FEBRUARY 11, 2013
Customers flay CBN’s bank account categorisation policy •Banks: It’s a welcome development
other day, it was an additional Know Your Customer, KYC, requirement, today, its account categorization.”
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r. Mike Azuka, a customer with UBA Plc said, “The account categorization should not be a priority at the moment. The CBN should think of things that would boost production and enhance the wellbeing of the people. A better policy like lowering of interest rate, reduction of inflation, and enhancement of naira should be things that the monetary authority
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UBA Academy 11: Group Managing Director/CEO, UBA Plc, Mr. Phillips Oduoza, Representative of the President of the Chartered Institute of Bankers of Nigeria (CIBN) Mr. Uche Olowu, officials of UBA Banking School, surrounded by the 3rd batch of Executive Trainees from the UBA Academy Banking School, in a convocation ceremony held in Lagos.
141.8
1.5
2,234.00
-4.00
18.17
0.01
118.90 +1.66 BY PETER EGWUATU, YINKA KOLAWOLE, MIKE EBOH, ROSE ONUOHA & PRINCEWILL EKWUJURU
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ank customers have questioned the rationale behind the new policy of the Central Bank of Nigeria (CBN) on categorisation of bank accounts, saying it is counterproductive with respect to its cashless initiative. The CBN policy categorised bank customers into Low Value Accounts
(Level One); Medium Value Accounts (Level two) and High Value Accounts (Level three), setting new deposit limits for each category of account holders and introduced a three-tier Know Your Customer (KYC) requirements for banks. In his reaction, Matthew Ogagavworia, a stockbroker said, “We now have a Central Bank leadership that believe the only way to include the many unbanked is to classify them as Low Value Account and limit the maximum single
deposit they can make and also peg the maximum such people can lodge into their Low Value Account. “Our Governor is not discussing issues of lower interest rates for the whole economy, nor a destructive inflation rate or foreign exchange stability that is optimal or the flow of credit to sectors of the economy that can support tangible economic development. It is either discussing politics or exhibiting crass ineptitude in the policies it initiates to combat economic problem he is paid for. The
95.72
-0.11
CURRENCY BUYING CENTRAL DOLLAR POUNDS EURO FRANC YEN CFA WAUA RENMINBI RIYA KRONA SDR
154.74 43.7464 207.5528 168.7275 1.6727 0.3006 237.0826 24.8262 41.2607 27.8084 237.8509
155.24 244.534 208.2234 169.2727 1.6781 0.3106 237.8486 24.9069 41.394 27.8983 238.6194
SELLING 155.74 245.3216 208.8941 169.8179 1.6853 0.3206 238.6147 24.9876 41.5273 27.9881 239.388
CBN Exchange rate as at 08/02/2013 C M Y K
18 — Vanguard, MONDAY, FEBRUARY 11, 2013
Cover Story
Youth restiveness and unemployment in Nigeria: The Way Out - Part 5
From left: The only female graduate driver Ms Mba Mabel Akwugo, Nigeria’s first female commercial pilot/Rector Nigeria Aviation College Zaria Captain Chinyere Kalu and Group Chief Human Resource Officer, Dangote Group, Mr. Paramjit Pabby, at the graduation ceremony of the Dangote Graduate Drivers in Zaria, Kaduna State.
Customers flay CBN’s bank account categorisation policy should be thinking of. At the moment, the manufacturing sector is suffering for lack of funds; even the funds available to them are very costly to access. It would be better for the CBN to reduce Monetary Policy Rate (MPR) so that banks can reduce the interest rate charged on loans.”
