for more progress and development, even more than other communities in Imo State. “I hereby present Prince Goodluck Obi, our Ezeelect, to you for your blessing,” Enwerem told Obi, the council boss. Responding, the council boss, congratulated the autonomous community and

the Eze-elect and promised to always keep in touch with the community through Prince Obi any time there would be need to do so. He extended his hand of fellowship to the Eze-elect and encouraged him not to hesitate to contact him should there be any reason to do so. The Dim Ubulu Ihejiofor Autonomous Community was carved out from Etiti Ubulu Autonomous Community in Oru West in 2017. Since then, the community had been pushing the process and procedure to have a monarch.

The process included a visitation of the chairman, House Committee on Autonomous communities and chieftaincy Affairs of the Imo State House of Assembly, Hon. Arthur Egwim and his members to the community on October 6, 2017, followed with the appearance of the community leaders and the Eze – elect before the House of Assembly on January 18,2018. This was preceded by a long process of choosing the Eze-elect, during which emerged unopposed after several other nomi-

nees withdrew in favour of Prince Obi. BusinessDay gathered that during the visitation of the committee members to the new autonomous community, they ascertained the peoples claims and confirmed the geography and topography of the place, the presence of primary and secondary schools, football fields, markets, churches, post office, pipe born water and bore holes, among other prerequisites for the recognizing of an autonomous community and the emergence of an Eze.

Chief Eugene Enwerem (m), presenting Prince Goodluck Obi (r) to Ogbuehi Paulinus Udemba Obi, the council chairman.

FG warned against extra-judicial killing as Shiites, security clashes enter third day INNOCENT ODOH, Abuja

he People’s Democratic Party (PDP) has warned that the highhanded crackdown on members of the Islamic Movement in Nigeria (IMN), popularly called the Shiites, by the Federal Government portrays rising cases of extrajudicial killings in the country under the President Muhammadu Buhari-led All Progressives Congress (APC). Residents of Abuja, the Federal Capital Territory (FCT), were on Tuesday again enveloped by tension as the lingering clashes between the Shiites and security forces entered the third day. Tuesday’s confrontation caused pandemonium as Wuse 2 and Aguiyi Ironsi Street, Maitama, two highbrow areas of the FCT, easily turned into theatre of

conflict, where the police for several hours reportedly shot canisters of teargas to disperse the Shiites, who again gathered in numbers in the area, especially at Adetokunbo Ademola Street in Wuse 2, to protest the detention of their leader, Ibraheem El-Zakzaky. Unconfirmed reports said about three people were shot dead in the melee, again. According to the PDP in a statement issued on Tuesday by its national publicity secretary, Kola Ologbondiyan, the party thoroughly rejects the resort to maximum force, unleashing of state apparatus of power against citizens at the slightest provocation, “resulting in bloodletting and extrajudicial killings of compatriots, preponderance of which are never investigated despite the usual lip service of bringing perpetrators to book.” Also reacting to the lin-

gering crisis, a security expert, Majeed Dahiru, told BusinessDay on Tuesday that the government must desist from persecuting the Shiites. “This can be described as a Shiite uprising in a predominantly Suni Muslim country and the Nigerian state has visited grave injustice on the minority Shiite community in Nigeria. The massacre in Zaria claimed 1,000 lives and the recurring highhandedness of the Nigerian government to the demand by IMN members to release their detained leader is nothing but persecution of a minority religious group in Nigeria and it has grave consequences. “The Nigerian state has failed to respect its own laws. Several court orders have been issued to release him yet he will not be released and when his members protest peacefully, to draw

the attention of the authorities, the government clamps down heavily on them. “And the fact that they come back each time in more numbers, shows you how determined they are. And if nothing is done to check this uprising, it might escalate. When you close the door to peaceful negotiation and resolution of issues, you open the door for violent extremism and I pray we don’t get to that,” he said. An eyewitness, who gave his name as Michael on Tuesday said, the residents of the Wuse 2 and business owners scampered for safety as shops and offices shut. Michael said, “The clashes have again proved that Nigeria has become a land where lives now mean nothing. Look at the killings that started at the weekend in Zuba and escalated on Monday is again threatening Abuja today. It is a pathetic situation.”

39 NEWS

BUSINESS DAY

Indorama more than double Urea sales to West Africa HOPE MOSES-ASHIKE & GBEMI FAMINU

ndorama Eleme Petrochemical is seen to have more than doubled its Urea sales in the Economic Community of West African States (ECOWAS) and other countries, as its total transaction rose by 126.92 percent in 2017. Urea total sales in these region and countries stood at 645,560 million tons in 2017 compared to 284,485 million tons in 2017, data from the Presidency, Bureau of Public Enterprises (BPE) reveal. In the first half of 2018, Indorama, which stands as a success testimony of the privatisation programme, made a total sale of 403,319 million tons. Consequently, Nigeria is replacing the Middle East, Russia and Ukraine from the Latin America Urea markets. With logistic incentives and proximity to markets, Nigeria has an added advantage and with the good utilisation of these opportunities, in future Nigeria is bound to displace these countries. Ibrahim Babagana, director of the Post Transaction Management Department (PTMD), disclosed this while presenting an update on the public sector reforms and the privatisation of public enterprises in Lagos, at stakeholders’ media interactive forum organised by the Enterprise and the Stakeholders Engagement Committee of the National Council on Privatisation (SEC-NCP). The BPE said it would be commissioning the

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second train of Urea fertiliser project by April 2021. Japanese Toyo Engineering Corporation was awarded a contract to build a second train (Train-2) of a fertilizer plant from Indorama Eleme Fertilizer and Chemicals Limited (IEFCL). At the end of 2012, Toyo received an order for IEFCL’s first train fertiliser plant located at Port Harcourt, Rivers State. The project cost of $1.10 billion, financed by debt component of $1.0 billion by a consortium of 16 lenders and equity contribution of $100 million. Also present at the event was the director-general of the BPE, Alex Okoh, who disclosed that the idle assets of the Federal Government would be put up for sale to generate funds for the government’s economic development plans. He further stated that the BPE recently concluded the sale of the Federal Government’s 21 percent stake in the Nigeria Security Printing and Minting Company to the Central Bank of Nigeria, underlining that the transaction will contribute a net sum of over N17 billion to the national treasury. Okoh said the process for recapitalisation of the Bank of Agriculture, to the tune of N250 billion to create a stable financial institution that would support farmers, was ongoing and that the government, through the CBN and the farmers associations would each acquire 40 percent while leaving the private sector with 20 percent.

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I, formerly known and addressed as Isaac Stephen now wish to be known and addressed as Isah Stephen. All former documents remain valid. General Public please take note.

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I, formerly known and addressed as Miss Fadekemi Mirabel Ilesanmi now wish to be known and addressed as Fadekemi Mirabel Omiri. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Peace Emem Joseph now wish to be known and addressed as Okodi Emem Joseph. All former documents remain valid. General Public please take note.

BUSINESS DAY

Wednesday 31 October 2018

CityFile

Flooding victims: NEMA, Anambra partner on relief items

ational Emergency Management Agency (NEMA) says it will collaborate with the Anambra State Emergency Management Agency (SEMA) in the distribution of basic food items to flood victims in the state. Walson Ibarakumo, the coordinator, Enugu zonal office of NEMA said in Awka. Ibarakumo said about 207 tons of food items including, rice, beans, garri, sugar, salt, seasonings, tomatoes, vegetable oil and beverages were ready for direct distribution to the victims. “We have about 207 tons of food items in the warehouse which we are about to commence distributing directly to affected persons in Anambra. “NEMA is going to ensure that those who deserve these items get them and we are working with Anambra State Emergency Management Agency (SEMA) to ensure effectiveness.” He said that people in the 63 communities across the nine affected local governments would benefit in this phase of intervention. Ibarakumo said that NEMA had set up Emergency Operations Office in Awka to coordinate the post-flood disaster situation including, the resettlement of displaced persons.

Lagos: NSCDC nabs 4 illegal security operatives, recovers arms

igeria Security and Civil Defence Corps (NSCDC) has arrested four persons for allegedly operating illegal private security company in Lagos State. Tajudeen Balogun, NSCDC Commandant in Lagos, told newsmen on Monday that the suspects were arrested while illegally guarding a property allegedly owned by one Oluwo at Ita-Oluwo area of Ikorodu. He said that the suspects were arrested on October 25 with dangerous weapons, including gun, while guarding the property. He said the suspects confessed to be members of Citizen for Peace and First Aid Mission of Nigeria (CPFAMN), allegedly owned by a retired army general, stressing that the security outfit was not registered with the Corps.

LASG gives 7-day ultimatum to owners of distressed buildings

agos State Building Control Agency (LASBCA) has given a seven-day ultimatum to owners of distressed buildings across the state to demolish them or bear the risk and cost of their demolition by the agency. The LASBCA general manager, Olalekan Shodeinde, gave the ultimatum on Monday. Shodeinde said that LASBCA had identified and marked some distressed buildings for demolition in some areas of the state. According to him, at the expiration of the ultimatum, LASBCA would demolish the buildings in accordance with the Lagos State Physical and Urban Planning Development Law, 2010. Shodehinde warned that owners of such buildings would pay the demolition cost to the state government within 90 days, failure of which the government would confiscate the land.

A crowd of petty traders being profiled by officials during the inauguration of TraderMoni, at Oba Market, Benin.

Relief as Edo pays N21.3m to deceased workers’ families IDRIS UMAR MOMOH, Benin

overnor Godwin Obaseki of Edo has presented cheques worth N21.37 million to beneficiaries of 10 workers of the state public service who died in active service. Presenting the cheques to the beneficiaries of the deceased at government house in Benin, Obaseki said the money was given under the life Insurance Policy of the State Contributory Pension Scheme. The governor assured that no worker registered under the Contributory Pensions Scheme (CPS) would be abandoned. “We want to demonstrate to the deceased families, civil and public servants as well as people of Edo that

the government will never abandon them because their loved ones died in active service”. Obaseki said that the scheme was less than two years old and beneficiaries of the deceased had started receiving some amount due to enrollment into the pension scheme. “I hope our labour union is now convinced that the presentation of cheques to deceaseds’ families of Edo government is real as this is the second edition in the state. “Edo government under my stewardship will never deceive Edo workers, as we hold them in high esteem and it is our goal that workers get t h e i r f u l l d u e s,” O ba s e ki sa i d o n Monday. The governor expressed hope that the workers would work with his administration to develop similar ar-

rangements to own their own houses under a housing arrangement. “I am hopeful that next year we will finalise our health insurance arrangement so that workers don’t need to think about the cost of health care.” Emmanuel Ademokun, chairman of the Nigeria Labour Congress (NLC), Edo chapter, who witnessed the presentation of the cheques thanked the governor for keying into the new pension scheme. Ademokun said that the new scheme had proved to be better than the old one which made it difficult for deceased families to access their pension and gratuity as at when due. He added: “We are grateful to the governor for the peace and harmony in the state as labour has not gone on strike in the last two years under the Obaseki-led administration.”

Kaduna crisis: Police begin prosecution of 43 suspects ADEOLA AJAKAIYE

he police say they have begun the prosecution of 43 out of the 93 suspects arrested for allegedly taking active part in the recent killings in Kaduna State. Following the killings in the state, the Inspector-General of Police (IGP), Ibrahim Idris, had deployed the Assistant Inspector-General of Police in charge of Zone 7, Taiwo Lakanu, to lead a police intervention force to the state to ensure that normalcy return to the area. Jimoh Moshood, spokesperson of the Nigeria Police Force (NPF), who briefed newsmen in Abuja, said that 43 of the suspects were being prosecuted while 50 were still in police custody. Moshood said that investigation was being intensified to arrest other suspects still at large. He said that the force, in collaboration with other security and safety agencies,

would continue the confidence building patrols throughout the state and sustain the normalcy that had been restored. Moshood said that peace and normalcy had been restored in the state, especially at Kasuwan Magani town and other parts of Kaduna South. “The Inspector-General of Police, Ibrahim Idris, has directed Assistant Inspector-General of Police, Zone 7 to meet with all the stakeholders in the state to give peace a chance and sustain the normalcy that have been restored,” he said. In related development, Moshood said the force had arrested 18 suspects across Kaduna, Niger and Katsina states for kidnapping, armed robbery and car snatching. He said that items recovered from them include: Five AK47 rifles, one locally made pump action rifle, 105 AK47 ammunition.

Moshood said that the suspects on August 12 kidnapped Abdulbasir Jargaba in Funtua local government area of Katsina state and robbed him of valuables. He said that the suspects also kidnapped Jargaba’s eight-year old son for 11 days and released him after collecting ransom. The spokesman said that following the incident, the Inspector General of Police Monitoring Unit Strike Force trailed the suspects to their hideout in Birnin Gwari and arrested them. He said that the suspects have confessed and admitted to their various criminal roles in the commission of the crime. “They have also confessed to be responsible for the recent cases of kidnapping and armed robbery in Katsina State and its environs. He said that all the suspects would be arraigned in court on completion of investigation.

A2 BUSINESS DAY NEWS Dangote Refinery to minimise environmental pollution, related health hazards OLUSOLA BELLO & MICHEAL ANI

ith the coming on stream of the 650,000 barrels per day (bpd) Dangote Oil Refinery Company (DORC), environmental pollution and it related health hazards from vehicles would be drastically reduced. Emission vehicles are regarded as one of the highest killer today in Nigeria. This is because the refinery has been designed to process a variety of light and medium grades of crude and produce extremely clean fuels that meet Euro V specification. Sulphur in petroleum fuels results in vehicle exhaust emissions that have negative impact on health and environment. Devakumar Edwin, group executive director of Dangote Refinery, disclosed this while speaking on ‘Promoting Efficiency and Clean Fuels in

African Refining and Petrochemicals Market’ at the Oil Trading and Logistics (OTL) conference in Lagos, on Tuesday. Dangote Refinery is investing in most advanced units to produce Euro V fuel to help Nigeria meet the European standard of gasoline. Edwin, who was represented by Srinivas Rachakonda, director, business strategy and optimisation, Dangote Refinery, said the construction of the refinery would provide thousands of direct and indirect jobs and add value to the Nigeria’s economic development. He noted that the refinery would lead to significant skills transfer and technology acquisition opportunities in the country. The group has embarked on a landmark integrated refinery and petrochemical project, regarded as the largest industrial complex in the history of Africa, which is expected to take Nigeria to new

heights through transformation of the economy, he said. According to Rachakonda, the refinery will ensure that the security of local supply of petroleum products is guaranteed as well as the availability of petrochemical feedstock (Poly-propylene and Polyethylene), which will be enough for the Nigerian market as well as the neighbouring countries. In addition to polypropylene and polyethylene, the refinery will also produce carbon black feedstock and Sulphur. With a fast-growing population and poor infrastructure, he said the refinery would also reposition Nigeria as an attractive investment destination and a major industrial hub in Africa. He disclosed that the company had also invested in the East West Offshore Gas Gathering System (EWOGGS) project, which is expected to unlock significant gas supply and help to reduce gas flaring in Nigeria.

The first phase is expected to deliver gas for the use of Dangote Industries, including the proposed fertiliser plant in the refinery complex, and other identified industrial and power plant users. Also speaking during the session, Reginald Stanley, former executive secretary, Petroleum Product Pricing Regulatory Agency (PPPRA), said Dangote Refinery was going to be a game changer for the entire African downstream industry. He commended Dangote Refinery for its decision to produce Euro V specification of gasoline. Dumping of toxic fuel in the country, he said was not acceptable, saying the earlier they stop it, the better for us. Giving his welcome address, chairman, OTL Africa Downstream, Emeka Akabogu, said recent market tendencies had shown appetite for some categories of investment in the downstream value chain.

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Lafarge Africa appoints Omotola Oyebanjo as head, corporate communications

afarge Africa plc has appointed Omotola Oyebanjo as its new head of corporate communications. In this role, Omotola will lead the development and execution of Lafarge Africa’s communications strategy and provide strategic direction for the organisation’s executive communications, financial communications, digital communications and media management. She joins Lafarge Africa from Union Bank of Nigeria where she served as head of strategic communications, leading the bank’s communications efforts around its recent, visible transformation and 100th anniversary celebrations. She previously served as head of corporate communications for British Council, the United Kingdom’s international organisation for cultural relations and educational opportunities. Other organisations she

Edo ready to pay agreed minimum wage, Obaseki assures

overnor Godwin Obaseki of Edo State has assured workers in the state that his administration will be the first to implement the resolution reached at the emergency meeting between the Federal Government and state governors over the new minimum wage for workers in the country. Obaseki gave the assurance while addressing members of the organised labour who were on a protest march to the Government House, in Benin City on Tuesday, to sensitise the people on the planned labour strike over the Fed-

eral Government’s alleged refusal to agree on N30,000 minimum wage for workers across the country. The assurance is coming after chairman of Edo State chapter of the Association of Local Governments of Nigeria (ALGON), Jenkins Osunde, said on Monday, that the Governor Godwin Obaseki-led administration has cleared 50 per cent of inherited salary arrears owed local government workers in the state. The governor, in his address to the members of the labour unions, said his administration is already paying N25,000 while other

states are paying N18,000, noting, “We believe in labour and our government is labour-friendly that is why we have maintained a harmonious relationship with labour in the state and have not had a single strike in two years”. He informed the protesters that he will be in Abuja to attend a meeting where governors are to deliberate on the minimum wage. “I want to assure you that whatever we agree in Abuja today (Tuesday), Edo State Government will be the first to implement it,” he assured. Obaseki urged the protesters to trust in the

present administration led by President Muhammadu Buhari because of its commitment to reduce the suffering of workers in the country, “The President Muhammadu Buhari I know will never support that Nigerian workers should suffer because he is committed to the welfare of the common man”. Chairman, Nigerian Labour Congress (NLC) Edo State chapter, Emmanuel Ademokun, commended the Governor for creating a friendly atmosphere that has ensured a harmonious relationship between the government and organised labour in the State.

has provided communications support for include Unilever Nigeria, the Australian Trade Commission and Kia Motors, among others. She has 17 years’ experience across advertising, brand management, marketing, media relations, public relations, digital communications, employee communications and executive communications. She will bring this expertise to support Lafarge Africa’s ambitious longterm growth objectives.

Shonubi, Fatokun, Dozie, Uwais expected at EFInA’s financial inclusion conference

L-R: Azubike Emodi, group commercial director/MD, VFD Microfinance Bank; Jewel Okwechime, independent non-executive director, VFD Group; Niyi Adenubi, executive director, Institutional Business & Investor Relations; Olatunde Busari, chairman, VFD Group; Kayode Fadahunsi, immediate past chairman; Nonso Okpala, GMD/CEO; Ngozi Aghanya, non-executive director; Gbenga Omolokun, chief operating officer, and Suleiman Lawal, non-executive director, VFD Group, during the directors’ welcome and send-forth dinner.

Wednesday 31 October 2018

nhancing Financial Innovation & Access (EFInA) has announced the theme and agenda for this year’s Financial Inclusion Conference (FIC 2018) holding in Lagos November 6, at the Eko Hotel and Suites from 8.30am. In a statement released in Lagos by its Board chair, Segun Akerele, EFInA states that the theme of the conference is, “The Business Case for Financial Inclusion” and the aim of the event is to examine how to drive up the uptake of financial products and services specifically targeted at the poor and at the same time provide stakeholders with the right incentives to create and support these products and services. According to Akerele,

the conference will be divided into three sessions of 70 minutes each. Each session will consist of a keynote speaker who will speak for 20 minutes. The speaker will subsequently join four other panellists for a fivemember panel for a panel discussion that will last for 40 minutes. The first session (“The Business Case I”) will review financial inclusion in Nigeria and its potential to act as an enabler of inclusive economic growth. Dipo Fatokun, Director, Banking and Payments at the Central Bank, Uzomah Dozie the group MD/CEO of Diamond Bank and Laoye Jaiyeola the CEO of the Nigerian Economic Summit Group are expected to lead the discussion during this session.

Obaseki inaugurates 8-man Governing Council for AAU

he Edo State governor, Godwin Obaseki, has inaugurated an 8-man Governing Council for the state-owned university, Ambrose Alli University (AAU), Ekpoma, urging members of the council to work towards repositioning the university into a worldclass institution. Reflecting on the history of the university as the second state-owned university established in Nigeria, Obaseki said the high-quality standard set by the institution 34 years ago has waned over the years, which showed that urgent action is needed to address the situation. He said, “The mandate of the institution is to teach, car-

ry out research and provide services to the community. After 34 years of its establishment, these expectations have not been met. We have reduced our university to one driven by political agents of whoever is in government.” Obaseki assured members of the governing council of his administration’s support in ensuring they succeed in the task of repositioning the institution, noting that “We spend over N300 million monthly on the university and we are ready to put more money on infrastructure but we will not do so until we are convinced that the government arrangement in the university is the right one that can properly manage the resources.”

Wednesday 31 October 2018

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Wednesday 31 October 2018

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Mergers, acquisition drive activities in microfinance banks Stories by Hope Moses-Ashike

ergers and acquisition will drive activities in the microfinance sub-sector in the next one and half years, following the recent upward review of the capital requirements of the Nigerian micro lenders. The Central Bank of Nigeria (CBN) on October 23, 2018, increased the capital requirements of various categories of microfinance banks in the country. Consequently, the capital requirements of National MfBs has been raised to N5 billion from N2 billion, State MfBs from N100 million to N1 billion and Unit MfBs to N100 million from N20 million. As disclosed in a circular signed by Kevin Amugo,

director, financial policy and regulation, CBN, the new minimum requirement takes immediate effect for new applications while the existing microfinance are required to fully comply by April 1, 2020. To meet these requirements microfinance banks are advised by the CBN to explore the possibility of mergers and acquisitions and/or direct injection of funds. Already, some consultants are making plans to engage the operators on a capacity building, with the aim of getting them acquainted with mergers and acquisition, create interest and encourage operators to merge. “With sufficient capital, these Microfinance banks will be in a stronger position to engage competent staff and invest in the right technology. The develop-

ment will also enhance their corporate governance. This CBN directive will no doubt sanitize the Microfinance sector and further stabilize the financial system”, Uche Uwaleke, professor/head, banking and finance department, Nasarawa State University Keffi, said.

According to him, the whole idea behind Microfinance banks is to have institutions that are in a position to grant micro credit to micro and small enterprises. That he said does not mean that such institutions should be small in size. “As a matter of fact, they

should be large and strong enough to perform their financial intermediation roles. In this regard, the directive to Microfinance banks to have their capital shored up by the year 2020 is welcome”. The reality is that many of the unit Microfinance banks in particular

with a minimum capital base of N20 million are financially sick with very high non-performing loans. The weak capital base hinders their ability to engage professionals in their operations as well as put proper risk management framework in place. Little wonder many of them are closing shop and their licenses being withdrawn by the CBN, Uwaleke added. The CBN said institutions that meet the capital requirements as well as demonstrate the existence of strong corporate governance in their operations will be allowed to open account at the CBN office within their state of operation. Such institutions the CBN said would also be channels for micro funding activities of the CBN and the Development Bank of Nigeria (DBN).

How Ecobank Nigeria slashes cost of funds transfer

cobank follows tradition of leadership in digital banking in Africa has introduced a dedicated mobile remittance app Rapidtransfer. The Rapidtransfer app was unveiled by Patrick Akinwuntan, managing director, Ecobank Nigeria, at a commemorative dinner to thank and celebrate outgoing members of the Ecobank Nigeria board and to welcome its newly appointed directors. Akinwuntan said: “Historically the cost for Nigerians in the diaspora to send funds home has been far too high, while the process itself has long been inefficient and burdensome. Customers often have to physically visit an agent and yet are left with little or no clarity as to when the funds will actually reach the intended recipient. Rapidtransfer removes all of these issues and its standout affordability will be a gamechanger in the way that Nigerians can send

money to their loved ones.” At the dinner, Patrick Akinwuntan, who was officially welcomed into his new role as managing director and regional executive of Ecobank Nigeria, and on to the Ecobank Nigeria board of directors said. “Many Nigerians work elsewhere in Africa, or further a field, and financially support their relatives back home,” he commented. “Rapidtransfer is a safe and secure low-cost remittance solution, which ultimately will put more money into the hands of the recipient. This will have a multiplier effect on the Nigerian economy by boosting demand and driving business growth.” As well as being intuitive, easy to navigate and multi-lingual with English, French, Spanish and Portuguese variants, the app provides simple and secure digital onboarding. Users can choose how and when funds are delivered to the intended beneficiary, with transparent foreign exchange rates prior to each

transaction. Charges range from 0% to 3% depending on the options the customer selects. The Rapidtransfer mobile app will enable Nigerians anywhere to easily and instantly send money to bank accounts, mobile wallets and cash collection in – and across – 33 African countries and globally. Nigeria is Africa’s largest recipient of international remittance inflows and is

also the fifth largest remittance recipient globally. It received US$22 billion in 2017, which accounted for 5.6 percent of Nigeria’s Gross Domestic Product (GDP). In 2015 remittances received included $5.59 billion from the United States, $3.7 billion from the United Kingdom and $2.29 billion from Cameroon. In the first quarter of 2018, the average cost of

sending US$200 globally was 7.1 percent, and remittance services in Sub-Saharan Africa were the costliest in the world at an average cost of 9.4 percent. The International Sustainable Development Goal aims to reduce the average transaction cost of remittances to less than 3% of the remittance amount by 2030. In a rousing speech during the proceedings, Ak-

inwuntan also took the opportunity to outline his vision for driving Ecobank Nigeria forward and assure his fellow Board members of his ambitions for growth. “Ecobank Nigeria must be the jewel in the Ecobank crown and the affiliate that sets the roadmap for others to follow,” he said. “We will do this by providing customer service excellence and a suite of innovative and convenient banking services that makes banking easy for retail and corporate customers alike. “Nigeria has a vibrant population of 180 million and I want a large share of these to be served by Ecobank. Therefore, I am setting an audacious customer growth target against the group goal to serve 100 million customers by 2020. We currently have 9 million customers in Nigeria and I want to grow this to 40 million customers within two and a half years. This may be a huge challenge but I resolutely believe that it is one that can be achieved.”

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Leadership

Wednesday 31 October 2018

SHAPING PEOPLE INTO A TEAM

How the US can rebuild its capacity to innovate France has used a combination of national public policy and procurement to build a world-class nuclear power industry.

SRIDHAR KOTA

any U.S. firms have long had a simple mantra: “Invent here, manufacture there.” But, increasingly, those same companies are now choosing to invent as well as manufacture abroad. From the automotive to the pharmaceutical and clean energy industries, America’s innovation centers have shifted east, offering growing evidence that the U.S. has lost what Harvard Business School’s Willy Shih calls the “industrial commons”: indispensable production skills and capabilities. It’s not just that virtually all consumer electronics are designed and made overseas. It’s that the U.S. has lost the underlying capacity to make products like flat-panel displays, cellphones and laptops. We know from looking at strong economies around that world that a nation needs both research and development and manufacturing activities to maintain a healthy 21st-century industrial ecosystem. While America has continued to lead the world in terms of investment in basic science research, it has lost the ability to engage in the kinds of process improvements that are essential for innovation. But it’s possible for the United States to reverse these developments. We have identified four principles with straightforward steps that policymakers, business leaders and universities can take to restore innovation ecosystems. 1. DON’T FEAR PICKING WINNERS.The United States invests an unrivaled $140 billion annually in federal R&D, and yet the U.S. annual trade deficit in advanced technology products alone stands at around $100 billion. America’s problem? It isn’t seriously investing in turning good ideas from laboratories into manufacturable products. In too many cases, other countries are securing new industries by taking advantage of

promising results from America’s federal research investments. The United States needs to invest in “translational research.” In other words, it needs to invest not only in basic science, but in the design, engineering and manufacturing work that can turn a promising idea into a valuable product. Japan spends about 7% of its government R&D budget on practical translational research, while South Korea spends roughly 30%. The U.S., in contrast, spends just 0.5%. Historically, Americans have been averse to translational investments for fear of “picking winners and losers.” But other free market economies have been able to pick winners and make these investments in fair, unbiased ways that demonstrably boost competitiveness. Rather than allowing promising R&D results to languish in labs or be commercialized by foreign competitors, the U.S. should launch a “National Innovation Foundation” to invest in engineering and manufacturing R&D in order to mature emerging technologies and anchor their production onshore. MForesight, a federally funded independent consortium of academic and industry experts focused on the future of U.S. manufacturing, estimates that with about 5% of the $140 billion federal research budget, the U.S. could create such an institution and significantly increase the return on investment

from taxpayer-funded research. 2. INVEST IN HARDWARE STARTUPS AND SCALE-UPS. According to a recent study, even when hardware startups based at the Massachusetts Institute of Technology had access to the skills and financing needed for R&D and proof-of-concept work, they required additional capital, production capabilities and lead customers that the U.S. simply couldn’t provide. The result: Most still had to go to China or elsewhere to scale production up to commercial levels. The problem lies with both the U.S. government and venture capital. The U.S. government has a long history of strengthening innovation through a combination of R&D and strategic procurement (think aviation and the internet). In recent decades, however, the U.S. has generally decreased these types of investments, leaving startups and scale-ups to piece together their own funding. At the same time, venture capitalists have overwhelmingly focused on software and biotech investments over hardware investments. U.S. policymakers can correct this imbalance by building on existing resources to help innovative hardware startups and scale-ups succeed — particularly through domestic government procurement. Other countries use government procurement skillfully to foster innovation. For example,

3. MIND THE MITTELSTAND. Ask a German businessperson or policymaker about the secret to the strength of the nation’s manufacturing sector, and he’ll likely mention the Mittelstand, Germany’s small and medium enterprises. And for good reason: These firms are defined by high levels of buy-in from owners, investors, managers and employees, and are an important basis of bottom-up innovation. Today, large multinational firms are essentially “systems integrators” — they depend on suppliers, mostly small and medium manufacturers, or SMMs, to provide most of the needed components in any product. While few SMMs entertain offshoring strategies, they do, increasingly, compete globally. The loss of America’s industrial commons has led to the consolidation, weakening or loss of many small suppliers. This can be corrected. In the United States, SMMs still amount to about 250,000 firms, or 98% of all manufacturing firms. By strengthening these firms, the U.S. could rebuild the backbone of its manufacturing sector. For example, America’s public sector could help by offering loan guarantees and technical assistance to SMMs to speed up the pace of adoption of new smart manufacturing technologies. The U.S. could also launch a series of industry fellowships that would pay recent engineering and business retirees to coach the next generation of manufacturing startups, business incubators and technology accelerators. 4. POWER TO THE PEOPLE. As America’s manufacturing innovation has declined, so too has its engineering talent. While U.S. high schools typically require students to dissect a frog, few require them to disassemble a power tool.

c 2017 Harvard Business School Publishing Corp. Distributed by The New York Times Syndicate

Exposure to real-world engineering is a crucial and cost-effective way to build interest in manufacturing careers. Germany’s dual vocational training system, which pairs apprenticeships with practical classroom learning, has long been the global gold standard. More recently, China has made major investments in talent to address the exponential growth of its manufacturing sector. Around the world, educated people are the one single indispensable ingredient for innovation. This starts with a solid elementary education and early opportunities to cultivate creative mindsets — think Maker Faires and the FIRST Robotics Competition. At higher levels, the public sector can address the need for talent by boosting the availability of graduate fellowships for qualified students. Industry can also work with local technical schools to customize classroom training and experiential learning programs. From the examples above we can see that real innovation takes time — something we know is often in short supply. With the overwhelming pressures of quarterly profit reporting and short-term election cycles, it can be hard for business leaders and policymakers to focus on longterm strategies for strengthening innovation ecosystems. But history shows us that with foresight and a sustained, cross-sectional strategy, it’s possible to both invent and manufacture at home. Strong economies depend on it.

Sridhar Kota is the Herrick professor of mechanical engineering at the University of Michigan and the executive director of MForesight: Alliance for Manufacturing Foresight. Justin Talbot-Zorn is a public policy consultant and senior adviser to MForesight. Tom Mahoney is associate director of MForesight.

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LegalPerspectives

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Odunayo Oyasiji

Beware of second-hand goods: It can be the path to the hangman’s noose

uying a used product is not a new thing all over the world. However, the party purchasing such property must be extremely careful when doing such transaction. It is safer to buy such product in more advanced countries where there are stores that specialize in selling such product. Nigeria does not have such organized market for used products. People buy it (especially used phones) anywhere and anytime. Legal issues with grave implications can arise from buying such products. What if the second-hand item is a stolen item? What if it was part of the booties of an armed robbery attack? Mostly, such items are sold at ridiculous prices which makes it attractive to people. What happens when a person is arrested with such item? What is the position of the law with regards to such situation? The foregoing questions are what this write up seeks to answer. Anybody buying a stolen item (whether innocently or not) can be accused or charged for receiving stolen property. This offence can be found under section 427 of the Criminal Code and section 316 of the Penal Code. It must be noted that a person

in whose custody stolen items are found can also be presumed to be the thiefthis is called the doctrine of recent possession in law. The doctrine is clearly stated in section167(a) of the Evidence Act. What does the doctrine entail? It states that a person who is in possession of stolen goods shortly after they were stolen is either the thief or a receiver of stolen goods having the knowledge that they were stolen except if he can properly account for how the goods came into his custody. It shows that giving proper account is the key to escaping the wrath of the law. For example, which proper account will anybody be able to give for how a phone he bought by the roadside at night got into his custody? None. If the doctrine of recent possession is applied, and someone is presumed to be the thief or armed robber, the punishment prescribed by the law will be applied. In case of armed robbery, the punishment is a death sentence! This has been established by the Supreme Court in the recent case of Haruna v The State (2018) 11 NWLR page 559 at 576 par B-D. In the case of a person being successfully prosecuted for receiving stolen property, the punishment

ecutors usually combine different offences on the charge sheet so that if one fails the person can be prosecuted under another offence. In order to prove the accused person’s knowledge of the fact that the property was stolen, a reasonable man’s test and the circumstances of the case will be put into consideration. In R v Adebowale (1941) 7 WACA 142-stolen gin was sold at 10 percent below its value. They were packaged in kerosene containers for delivery under the law is fourteen instead of the normal gin years’ imprisonment. It container. It was held that must be noted that pros- the circumstances war-

rant a reasonable man to suspect that they were stolen. Therefore, if you buy goods in a circumstance where a reasonable man ought to suspect that they were stolen then your knowledge of the fact that the goods were stolen is established. Beware of second hand goods. The consequence can be serious If it turns out to be stolen and no reasonable explanation as to how it got into your custody can be given. If you are lucky, it can land you some years behind the bar. If you are unlucky on the other hand, it can end in the hangman’s noose!

The Liabilities of the owner and hirer under hire purchase contract in Nigeria

he Hire Purchase Act regulates hire purchase transaction in Nigeria. The Act defines hire purchase in section 20(1) as “The bailment of goods in pursuance of an agreement under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee.” For easy understanding, hire purchase contract or agreement has to do with a person hiring something with an option for him to purchase it. The owner of a property lets it out to another person with an undertaking to sell it to the person or that it becomes the person’s property after he has paid an agreed amount over a period of time. It is usually paid in instalments. The ownership of the property does not get transferred to the person until the last instalment is paid. This type of contract is common with regards to vehicles, motorcycles and tricycles. There are usually two to three parties to such contract or agreement i.e. the owner, the hirer and a guarantor. The owner is the person that owns the property and is giving it out to another person in exchange for regular payment. The hirer is the person to whom the property is given

while the guarantor is the person that undertakes to take liability for the hirer’s obligations should the hirer fail or default. A hire purchas e contract is expected to reflect some things- be written and signed by parties to the agreement, the price the hirer can pay to fully purchase the hired property, the amount and date when each instalment is to be paid and a good description of the property that is subject of the hire purchase agreement. In a higher purchase contract, it amounts to a breach of contract for either party to unilaterally terminate the contract. Under the Act, when a hirer terminates the contract some liabilities will arise. The liabilities are1. Return the hired property to the owner. 2. Pay damages to the owner in a situation where he hasn’t taken proper care of the property. 3. The hirer is under the obligation to pay half of the hire purchase price. 4. If the hirer has paid more than half of the hire purchase price he forfeits the extra amount paid. It must be noted that the ownership of the property that is the subject of a hire

purchase contract is vested in the owner. Therefore, the owner can take steps to recover the property from the hirer if necessary. However, such recovery cannot be made except by recourse to court if ‘relevant proportion of the hire purchase price’ has been paid. So what constitutes relevant proportion of hire purchase price? The Act states that if the property is not a motor vehicle then half of the hire purchase price is the relevant proportion while if it is a motor vehicle then three-fifth of the hire purchase price is the relevant proportion. What it means is that the owner cannot recover the property if the foregoing relevant proportion has been paid except by the help of the court. The Act suggests that where the relevant proportion hasn’t been paid then the owner can recover without the help of the court. Such recovery must still be within the ambit of the law. Where an owner does not operate within the ambit of the law to recover a property then he incurs some liabilities. The implications are- the hire purchase contract is terminated and the hirer is free from all liabilities and has the right to recover all monies paid to the owner under the contract.

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FINANCIAL TIMES Facebook employees overwhelmingly back Democrats

Crypto exchanges brace for additional supervision

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World Business Newspaper

EU pledges access to UK clearing houses in no-deal Brexit Short-term permission reflects Brussels’ fears over financial stability of bloc JIM BRUNSDEN AND PHILIP STAFFORD

russels has responded to financial industry calls for continued access to London’s capital markets by providing reassurance that EU groups will temporarily be able to use crucial derivatives clearing services in the UK even after a no-deal Brexit. The commitment by Valdis Dombrovskis, European Commission vice-president, follows months of warnings by European bankers that EU companies otherwise face hefty rises in trading costs — or will be unable to hedge their market exposures. Brussels’ offer shows the importance regulators attach to avoiding any disruption to the operation of clearing houses, which have become a vital pillar of the financial system in the wake of the 2008 crisis. Mr Dombrovskis, who is responsible for financial regulation, told the Financial Times that the relief, which would allow EU banks and companies to continue using UK-based clearing houses to process derivatives trades if Brexit negotiations fail, would be strictly short term. It would also be linked to the UK’s willingness to stick close to EU regulatory and supervisory standards. “Should we need to act, we would only do so to the extent necessary to address financial stability risks arising from an exit without a deal, under strict conditionality and with limited duration,” he said. Two EU summits in the past two months have failed to make progress on Brexit, giving Brussels and London limited time to close a deal before the UK’s scheduled departure on March 29. In a no-deal Brexit, EU rules could stop the bloc’s banks and companies from using UK-based clearing

Valdis Dombrovskis said Brussels was open to discussion on adding more equivalence possibilities into EU law

houses, which process most of the world’s trade in the $530tn market for derivatives contracts and which cushion their users from the risk of default and associated legal and trading problems. The EU regulations ban European companies from using clearing houses outside the bloc unless Brussels has specifically recognised them as being properly regulated and supervised. But institutions elsewhere in the EU lack the scale of LCH, the clearing house majority controlled by London Stock Exchange, and other venues in the City. European banks and

Shell taps its deepwater legacy to fund its future Anglo-Dutch oil major banks on Gulf of Mexico to help navigate energy transition

ANJLI RAVAL

helicopter ride 130 miles south of New Orleans in the Gulf of Mexico brings you to Royal Dutch Shell’s offshore Olympus platform. The hulking steel structure supports a deepwater drilling rig that can produce the equivalent of 100,000 barrels of oil a day. For the Anglo-Dutch major, drilling far beneath oceans is essential for raising the funds for investments that will steer it through an uncertain energy transition. “The responsibility deepwater has is to generate the cash that is going to pay for shales and for renewables,” said Wael Sawan, Shell’s head of deepwater exploration and production. “From 2020 we start to pay the bills for the organisation,” added Mr Sawan, speaking to the FT on the four-year-old platform. The company is banking on this new profit centre — alongside

conventional fossil fuels, integrated gas and its refining arm — to cover the dividend, finance debt and pay for the investments that will futureproof Shell. “Failure is not an option here,” said Mr Sawan. “We are trying to navigate what is an evolving landscape.” The energy industry is grappling with how to invest in cleaner and more flexible production amid uncertainty about future oil demand growth, when returns cannot match those from traditional fossil fuels. For Shell, this means turning back to its legacy business to fund its future. Drilling in water depths greater than 300m was previously plagued by delays, exorbitant costs and questions over safety standards after the fatal 2010 Deepwater Horizon explosion. Despite being capital intensive, today’s projects are cheaper, simpler and smaller. Continues on page A11

non-financial companies account for 14 per cent of LCH’s interest-rate derivatives business. The financial industry has warned that there is no alternative venue for some types of contracts and also notes that transferring positions in derivatives portfolios takes several months. Mr Dombrovskis added that any temporary solution would be based on EU market access rules, known as “equivalence” standards, which could be used to grant short-term approvals of UK-based clearinghouses. The EU has “all necessary tools to act quickly in order to ensure no

disruption in central clearing” of derivatives, he said. “The time remaining until March 30 2019 is sufficient in this respect.” An EU official said Brussels had not defined how long it might provide such relief, which would depend on developments on the ground. By contrast, the Bank of England has indicated it will grant temporary licences for up to three years allowing UK financial firms to access EUheadquartered clearing houses in the event of a no-deal Brexit. Mr Dombrovskis said the EU decision reflected the findings of a joint working group of Bank of England

and European Central Bank officials set up this year to assess what risks a no-deal Brexit would pose to financial stability. The group has presented its work to the commission and the UK Treasury, highlighting “in particular risks in relation to centrally cleared derivatives”, he said. Mr Dombrovskis underlined that the commission remained “fully committed” to reaching a Brexit deal and providing the UK with a transition period after it leaves the bloc. Theresa May, UK prime minister, has recently acknowledged that such a period could last until after 2020.

General Electric cuts dividend to 1 cent after $22bn writedown US company to restructure power division after failing again to reverse its fortunes ED CROOKS

eneral Electric cut its dividend for the second time in less than a year and unveiled a radical restructuring of its troubled power equipment division after third-quarter results revealed the industrial group remains unable to turn round its declining fortunes. The quarterly dividend is being cut from 12 cents per share to just 1 cent, allowing the company to save almost $4bn of cash a year at a time when its finances are under severe pressure. Adding to the strain, the company made a $5.1bn cash contribution to its pension fund, up from $1.2bn in the equivalent period of 2017. The earnings are the first to be reported under new chief executive Larry Culp, who took over last month after the abrupt exit of John Flannery. They included a $22bn non-cash writedown for goodwill in the power division, which the company announced last month when it replaced Mr Flannery. GE also revealed that the Securi-

ties and Exchange Commission had widened the scope of its investigation into the company, and that the US Department of Justice had also launched a probe. The SEC, which has been investigating GE over its accounting treatment of long-term contracts and its provisions for insurance liabilities, has widened that probe to look at its $22bn goodwill writedown, most of which relates to the 2015 acquisition of Alstom’s energy unit. The DoJ is now also looking at those issues. “After my first few weeks on the job, it’s clear to me that GE is a fundamentally strong company with a talented team and great technology,” said Mr Culp. “However, our results are far from our full potential. We will heighten our sense of urgency and increase accountability across the organisation to deliver better results.” Earnings per share for the third quarter, excluding that writedown and other one-off items, were 14 cents, well below analysts’ average forecast of 20 cents. The earnings for the period were down 33 per cent from the equivalent period of 2017.

The results showed that the difficulties at the power equipment division, built around the 2015 Alstom deal and hit by the rise of renewable energy and slowing demand in developed countries, have continued unabated. The division suffered an adverse swing of almost $1bn, slumping into a loss of $631m for the quarter compared with a profit of $464m for the equivalent period of 2017. Orders were down 18 per cent at $6.6bn for the quarter. John Inch, an analyst at Gordon Haskett, described the results as “disappointing” and said the dividend cut suggested “GE faces a significant cash constraint, particularly as we expect that new management would still be early in thoroughly reviewing the operations”. In his first strategic move since taking the job, Mr Culp said he would be breaking up the power division, separating it into a unit for GE’s traditional business of gas turbines and another with all other assets, including steam turbines and grid equipment.

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NATIONAL NEWS

FT Shell taps its deepwater legacy to...

Round-tripping: how tiny Mauritius became India’s main investor

Continued from page A10

For the majors a sweetspot has been struck. High-margin new production is starting up as costs — for now — are falling, even as oil prices continue to rise. “For all big majors, deepwater is a growth element,” said Angus Rodger at oil consultancy Wood Mackenzie. “Deepwater is where all the big discoveries are made . . . But it is only accessible for those with cash reserves and technical capability.” Shell has both. In July, Shell reported cash generation from operating activities excluding working capital of $11bn, the strongest since 2014 when oil prices were above $100 a barrel. Its third-quarter financial results on Thursday are expected to reveal higher earnings, with Shell continuing to deleverage its portfolio and a $30bn divestment plan nearing an end. Analysts also see improved profitability from the upstream business. Shell’s improved financial position is allowing it to spend more than a fifth of its annual total capex budget, $5bn-$6bn, in deepwater compared with $2bn-$3bn for shale projects and $1bn-$2bn on new energies — from electric vehicle charging providers to biofuels and renewable technologies. Deepwater has a target to generate $6bn-$7bn in organic free cash flow from operations in the 2020s with crude averaging $60 a barrel. However, with the oil price expected to exceed this, cash flow from deepwater could come second only behind its dominant integrated gas business. This would help manoeuvre Shell through what Mr Sawan calls a “time of turbulence”. Shell also has scale. It is the largest operator by production in the US Gulf of Mexico, pumping out 350,000 barrels of oil equivalent per day — more than 40 per cent of the company’s total deepwater production, which is on track to reach more than 900,000 boe/d by 2020 as new projects come on line. The division’s centre of gravity remains in the Gulf of Mexico, but it is also in the early stages of expanding its presence in Brazil and Mexico. Nigeria and Malaysia are other deepwater hubs. “They need to grow the deepwater business now to make it a cash engine of the future,” said Irene Himona at Société Générale. “Conventional oil and gas and the other divisions will continue to generate profits but these are mature businesses.” Barriers to entry in the deepwater sector are high. About 75 per cent of future spending — $250bn of deepwater projects are in the pipeline — will be made by eight majors, according to Wood Mackenzie. ExxonMobil of the US is prioritising Guyana, UK’s BP seeks big potential in Mauritania and Senegal, France’s Total is dominant in west Africa and Equinor of Norway is also investing in Brazil. Executives at these energy majors are acutely aware of the need to produce returns quickly for shareholders who now have little appetite for large-scale costly developments that take years to generate a return.

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Statistical disparities highlight foreigners’ tax evasion even as FDI has driven progress ADRIENNE KLASA

Facebook employees overwhelmingly back Democrats Former GOP Senator Jon Kyl is probing whether social network has a liberal bias HANNAH KUCHLER

ew figures show Facebook employees have donated almost seven times as much to Democrats as they have to Republicans, as the social network comes under pressure to prove it is not biased against conservatives. Since the social network was founded in 2004, employees have made 87 per cent of their political contributions to Democrats and progressive causes, including the presidential campaigns of Hillary Clinton and Barack Obama, as well as current Democratic senators Kamala Harris and Cory Booker. Just 13 per cent of employees’ donations went to Republicans, according to an analysis by GovPredict, a political analytics company. The figures showed Facebook employees donated just over $5,000 to Donald Trump’s presidential campaign, less than they gave to California state senator Scott Wiener, Oregon state senator Bill Hansell and San Francisco’s new mayor London Breed — all Democrats. Chris Christie, the former New Jersey governor and presidential candidate, was the biggest Republican recipient of donations from Facebook employees, with more than $50,000 in contributions. Mark Zuckerberg, Facebook’s founder and chief executive, made

the single largest political donation of any of the company’s employees, giving $1m to FWD.US, a proimmigration tech lobbying group. Sheryl Sandberg, Facebook’s chief operating officer, gave more than $400,000 to the Hillary Victory Fund — a fundraising vehicle for Mrs Clinton’s presidential campaign, as well as the Democratic National Committee — while Kevin Systrom, the Instagram co-founder who recently left the company, donated $100,000 to the same fund. Joel Kaplan, Facebook’s vicepresident of global policy, the former deputy chief of staff for George Bush, is by the far the most prominent Republican at the company. Mr Kaplan is responsible for more than a quarter of Facebook employees’ contributions to Republican state candidates. Mr Kaplan attracted criticism from Facebook employees earlier this month after he attended the nomination hearing for his friend Supreme Court Justice Brett Kavanagh. Facebook said at the time its leadership team had “made mistakes” in handling the event and “was grateful for the feedback” from employees. According to GovPredict, donations from employees at other Big Tech companies have also skewed heavily towards the Democrats in recent years. Staff at Alphabet,

Google’s parent company, have given more than 90 per cent of their donations to Democrats and Democratic causes since 2004. Facebook has been quizzed by Congressional Republicans in recent years over its decisions to remove conservative-leaning content. Earlier this year, the company brought in former Republican Senator Jon Kyl and his team at law firm Covington and Burling to investigate whether the company was discriminating against rightwing views. Senator Kyl has yet to publicly report his findings. The concerns date back to before the 2016 US presidential election, when a former employee on the company’s Trending Topics section claimed that conservative headlines were not promoted, even if they were trending. Facebook dropped human moderators for the section to rely on algorithms, and later shut down Trending Topics completely. Facebook did not comment on the GovPredict figures. But its website says it supports campaigns of candidates “who are our vision of an open and connected world and a culture of innovation”. “The private political preferences of Facebook executives, directors, and employees do not influence either FBPAC [Facebook’s political action committee] or the company’s political contributions.”

Eurozone economy growth at slowest rate since 2014 Bloc growth halves from last quarter as Italy stagnates and German car production hit by new tests

CAT RUTTER POOLEY

urozone growth slowed sharply in the third quarter as new emissions tests hit German car production and the Italian economy stagnated amid a stand-off with Brussels over its national budget. Gross domestic product for the bloc increased by 0.2 per cent from the end of June, confounding expectations of economists polled by Reuters that the single currency area would maintain the 0.4 per cent pace of economic growth experienced during the second quarter of the year. The annual pace of GDP growth was also slower than anticipated, at 1.7 per cent during the three months to September

against expectations for a 1.8 per cent rise. It was 2.2 per cent in the second quarter, revised up from the 2.1 per cent initial reading for that period. The flash data published on Tuesday follow sluggish growth figures from the eurozone’s third-largest economy, Italy, which recorded no quarterly GDP growth in the third quarter. In France, however, the pace of growth accelerated, to 0.4 per cent from 0.2 per cent in each of the two previous quarters. The euro drifted lower in trading on Tuesday morning, with analysts citing fears over Italy GDP. “As we believe that part of the slowdown is being caused by transitory factors, particularly

in Germany, we still expect a modest bounce back in Q4 activity,” said Nicola Nobile, lead eurozone economist at Oxford Economics. “But we are conscious that ‘temporary factors’ have been overplayed to justify the slowdown in the eurozone economy at the start of the year, and that risks are clearly skewed to the downside.” HSBC said the quarterly growth was the weakest since the European Central Bank began its policy of quantitative easing — bond purchases to stimulate the economy. “Eurozone growth is faltering faster than we had expected … [this is] perhaps a reminder of what a future without QE might look like,” HSBC said.

nce a land of sugar plantations and rum distillers, Mauritius has evolved into one of Africa’s most advanced economies. The catalyst has been foreign investment. The remarkable metamorphosis from a commodity exporter to a middle-income financial hub has allowed Mauritius to average GDP growth of 4 per cent between 2001 and 2016. Foreign direct investment (FDI) has driven the economy’s transformation since the 1960s from one based on agriculture to one that is “labour-oriented, particularly in textiles and tourism”, says James Zhan, UN Conference for Trade and Development (Unctad) director for investment and enterprise. While foreign investment has benefited Mauritius, tax evasion through a practice known as investment round-tripping — where capital is channelled through a low tax jurisdiction before being reimported into the economy of origin as FDI — remains a problem. So far in 2018, the country has attracted $285.6m in greenfield FDI — namely investments in new projects or expansions of existing ones — compared with just $31m in 2017. Last year was the slowest for investments into Mauritius since 2003, according to FT sister company fDi Markets, because of slowing flows from China. Investors in France, South Africa, the US and India are leading sources, putting funds into property, IT and tourism. In the past five years holiday company Club Med and US telecoms specialist Verizon have made investments of over $100m in Mauritius, in line with the government’s development strategy. For its part, Mauritius has made the transition to a “financial hub, high-grade tourism and services economy”, says Mr Zhan. As foreign investment interest in Africa has grown, Mauritius has presented itself as an investment hub for the continent. It regularly tops rankings for Africa measuring the ease of doing business. In a continent often associated with volatile politics the country enjoys a stable multi-party democracy, says US-based political research group Freedom House. In the capital, Port Louis, the stock exchange is set to launch a new index designed to track African equities. “The trend we are seeing is that a lot of new issues and listings are Africacentric,” says chief executive Sunil Benimadhu. While most African countries require fellow Africans to wade through red tape for visas and work permits, Mauritius mostly eschews such restrictions. “The number one thing for us was getting work permits,” says Fred Swaniker, a Ghanaian and founder of African Leadership University, which opened its campus in Mauritius in 2015. Within a month it was granted 40 permits and in two years had permits for 200 staff. While Mauritius’ low tax rates are attractive, Mr Swaniker argues that work permits and a lack of foreign exchange controls are what really make the island stand out compared with other African destinations.

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NEWS YOU CAN TRUST I WEDNESDAY 31 OCTOBER 2018

Opinion

Atiku versus Buhari OPEYEMI AGBAJE opeyemiagbaje@rtcadvisory.com

l h a j i Ab u b a k a r Atiku and his party the PDP have already achieved s omething that would have been considered highly improbable just a few weeks ago-transformed the 2019 presidential elections into a real competitive context with the incumbent President Muhamadu Buhari. From the beginning of 2018, my analysis and scenario building ascribed a probability of 65 per cent to Buhari retaining the presidency-not an eventuality I considered desirable by any means whatsoever, but one that seemed inevitable for most of this year! I have since revised my calculations, and I now think the 2019 battle is a 50:50 affair between Atiku and Buhari! The fact that Buhari even stands any chance of victory is not a good commentary on Nigeria and our political system. Indeed the fact that

he could be elected in 2015 in spite of a record unambiguously comprised of tendencies towards dictatorship, (of a draconian type); incompetence in policy, economy and administration; abandonment, if not complete dereliction of duty, in favour of subordinates; acute nepotism and provincialism as well as ethnic, religious and sectarian parochialism of an extreme variety demonstrates the shallowness of our public and civic consciousness as a people and the utter cynicism and self-centredness of our political elite. If the historical error of 2015 was either permissible or understandable due to the naivety, weakness and poor strategic faculties of the Goodluck Jonathan administration, countenancing the re-election of Buhari in 2019 is sheer irresponsibility amounting to a near sentence of death on the concept of a prosperous, united, federal, free and democratic Nigerian nation state. The “best” (actually a cynical and naive rationalisation, rather than plausible) argument anyone has offered for re-electing Buhari has been the plea that we should allow Buhari spend a second term of four years in order that presidency may “return” to the South or

South-west. That argument discountenances the incompetence in economic policy and management that has accentuated poverty and unemployment, and banished real economic growth in the countr y. It discounts the utter misery in which millions of our people are condemned and virtually assures the destruction of our economic fortunes after a possible eight years of policy statis and retrogression. It disregards the state-condoned (or worse!) murders in the middle belt, of Shiites and Biafrans anytime they protest; and the resurgence of daily killings by the “technically-defeated” Boko Haram while the government keeps mute. It ignores the lack of hope that drives our young people into exile-across the Sahara for the poor; and into another brain drain into, Europe, Canada, Asia and the United States for the more fortunate. It rationalises the shocking hypocrisy over a now completely discredited anti-corruption war in which the APC’s broom has become like the blood of our Lord and Saviour Jesus Christ that washes away all sins and sanctifies even current rogues who loot the NNPC, funds for internally-displaced persons or commit other crimes of

If the historical error of 2015 was either permissible or understandable due to the naivety, weakness and poor strategic faculties of the Goodluck Jonathan administration, countenancing the re-election of Buhari in 2019 is sheer irresponsibility amounting to a near sentence of death on the concept of a prosperous, united, federal, free and democratic Nigerian nation state

gross corruption. Those whose family and relations have been killed by roving killers in Benue, Plateau, Nasarrawa, Kaduna and other places will not lightly wish for four more years of such wickedness, based on cynical elite power calculations, and neither will unemployed youths whose chances of securing jobs are undermined by weak policy, or by selective employment of

privileged children of the new political elite. Unfortunately there are large s egments of the Nigerian population for whom “progress” is not defined in terms of education, prosperity or development but based on ethnic, sectarian, religious or other identification while on the other hand, many define “progress” on strictly personal grounds-what office do I hold? How many contracts have I received?? What are my prospects of getting an appointment or a contract? The prospects of an Atiku presidency are not without their own complications. Atiku’s brand has been badly tarnished by his former boss, President O lusegun Obasanjo. Most Nigerians associate his reputed immense wealth with corruption; his peripatetic movements from PDP to ACN, then APC and back to PDP have strengthened the image of a typical (meaning unprincipled) Nigerian politician. In other circumstances, many Nigerians would not want to vote in a President Atiku Abubakar, but faced with the alternative of four more years of Buharian recession or low growth; a rapid slide towards despotism; a mockery of an anticorruption war; and growing poverty and misery, the Atiku

option has become seemingly unavoidable! If one could discount the perverse role of incumbency in Nigerian presidential elections, I would in fact upgrade Atiku’s chances beyond 50% and predict his victory (several global media and financial institutions including the Economist, Financial Times and HSBC Bank are already anticipating Buhari’s defeat and I suspect Western leaders seeing increased migration out of Nigeria are reaching similar conclusions), but the reality of a potentially despotic ex-militar y dictator ; who sought power unrelentingly from 2003 until he got it in 2015; who has centralised military, security and intelligence in a narrow circle of Hausa/Fulani/Kanuri Muslims; who has appointed his relatives into INEC and conducted less than credible elections in Kogi, Ondo, Ekiti and Osun States ; and who has no qualms about the killing of Shiites, Biafrans and other protesters, cautions that anyone who hopes to see the end of Buhari’s incompetent and dysfunctional government should focus as much on electoral campaigns as on global diplomacy, citizen mobilisation and ensuring and protecting the process of free and fair elections!

Banks and their questionable fees: Agents of financial inclusion or exclusion?

FRANKLIN NNAEMEKA NGWU Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.

f serious concern to every bank account holder or user in Nigeria is the numerous (most questionable) charges incurred in virtually every financial transaction with the banks. In the 2017 CBN Revised Guide to Bank Charges, there are over 100 different incurable bank charges. With charges such as card issuance and maintenance fees, credit and debit alert fees, cheque books and counter cheques, bank transfers, ATM usage, current and savings accounts maintenance, bank drafts and stopped cheques charges, one will begin to wonder if the Nigerian banks are actually financially intermediating or ‘dis-intermediating’ the Nigerian economy. Of all these charges, the ones that are most disturbing to Nigerians especially the poor are ATM withdrawal charges, debit card maintenance fees and credit/ debit alert charges. Not only are these charges contributing to financial exclusion of Nigerians, they seem unethical and exploitative. A situation where any and every attempt to use the formal

banking sector especially by poor Nigerians is met with a fee is not only abnormal but contradicts all our financial inclusion efforts. Traditionally, banks generate their revenue and profits through the performance of their inherent intermediation functions to the economy. Primarily, this is done through the mobilization and transfer of savings and other resources from areas of surplus (depositors) to areas of scarcity (borrowers & investors broadly defined). The revenue or profit of the banks therefore comes from the interest rate spread which is the difference between the deposit interest rate paid to the depositors and the lending interest rate charged the borrowers. Other sources of revenue or profit made by the banks are variations or mutations of this fundamental intermediation function. Economies where banks effectively perform these functions are characterised by visible and sustainable economic development and particularly the contribution of the banking sector to the economy. Unfortunately, this is not the case in Nigeria even when we have had a formal banking sector for over 122 years. A better understanding is through a comparison with that of UK where Nigeria adopted and continues to adopt her banking and other economic systems from. In a country of about 200 million, the total number of formal bank account holders in Nigeria is about 35million. With a lending interest rate of about 20%,

... high charges inhibit the patronage and usage of the banking sector which Nigeria immensely needs for a more developed and contributory banking sector. More surprising with the Nigerian banking sector is the high profits normally declared by the banks even when their contribution to the economy is marginal

only about 7% of adults and 10% of firms have loans with Nigerian banks even as access to credit remain a major challenge to over 80% of SMEs. From 2008-2012, the average credit provided by the banking sector to the economy as a percentage of the GDP was about 24.62% and 26.56% in 2016. While only about 6.9% of Nigeria firms are using banks to finance investments, only 3.9% of working capital of Nigerian firms is provided by the banks. In the UK with a population of about 66 million people, there are about 150 million bank accounts (savings, deposits and current) and about 95% of adults have at least one bank account. Not only

did the financial sector contribute about £119billion to the UK economy, it enhanced tax revenue of UK by about £27.3 billion in 2017. With about 65,379 ATM machines with no withdrawal charge in over 98% of them, the financial sector employs about 1.1million people and generated a trade surplus of about £51 billion in 2016. Interestingly, there is no maintenance charge for savings account and most current accounts. The few fee-paying current accounts come with added services such as travel insurance, car breakdown cover, home emergency and mobile insurance among other services. While the lending interest rate in the UK over these years has been about 0.5%, the average credit provided by the banking sector to the economy as a percentage of the GDP from 2008 to 2012 was about 214.32% and about 168% in 2017. With over 10,500 bank branches, there is no charge for interbank transfers, cheque books, debit cards etc. Using other measurement variables for banking sector development and contribution to the economy reveal the same wide differences between Nigeria and UK. The deductions from the above comparison are clear. UK with very few charges has a better and more contributory banking sector than Nigeria with many charges. The implication is that the high charges inhibit the patronage and usage of the banking sec-

tor which Nigeria immensely needs for a more developed and contributory banking sector. More surprising with the Nigerian banking sector is the high profits normally declared by the banks even when their contribution to the economy is marginal. The question therefore is where the profits come from and the answer is possibly through their numerous but questionable charges and investment in government securities. A further question then is if the banks can profitably survive without many of their questionable charges and I think the answer is yes! In addition to the questionable charges, another lamentable problem is the high lending rate which is a kind of double jeopardy for both the banks and the public (the economy). With a very high lending rate, only few people are willing to borrow and the banks are equally reluctant to lend due to fear of repayment failures. Expectedly they (banks) have to resort to three main options: concentrated lending with the consequent outcomes as shown by the reports that about 100 Nigerians and their affiliated companies account for over 40% of the total credits from the banking sector, investment in government securities and innovation of exploitative charges. Reducing the lending rate will require a serious willingness and commitment of the banks. As a major component of calculating lending interest rate are the risks and collateral

pledged, the banks can utilise the cashless policy to help create an effective transaction based credit register. They can collectively create the register as part of their strategic CSR project. With the transaction based credit register, lending should not be collateral-based only but also transaction based with the latter vigorously promoted. For instance, all tenants should be made to pay their rents through monthly standing orders to their landlords and any tenant that has timely and consistently paid his rent for two years should automatically qualify to borrow at least 50% of his/her annual rent for a start. For very low income earners or petty traders, banks should develop effective collaboration with informal finance groups who can serve as risk screening and management hub for bulk lending and distribution. Other similar innovative ways on how to reduce lending risks and consequently the interest rate should be explored. This approach should also be used to enhance savings mobilisation. Expectedly, with possible reduction of risks and increased savings, there will be a reduction in the lending rate, more people will be able to borrow and the banks will make more sustainable profits. Through this approach and others, the banks should be required or forced to further reduce or eliminate most of their questionable charges even though some of the charges should not be there in the first place.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Ghana Office: Business Day Ghana Ltd; ABC Junction, near Guinness Ghana Limited, Achimota – Accra, Ghana. Tel: +233243226596: email: mail@businessdayonline.com Advert Hotline: 08034743892. Subscriptions 01-2950687, 07045792677. Newsroom: 08169609331 Editor: Anthony Osae-Brown. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.

WEST AFRICA

ENERGY intelligence oil

gas

power

Wednesday 31 October 2018

C002D5556

BUSINESS DAY

OIL

Congo: Total says oil output in Congo exceeds expectations Page 2 Market Insight L-R: Rumundaka Wonodi, CEO, ZKJ Energy; Damilola Ogunbiyi, managing director, Rural Electrification Agency; Dipi Khilnani, chairman, Cummins Power Generation Limited; James Momoh, chairman, Nigerian Electricity Regulatory Commission (NERC); Ola Alokolaro, Partner Advocaat Law Practice; Alex Papachristou, Country Rep. Soventix & Rotimi Akapo, Partner Advocaat Law Practice at the recent Advocaat Law Practice Discourse themed: Technology Disruption in the Power Sector.

Debrief

Brent to average $75, Iran production down a million barrels a day in 2019

Page 7

OPEC weekly basket price DAY

PRICE

26/10/18

76.37

19/10/18

78.85

12/10/18

81.43

5/10/18

83.17

28/9/18

80.64 Source: OPEC

Lack of investments in LNG carrier to hurt market development FRANK UZUEGBUNAM

he rise of major emerging liquefied natural gas (LNG), buyers led by China has created the need for infrastructure investment and new shipping capacity to avoid price volatility. Continued lack of timely investments in building the LNG carrier fleet would hurt market development and security of supply much more than insufficient liquefaction capacity according to Keisuke Sadamori, Director, Office for Energy Markets and Security at the International Energy Agency. The LNG carrier spot rates

have hit record levels. The Pacific and Atlantic shipping rates have touched $170,000/day and $140,000/day respectively, and Atlantic and Pacific ballast rates remain steady at 125 percent and 150 percent respectively, according to S&P Global Platts data. The IEA’s projections show that spare fleet capacity in the LNG market was sustained well above 15 percent between 2015 and 2018, but starts to decline sharply from 2019 onwards into single digits, and drops below zero by 2022-2023, indicating severe vessel shortages. “Changes in the LNG market challenge the traditional LNG shipping business model,” Sadamori said adding that the cur-

rent liquefaction projects led to many new vessel deliveries, which reach a peak in 2018, but this may not be sufficient for new supply by 2020. Shipping investment has been under pressure as the banking sector has pulled bank due to sharp losses and write-downs incurred in the last decade as shipping companies reeled from heavy losses and oversupply. Rising interest rates and tighter money supply have raised concerns about new investment in LNG shipping. “Under the move towards a more volatile and flexible business environment, the shipping industry must find new ways of mitigating credit risks to incen-

tivize shipping investment,” Sadamori said. Sadamori said that he expects increased flexibility of the LNG market to absorb the negative impact from the difficult trade situation of the impact of increasing trade tensions between China and the US and the tariffs on US LNG. LNG term contracts signed in 2017 show strong growth in short-term contracts of up to one year, with new buyers showing a preference for time flexibility over destination flexibility, according to the IEA. In general, the share of destination-free volumes is a growing trend, indicating the rapid development of the secondary LNG market.

02 BUSINESS DAY WEST AFRICA Outlook Brief Libya: Oil chief sees output reaching Qaddafi-era levels

ibya, one of the most volatile and politically fragmented oil producers, expects to pump as much crude by the end of next year as it did before the 2011 revolt against former strongman Moammar Al Qaddafi according to Mustafa Sanalla, Chairman National Oil Corp. The country plans to refurbish its pipeline network and raise output at some fields to reach a target of 1.6 MMbpd, Sanalla said in an interview. The North African nation currently pumps 1.25 MMbpd, he said in the eastern city of Benghazi. “We have put together a plan to boost field production, including pipeline maintenance and addition of new pipelines,” Sanalla said. “We aim to reach 1.6 MMbpd by the end of next year, and

this level can increase.” If it reaches this target, Libya would be producing at the level it last maintained in the years before Qaddafi’s ouster and death and the nation’s ensuing civil war. Political divisions and internal fighting have plagued Libya since then. While NOC officials have sought to increase oil and natural gas output, security issues and lawlessness continue to threaten the country’s energy revival. Sanalla struck a conciliatory tone. “I would like to use this opportunity to stress the importance of transparency to ensure the fair distribution of oil revenues across the country. Every Libyan citizen has the right to see how every dinar of their oil wealth is spent,” he said, according to the NOC’s website. Libya’s oil production has risen from 660,000 bpd in July, and the increase is helping to offset the impact on global crude supplies from an economic crisis in Venezuela and impending US sanctions on Iran. Libya last pumped 1.6 MMbpd in July 2012, when production surged briefly during a lull in fighting.

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oil

Congo: Total says oil output in Congo exceeds expectations

il production at Total SA’s subsidiary in the Republic of Congo has exceeded expectations, Martin Deffontaines, general manager of Total E&P Congo, said. The company is pumping 200,000 bpd in the Central African nation. “Its production is far more than what we had anticipated,” Deffontaines said. Congo became an OPEC member in June this year. The central African nation is targeting a 65 percent increase in overall oil production this year. It will be recalled that the Democratic Republic of Congo granted Total SA a one-year extension to a license allowing it to explore for oil along the Ugandan border. Total must meet objectives including developing a drilling program before the new permit expires January 26, 2019, Aime Ngoy Mukena, Oil Minister said. The company is also expected to produce a plan for exporting future oil production via a link to a pipeline that will connect western Uganda’s oilfields to Tanzania’s coast.

Ghana: NPA to conduct integrity assessment of underground petroleum storage tanks

The French oil giant acquired an operating interest in Block 3 in eastern Congo in March 2011. Its license, which was supposed to end in January 2016, was initially prolonged by two years before the latest decision by the central African country’s government. Total has a controlling stake in an oil-exploration project on the Ugandan side of the border, in partnership with China’s CNOOC

he National Petroleum Authority (NPA) has announced plans to secure the services of a consultant to conduct integrity assessment of all underground petroleum products storage tanks including pipelines of retail outlets across the country by next year. The Authority had also issued directives for depot operators to ensure that their operations and measuring systems were compliant with the industry requirements. It further asked them to automate their process, which would be integrated into

and London-based Tullow Oil. In August, Standard Bank Group’s Ugandan unit said it plans to raise $3 billion by the second half of this year for the 898-mi pipeline, which will ship the country’s oil via Tanzania and the Indian Ocean. The Ugandan government expects Total, Cnooc and Tullow to start pumping by 2021. Congo currently produces about 22,500 bpd

from aging oil blocks on the Atlantic Ocean coast. The government had planned to boost production by issuing new onshore licenses in the center and east of the country and passing a new oil law in 2015, but progress has been slow. Congo may hold as much as 6 percent of Africa’s oil reserves and has “significant development potential,” according to a 2013 briefing note by Norton Rose Fulbright.

the NPA’s Enterprise Relational Database Management System (ERDMS). Those measures formed part of efforts to improve transportation and safety of petroleum products in the country. Hassan Tampuli, Chief Executive Officer, NPA, made the announcement at a stakeholders’ meeting of petroleum downstream sector in Accra. He said the Authority was also reviewing the Oil Loss Control Manual and copies had been made available for all stakeholders for use and expected that the manual would improve and ensure accurate

reporting receipts and delivery of petroleum products. The stakeholders meeting afforded the opportunity to petroleum downstream players to dialogue, share and exchange ideas on ensuring effective and efficient management of the sector to promote economic growth. It also created a platform for the NPA and other stakeholders to disseminate industry information, trends and opportunities to ensure the continuous growth of the downstream sector in accordance with international best practices.

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gas

ENERGY intelligence

World’s first LNG-powered Aframax tanker completes maiden voyage

WEST AFRICA

Brief

he 114,010 dwt Gagarin Prospect, the world’s first LNG-fueled Aframax crude oil tanker, has completed its maiden voyage across the Baltic and North Seas from Primorsk to Rotterdam with a cargo of 104,815 mt of crude oil, Russia’s state-owned tanker company Sovcomflot said in a statement. This makes Gagarin Prospect the largest operational oil tanker to date to be fueled by LNG, and committed to an international oil

BUSINESS DAY

LNG on long haul routes in the future. Gagarin Prospect concluded its first commercial voyage to deliver Russian crude oil under a long-term time-charter between Sovcomflot and Shell on October 22, the Russian shipowner said. “She is the lead ship of the next generation of tankers, which will set a new standard of navigation safety and quality,” Sovcomflot said, adding that switching to LNG fuel allows it to reduce its impact on the environ-

Global gas prices rally unstable as buyers explore new options STEPHEN ONYEKWELU

lobal gas prices, which had been rallying recently may hit a glass ceiling due to competition from other energy sources. “In the power sector, there are many competitors for natural gas, renewables being one of them and coal on the other side,” Fatih Birol, executive director of Paris-based energy policy adviser the International Energy Agency, said in an interview earlier this month. “If the price of natural gas goes up, there may be a question for demand growth.” For instance, in the United States of America, electricity from renewable sources, especially wind and solar, continued to increase in 2017. Wind made up 6.30 percent of total net generation, and utility-scale solar made up 1.30 percent, record shares for both fuels. Although natural gas continued to be most-used fuel for electricity generation for the third consecutive year, natural gas-fired electricity generation fell by 105 billion kilowatthours in 2017, the largest annual decline on record. Coal-fired electricity generation also fell, but to a lesser extent, marking the first year since 2008 that both natural gas- and coal-fired

electricity generation fell in the same year. An expected liquefied natural gas boom, with record supply growth next year and as much as $200 billion earmarked for new projects in the next three years, may help pare prices outside North America. With the world transiting away from dirtier coal, strong demand seems pretty certain, but high prices are not, Tatiana Mitrova, director of the energy sector at the Moscow said. Natural gas prices had surged to a ten-month-high on the back of low United States gas stockpiles, higherthan-usual power demand due to warm autumn and nuclear plant outages but Nigeria did was unable to con-

tribute to narrow down this demand-supply gap because of its stalled gas development projects. Natural gas prices had gone up about 12 percent over the last month to roughly $3.16 per million British thermal unit. On Wednesday of the week ending October 5, they hit a more-than-sevenmonth high, at $3.26per mmBtu. London-based Barclays Bank expected a volatile winter for natural gas prices, with supply and demand balanced on a “knife’s edge.” Consumers of gas are too clever, Mitrova said, citing Germany’s promotion of liquefied national gas (LNG) import projects in a bid to win lower prices from Gazprom,

the world’s biggest gas producer. The Russian company may also face lower prices in Asia, Mitrova, who sits on the board of oil-services company Schlumberger Ltd said. Competing to Build Germany’s First LNG Import Terminal Gazprom knows the drill. It already suffered thin margins for some hub-market sales in Europe in 2015 and 2016, she said. “Gazprom was supplying gas at break-even prices,” Mitrova said in an interview at the Oil & Money conference in London. “I’m afraid supplies to China might see the same development.” Markets are signaling lower prices as oil dropped, as this comparison of the forward curve for the Dutch Title Transfer Facility, Europe’s most liquid gas hub, over the past month shows. With Russia, the Middle East, the U.S., Canada, Australia and Africa all competing to supply, prices will probably come under pressure, Nick Campbell, director of energy intensive clients at Inspired Energy said. Then there are other key areas of demand, gas users beyond power generators. The manufacturing sector is a “main driver” for demand growth during the coming years, and renewables probably aren’t a viable alternative for many factories, the IEA’s Birol said.

Eni cuts 2018 output growth target after gas production disappoints route, paving the way for what could be an entire generation of LNG-fueled cargo ships. Aframax tankers are typically used for short haul international trades, and the success of LNG as a marine fuel for these vessels also throws open the possibility for much larger oil tankers like Suezmaxes and VLCCs to fueled by

ment in high-traffic areas like the Baltic and North Seas where the tankers will operate. LNG-fueled tankers emit zero sulfur oxide and particulates, 76 percent less nitrogen oxides and 27 percent less carbon dioxide than vessels operating on heavy fuel oil. Gagarin Prospect was delivered to Sovcomflot in July.

talian oil major Eni cut its full-year production growth target after failing to grow its upstream volumes during the third quarter due to lower-thanexpected flows of natural gas. The Rome-based company said it now expects its oil and gas production to grow about 3 percent year on year in 2018, after gas sales were hit in Venezuela, Libya and Ghana. The company had previously forecast an

average 4 percent production growth to about 1.9 million b/d of oil equivalent this year, assuming a Brent price scenario of $60/b. In the third quarter of 2018, oil and natural gas production averaged 1.803 million boe/d, unchanged from the third quarter of 2017, Eni said in an earnings statement. The production volumes were partially hit by the termination of a production

contract at Libya’s Intisar gas field in June, Eni said, the effect of which reduced its output by 43,000 boe/d over the first nine months of the year. Lower gas output in Venezuela and Libya due to weaker domestic demand and in Ghana, due to lower gas nominations from the buyer, also crimped upstream flows in the quarter, Eni CFO Massimo Mondazzi told analysts on a conference call. Eni expects its produc-

tion growth will continue to be fueled by the ramp-up of the giant Zohr gas field off Egypt and helped by new fields in Indonesia, Congo and Ghana.

04 BUSINESS DAY WEST AFRICA Interview

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‘Public, private sector collaboration strategic to tackle growing energy challenges in Nigeria, Africa’ SEYDOU KANE, managing director for Africa, Eaton in this interview with KELECHI EWUZIE, speaks challenges Africa countries face due to ineffective supply of electricity, energy outlook of the continent and important steps to be taken to attract the right investment to boost future energy. Excerpts: What is your assessment of the utilisation of power from the Africa perspective? hen you look at Africa and its utilisation of power, potentially, I will say Africa has two major issues, Infrastructure with power being one main aspect of infrastructure, while the other one is agriculture. There is a massive gap in terms of the availability of power that is been used on the African continent. The second point is the reliability of this power. It is worrying that the scarce power available in the continent is hardly reliable due to aging grid infrastructure. This is so because a large portion of the grid infrastructure being used in Africa currently is the legacy of the sixties. A lot of work needs to be done on the grid particularly as it affects the disruption and power shortages etc. The reason power reliability is important is reliable electricity is directly linked to economic growth and good health. So it is absolutely critical to ensure those elements are well taken care of. Again, when I look at the outlook on Africa’s power industry, there are key targets that provide you the extent of the challenge. The African Development Bank highlighted the target of universal access to electricity by 2025 to include about 160 gigawatts of additional grid generation; 130 million new grid connections which is also combined with off grids. We are talking about 75 million off grid connections. In all these significant challenges, I will like to see

the incredible opportunities for the continent to shape the sector going forward. How prepared is Africa to meet up the 2025 investment targets in power? It is going to be extremely challenging. Nigeria for example has only 5,000 megawatts of electricity generation. It is unfortunate to note that this number has not drastically improved or change even as the nation is increasing in population. This is the kind of picture that you see across the continent of Africa. However, it is also important to note that significant efforts are been made in order to look at energy differently particularly the off grid aspect and the micro grids to bring in new business models to play, in order to reach basically those objectives. The 2025 objectives is a very aggressive one and the continent needs to be aggressive when it comes to power but it’s going to be very challenging. Are there countries Nigeria can look up as examples to follow in order to meet up this 2025 target? There are some cases that can potentially be looked at when exploring the opportunities for attracting more investments in the country. There is the need to look at de-risking the investment and reducing the cost of capital. These are two major challenges to attracting these capitals. From a country perspective, it is important to put some emphases on providing an enabling regulatory framework and feasibility because what investors are looking for particularly in the power industry is feasibility in mid to long term framework, so that it can improve

the ease of doing business. For example, import taxes, power purchase agreements could be some incentives that Nigeria can look at in encouraging private investments. How best can Nigeria plan to achieve energy efficiency using renewable? In Nigeria, the reduction in the cost of renewable over the years coupled with the coming of new technologies like energy storage, or micro grids is making the process better. I do think that in the case of Nigeria, there is going to be a significant business case to increase renewable sources and micro grids in the country particularly in the area of distributed energy in the country. Nigeria has 5,000 of centrally generated electricity

capacity, however, when you look deeper in Nigeria, the country has close to 20,000 megawatts of power produced by diesel or gas generators. This is huge and that provide as well an opportunity of introducing or combining this existing capacity into microgrids as well which will optimise the cost of energy and allow faster electrification to communities where the grids cannot access previously. So for Nigeria to a move around distributed energy, adopting more renewable energy and micro grids, it is going to be beneficial for the country. Africa continent is challenge when it comes to effective implementation of policies. How can her lead-

ers and private sector collaborate to meet this energy target in the short, medium and long terms? The key word here is collaboration considering the extent of the challenges in attaining 160gigawatts which needs to be done as soon as possible. I do not see any single government or single private sector actor picking up that challenge. So I think that collaboration is going to be paramount in order to find solutions to address those issues. From the government side, it involves setting up the enabling environment and providing those incentives while from the private sector requires commitment in terms of investment; being side by side with the local government and different stakeholders to help put those capacities in place. It is also important to make sure that the skills and knowledge transfer happens in order to make those investments sustainable. It is not just about putting the money down; there is need for the process to be maintained, ensure that all the skills are available and ensure there is good infrastructure going forward. What role, if any is Eaton playing in this regard to ensure the 2025 targets are met? Eaton is a company that is more than 100 years old. We have extensive experience in utility energy systems. We provide software and designs for grid infrastructure and for distribution in particular. We have positioned ourselves as a trusted adviser to help our customers to design solutions that really address their specific issues and their needs.

When we look at Africa, I will say that we focus particularly on solar and storage system to micro grids between 5 KV to 5 megawatts, those are projects which we believe with the expertise we have will be a value adds in order to support our customers. How soon are you looking at deploying your energy solutions into the Nigeria market? We are already in Nigeria engaging with partners to deploy some of these energy solutions in the country. Nigeria is one of the absolute key countries that we are focusing on for our growth in Africa. I did highlight the huge install based diesel generator set. So there is a clear business case in our view to bring in cheaper, flexible and more environmentally friendly energy to Nigeria. What is the energy outlook for Africa in the next five years? Right now, there are approximately 600 million people across Africa that do not have access to energy, but the good news is that Africa will be able to leap frog and use a lot of the advances particularly in the renewable space to move away from a centrally driven grid type of electricity because in the future, grid type of energy will be too costly and much slower than using distributed energy approach. So those are elements that we see are going to be significant in terms of how energy are brought to the people of Africa and the speed at which energy is deployed to alleviate the existing grid and also provide electrification particularly in the rural areas across the continent.

Wednesday 31 October 2018

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POLICY

BUSINESS DAY

WEST AFRICA

ENERGY intelligence

Big win for electricity consumers as DISCOs partner renewable energy companies STEPHEN ONYEKWELU

ew forms of partnerships between electricity distribution and renewable energy companies is set to change Nigeria’s electricity supply industry and consumers will be better off as a result. One such partnership happened recently when the Benin Electricity Distribution Company (BEDC) took steps towards realigning its power solutions with renewable energy options and as it signed a memorandum of understanding with Coloradobased Rocky Mountain Institute and Rubitec Nigeria Limited to provide mini-grid electricity to its customers.

This will connect all communities in its franchise states without electricity supply. Based on this, BEDC is expected to facilitate the choosing of locations for mini-grid solar power. With an estimated population of 190 million people approximately 60 million rural dwelling Nigerians still lack access to electricity. It is estimated that over N2 trillion Naira will be required to close the rural electricity access gap, in line with Vision 2020. In this light, the tripartite MoU agreed by Funke Osibodu, the Managing Director/CEO, BEDC, Bolade Soremekun, Rubitec CEO, and James Sherwood, RMI Manager, at the BEDC head office in Benin, recently, breaks new grounds that benefit consumers. According to the MoU, Rubitec is expected to construct solar mini-grid facilities within BEDC’s

licensed area of coverage, while RMI will provide expertise in developing renewable electrical solutions and advise implementation of a pilot mini-grid in the chosen location. Funke Osibodu said the initiative was aimed at bridging the service gaps for areas within the company’s network with an existing but poorly supplied or nonfunctional distribution system or those without an existing distribution system. Osibodu said the mini-grid initiative was also necessitated by the need to reduce dependency for power supply to customers through the Transmission Company of Nigeria (TCN) source, saying that one community in Edo State would be used as a pilot for the project before it is extended to other locations. According to her, the proj-

ect will entail an interconnected mini-grid using BEDC distribution lines in the selected locations to distribute solar power to the residents in the communities who are also expected to sign contract agreement with the suppliers. The agreement will be completed after the joint visitation by a combined team of BEDC staff and officials of the partnering firms to assess the situation on ground at the locations and determine the feasibility and commencement date of the project. Bolade Soremekun, CEO of Rubitec said “Collectively, Rubitec and our partners are proud to execute the pilot project to provide more knowledge and insight to the interconnected mini-grid space so as to enable more rapid scaling of the concept and model all over Nigeria.”

The mini grid sector in Nigeria started to develop only recently. Most operators were established in the past five years. Today, eleven private mini grids operate in Nigeria. These mini grids serve about 9,100 people, with a cumulated capacity of about 236kW, according to a World Bank study. Efforts at developing a legal and institutional framework for mini grids have also just started. In 2017, the Nigerian Electricity Regulatory Commission (NERC) adopted the Regulations for Mini Grids (‘the Regulations’). Also in 2017, the Rural Electrification Fund (REF) issued its first call for expression of interest for off-grid projects; the Fund was established to develop on-grid and offgrid electrification in rural areas, including mini grids, through financial support and technical assistance.

06 BUSINESS DAY

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WEST AFRICA

ENERGY intelligence

Wednesday 31 October 2018

finance people appointments

20 African oil ministers, OPEC, Non-OPEC members to headline NIPS2019

Brief

A Saudi Aramco IPO due by 2021 after construction of downstream assets

audi Arabia would likely carry out an initial public offering for Saudi Aramco in 2021 after it builds up some downstream assets including petrochemical production, Khalid Al-Falih, the country’s energy minister, said. “If you look at the downstream of Aramco it is significant, but is not at the same level as upstream. Our petrochemical portfolio also is not so large, and is not so strong in terms of technology and global reach. So the decision was made that Aramco needs to balance its portfolio,” AlFalih said. While Aramco is the world’s largest company in the upstream, with production of about 14 million barrels of oil equivalent per day and 260 billion barrels of oil, as well as 300 trillion cubic feet of gas as reserves, the

downstream needs development, he said. “If in the next oil cycle the prices for the upstream go down, the downstream will be able to create a very healthy return,” Al-Falih added. Saudi Aramco plans to buy 70 percent of Saudi Arabian petrochemical producer Sabic “and this deal will take at least 18 months,” he said. “Only after that we could share the information about the financial benefits of the deal with investors,” he added. He also mentioned an already announced plan for a joint venture with Total to build petrochemical production infrastructure. Aramco has a target of 3 million barrels per day to convert into chemicals and “it does not necessarily have to be all Saudi oil,” he said. Saudi Arabia’s plans for an IPO of Saudi Aramco were halted in August.

s a demonstration to the pledges made at the maiden edition of the Nigeria International Petroleum Summit (NIPS) held earlier in the year in Abuja, over 20 African oil ministers and various heads of delegation including members and non-OPEC member countries have confirmed to attend the 2nd edition of the African focus strategic conference and exhibition for the petroleum sector scheduled to hold from 27th to 30th January 2019 at the International Conference Centre, Abuja Nigeria. According to Emmanuel Ibe Kachikwu the President of African Petroleum Producers Association (APPO) and doubling as the Nigeria Minister of State for Petroleum Resources, the Nigeria International Petroleum Summit (NIPS2019) will be Africa’s largest and most definitive platform, not just for Nigeria, but also for Africa to engage the global energy, oil and gas community. The NIPS2019 will be welcoming estimated 1,000 international attendees and exhibiting country pavilions such as United States of America; Norway; India, Russia; China among others. Further highlighting the significant of the petroleum summit, the President of

L-R: James Shindi, Managing Director of Brevity Anderson; Ibe Kachikwu, President of African Petroleum Producers Association (APPO) and Folashade Esan, Perm. Sec. Ministry of Petroleum during the maiden Nigerian International Petroleum Summit (NIPS) in Abuja.

the African Petroleum Producers Association (APPO) said, at NIPS2019, we shall be deepening collaboration by having a session to look into the historic agreement and declaration of cooperation between oil producing countries and its present and future impact on the continent increased appetite to energy and power demands. The Nigeria International Petroleum Summit (NIPS): An African Petroleum and Business Conference (APTBC) is the official Federal Government of Nigeria industry event and is organized by the Federal Ministry of Petroleum Resources and all its parastatals including the Nigeria National

Petroleum Corporation (NNPC); Nigerian Content Development Management Board(NCDMB) and Department of Petroleum Resources(DPR) et cetera. It would be recalled that, the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Maikanti Baru said at the opening of the NIPS2018, that NIPS is long overdue. And it will henceforth be the most important platform for the industry and ultimate meeting place between key Nigerian and African political decision-makers, government officials as well as directors and specialists from the petroleum ministry, NNPC,

African IOCs, multilateral organizations and the academia including relevant stakeholders to collaborate at the highest levels for petroleum policy decisions Africa-wide and its entire economy. As a recognized government of Nigeria official international platform and the key event in the continent of Africa oil and gas industry, NIPS2019 summit will provide a comprehensive picture for leaders and investors in the natural gas and petroleum market and affirm what we can achieve as a continent in the changing world of oil and gas in the next decade. Brevity Anderson Consortium is the conference producers .

Oil and Gas Institute names Bakson best in fireproof products

he Institute of Oil and Gas Research and Hydrocarbons Studies has named Bakson Fire Resistant Safe Brand the Best Fireproof Safe Product of the Year at its Oil and Gas Products Awards held in Lagos recently. The award was received by Jonathan Bakare, Managing Director and Chief Executive

Officer of Bakson Investment Nigeria Limited on behalf of the company. Professor Akin Akindoyeni, Chairman of Council of the institute handed over the award. Bestowing the award, the institute noted that Bakson products were “made with the finest fire resistant safe materials that closely adhere to international standards”.

Speaking with newsmen, Bakare said his company was grateful for such recognition and promised not to rest on their laurels. He noted that the products’ ruggedness and safety remains unparalleled for long service product life, making it to stand out in its category. “Our product is complete structure coated with epoxy resin powder.

L-R: Professor Akin Akindoyeni, Chairman of Council, Institute of Oil and Gas Research and Hydrocarbons Studies , Jonathan Bakare, Managing Director and Chief Executive Officer of Bakson Investment Nigeria Limited and Miss Tope Bakare, Staff of Bakson Investment Nigeria Limited

07 WEST AFRICA ENERGY intelligence

Wednesday 31 October 2018

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marketinsight Brent to average $75, Iran production down a million barrels a day in 2019

he Energy Information Administration said that Brent futures will average $75 per barrel in 2019 and that once sanctions are implemented Iranian oil production will continue next year at a rate of about 2.8 million barrels per day. “The October ShortTerm Energy Outlook assumes that the effects of sanctions will increase during the first few months of full implementation and that Iran’s average crude oil production (excluding condensate) in 2019 will fall by approximately 1.0 million barrels per day from Iran’s April 2018 production level of 3.8 million barrels per day,” the agency said in its report. “This decline is similar to the drop in Iran’s crude oil production that occurred when sanctions on Iran’s Central Bank were imposed in 2012,” it said.

According to the latest OPEC production report, Iran oil production had come down to 3.4 million barrels per day as of September. Iranian net oil export revenues were estimated at $55 billion last year, it added. The share of income that the country will lose will depend “on the response from OPEC members and other countries,” the report said.

It said that there is uncertainty also whether other producers would help compensate for projected losses in Iranian supplies. OPEC spare production capacity in 2018 of about 1.6 million barrels per day will fall to 1.3 million barrels per day in 2019, down from 2.1 million barrels per day in 2017, it said. “This decline creates a market with relatively low

spare capacity at the same time Iran and Venezuela are forecast to experience production declines,” it said. Higher crude oil prices in the end of 2018 and 2019, in comparison with the four previous years, will likely motivate producers globally to increase output. EIA forecasts US crude oil production will increase by 1 million barrels per day in 2019.

IEA raises long-term oil outlook for Russia, cuts Venezuela’s

ussia is well placed to maintain oil production levels above 10 million b/d beyond the next decade, despite western sanctions limiting its access to technology and capital, the International Energy Agency said. Aided by consistent upstream spending through the oil price downturn, Russia aims to halt declines

and improve recovery at its major producing fields Western Siberia and the Volga-Urals basin, the IEA noted in a new long-term outlook for major oil and gas producers. As a result, the IEA said it now expects Russian oil production to remains above 10 million b/d into the 2030s before a gradual decline to 9.4 million b/d in 2040.

The new forecasts mark a sharp upward revision from the IEA’s latest long-term energy outlook, which in November 2017 predicted that Russian oil flow would peak around 2020 before slipping below 10 million b/d before 2030 and falling to 8.6 million b/d in 2040. Russia, which could agree to extend its existing oil output cooperation pact with OPEC by year-end, was pumping at record highs of about 11.36 million b/d in September, according to the energy ministry. Western sanctions on Russia’s Arctic, deepwater and shale resources have the potential to still constrain Russia’s oil growth, the IEA said. It noted, however, that Moscow is seeking alternative, non-western funding sources and

equipment, and encouraging domestic companies to invest more heavily in research and development. “If maintained, current sanctions could affect the longer-term competitiveness of the Russian upstream by slowing its move into new, more complex resource areas such as tight oil, the Arctic and deep offshore,” the IEA said. Meanwhile, the IEA was more pessimistic on Venezuela’s longer-term oil future because of its ongoing political and economic turmoil which has almost halved its oil production since early 2016. Crude oil production decreased from 2.35 million b/d in January 2016 to 1.22 million b/d in September 2018, according to S&P Global Platts data.

BUSINESS DAY

OPEC Flakes ‘OPEC should boost crude production at next meeting’

PEC must decide to boost oil output at its next meeting to “comfort” a tightening market, said Fatih Birol, head of the International Energy Agency. “Global oil markets are going through a very sensitive period, global economic growth as well,” Birol said. “If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market.” Without an increase in output from the Organization of Petroleum Exporting Countries, Birol reiterated his warning the global economy will enter “a red zone” because momentum is already slowing amid trade disputes. The world still needs more oil to compensate for losses from Iran and Venezuela, he said.

While the oil market is well supplied right now “the next few months might be difficult if the producers don’t increase production or give the signal for it.” Birol’s warning came in contrast to a statement from ministers from Saudi Arabia, Russia and other producers. They gave the clearest sign yet that they could return to cutting production, highlighting the need to prepare “options” for how much oil the group should produce next year to prevent the market slipping back into imbalance.

OPEC could cut production in 2019

PEC signaled it could cut output in 2019 due to concerns about rising oil inventories and economic uncertainty, lurching away from a pledge made just days ago to pump flat out. The cartel’s vacillations came as the sizable crude-price gains of September vanished in an October rout. If the group follows through, it could change the outlook of the oil market and reignite the ire of US President Donald Trump, who has repeatedly demanded that OPEC keep prices low. A committee of producers including Russia and Saudi Arabia highlighted the need to prepare “options” for how much oil they should pump next year to prevent the market slipping back into imbalance. The group, which since May has been boosting production, said the rise in oil inventories in recent weeks coupled with

fears about an economic slowdown “may require changing course.” Key players in the market are now issuing contradictory warnings, with the International Energy Agency fearing a looming shortage as OPEC frets about a resurgent glut. “Global oil markets are going through a very sensitive period, global economic growth as well,” IEA Executive Director Fatih Birol said. “If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market.”

08 BUSINESS DAY WEST AFRICA ENERGY intelligence

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Wednesday 31 October 2018

talking points

Electricity tariff between N4 and N50 per kWh not cost reflective - report DIPO OLADEHINDE

ith approximately 55 percent of Nigeria’s population lacking access to electricity, the country’s current electricity tariff of between N4 and N50 per kWh is neither cost-reflective nor sustainable, Nigeria’s Mini Grid Investment report 2018, has disclosed. Authored and published by the Nigerian Economic Summit Group (NESG) and Rocky Mountain Institute (RMI), the report explained the current electricity tariff is not cost reflective which has led to inadequate supply of electricity to both domestic and commercial consumers who spend an estimated N4.9 trillion ($14 billion) annually to power 14 GW of small –scale diesel and petrol generating sets. “Rural electrification is especially complicated; only 36 percent of the population has access to electricity because rural communities have lower economic activity and energy demand compared to their urban counterparts as grid extension to rural areas is problematic due to the generation shortfall, the non-commercial viability of many rural grids, and high technical and

non-technical losses; so rural communities experience limited economic growth,” the report noted. The report published by NESG and RMI admitted that despite the challenges with grid extension, off-grid alternatives such as mini-grids and solar home systems have not fully penetrated the rural market. “Today’s cost-reflective mini grid tariffs are typically near N200 per kWh ($0.57/kWh), which is less expensive than the cost to run a small diesel or petrol generator set. The report admitted that although this cost reflects the small scale and risk of a nascent market, mini grid tariffs are expected to continue falling and can be reduced by 60 percent by 2020. “The insufficiency of grid-supplied power hinders business productivity, profitability, and growth throughout Nigeria particularly for small and medium-scale enterprises as over 80 percent of Nigerian business owners cites electrification challenges as the most significant obstacle to doing business, as they experience an average monthly power outage of 239 hours,” the report said. The report noted that Nigeria’s Power Sector Recovery Programme (PSRP) estimated that the erratic supply of power results in an annual economic loss in excess of $25 billion as unreliable power supply creates social

challenges such as lack of access to food, potable water, lighting, healthcare, education, information, and other basic amenities. However, the Mini Grid Investment report 2018 recommended Mini-grids offer as an alternative to costly grid extension and an emerging solution to rural electrification challenges in Nigeria that can rapidly become cost-effective, presenting an opportune for investment and economic development. “Scaling the Nigerian mini-grid market to ten thousand 100 kW sites by 2023 would power 14 percent of the population with capacity up to 3,000 MW and create a N7 trillion ($20 billion) investment opportunity generating over N1.05 trillion ($3 billion) in annual revenue. “In total, the mini-grid market in Nigeria offers potential annual revenue of N2.8 trillion ($8 billion). In order to realize this potential for market growth and investment, government, development partners, and the private sector must work together to accelerate mini-grid development. The report explained that Mini-grids are often deployed in remote rural areas as a more cost-effective means of electrification than traditional extension of the main grid as they offer more reliable power than the main grid in many settings, including much

of rural Nigeria. “One GIZ assessment of the mini-grid opportunity suggests that over 26 million Nigerians can be most effectively provided with electricity via nearly 8,000 isolated minigrid systems providing 4.4 GWh per year.” The report however outlined what needed to be done by the various stakeholders in the mini grid sector. It stated for instance that policymakers should allow tax and duty exemptions and reduce import delays; clarify current regulations and implement additional enabling policies; increase state and local government involvement; as well as review the ESIA process. For the business community, it noted that they could create a mini grid business community consortium; design standardized, modular mini grid systems; and improve telecom service reliability. Investors and development partners in the mix, it added can support efforts to increase affordability and availability of finance; provide partial grants and operational subsidies; create a mini grid finance consortium; and create cross-sectoral implementation. Similarly, the report requested mini grid developers to improve customer engagement strategies; implement cost-reduction strategies; and develop a data-sharing platform.