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ccording to Elvis Madu, another customer with a new generation bank, the new policy shows that CBN is confused. He said that the CBN is complicating account opening process rather than simplifying it. Madu said that the banks might capitalise on the new policy to introduce unnecessary fees. “With this new policy, if a customer wants to upgrade after getting to a certain level, the banks might take advantage of the situation to introduce charges which ordinarily the customer did not anticipate. The CBN has not been able to do anything about the previous charges, how are we sure that it can do something when the banks eventually introduce charges in this new policy.” In his own reaction, Mr. Akonte Ekine, Managing Director, Absolute PR, said, “It would be a disaster for the banking industry if some thing like that is introduced. The banks say they are looking for customers and now they trying to categorise C M Y K
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Continued from page 17
With this new policy, if a customer wants to upgrade after getting to a certain level, the banks might take advantage of the situation to introduce charges which ordinarily the customer did not anticipate
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account holders, this will definitely scare depositors away from the banks. It will be a bad sell for banks to try to categorise accounts.” Also speaking, Mrs. Constance Igboanugo, Executive Director, Orlick Communications, said, “This would pose danger for the banking industry. What is the government trying to achieve with this kind of measure. The measure will rein the banks, people will begin to keep their money at home. The CBN recently talked about cashless society and now is trying to categorise accounts. It is absurd if I would say. What are they trying to tell Nigerians, not to grow their accounts to a level, Nigerians will become apprehensive to save in the banks because now people will believe that government wants to monitor their savings that will not help the banks, particularly where the government is talking about the banking
industry.” However, many of the banks who spoke to Vanguard on the categorisation of customers based on the account balance said, the policy is a welcome development as it will help them to know more about the customers they are dealing with. The measure will not make the banking public to hide their money as being speculated rather it will help them to bring more of the money to the system. They further noted that once a customer opens an account with a bank as a lower income earner he or she does not need to open another accounts when he or she graduate to middle income earner as the system will automatically move such category of person to the next class based on the balance in his or her account. “If people decide to keep their money at home it will not have any benefit to them nor the economy. If you keep money at home it will lose value but when it is saved in the bank, interest will be paid to the owner and the money will also be lent out to those who need them for productive purposes that will generally engender growth and development of the country,” an official of one of the banks said, on condition of anonymity. The new policy was announced last month by the CBN via a circular to all banks and other financial institutions (OFIs). The circular which was signed
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HE Minister of State for Education, Chief Nyesom Wike, has said the Federal Government will invest in technical and vocational education to create about one million jobs through collaboration with educational institutions in Taiwan, South Korea and United Kingdom to create access to functional vocational education for Nigerian youths. He says the focus is to use technical and vocational education to create jobs for Nigerian youths The World Bank advocates a “three-lens approach” to youth empowerment involving • Working for youth as beneficiaries • Engaging youth as partners • Supporting youth as leaders. According to the World Bank, policymakers should frame correct social as well as economic policies based on these “youth lenses.” To bring this about requires the following broad initiatives: Changing the Policy Environment: The policymakers need to expand access to and enhance the quality of education and health services. The policymakers need to give young people a voice to articulate the kind of required assistance and the opportunity to participate in the delivery of assistance policies. Develop Youth Capabilities: To help the young people to choose the best from these opportunities, policymakers need to develop the youth’s capabilities. To do this, the policymakers first have to recognise the youth of their country as a strategic resource and vital decisionmaking agents. They also need to make sure that the youth are well-informed, sufficiently resourced and judicious while making their decisions. Provide Second Chances: The policymakers have to provide the young people with an effective system wherein they should grant the youth second chances. For this, they have to implement target programs that would provide hope to the younger people as well as
provide them incentives to positively reshape their destinies. Increase Investment in Youth: If done properly, investment in youth especially during the five life transitions of youth will develop, safeguard and put in place proper human capital. As the youth undergo each transition from learning, work, health, family and citizenship, public policies and investments in youth can determine their directions and can prevent the youth from going off-track especially when there are economic crises and markets do not provide sufficient economic opportunities. Create a Productive Working Life: Once youth obtain the
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makers first have to recognise the youth of their country as a strategic resource and vital decision-making agents
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necessary skills, it is important to deploy those skills. This should be done by framing policies and implementing programs that would benefit the rich and poor so that there is fair and even competition. The states have to realise that freeing up their economy to foreign investment not necessarily restricts their role but in fact increases their role in the economic affairs. The policies that open up the economy will become youth- friendly only if the government is able to direct proper resources towards the youth and provide them access to jobs that are created due to liberalization of the economy.
Vanguard, MONDAY, FEBRUARY 11, 2013 — 19
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igeria is a country of paradoxes and contradictions. These contradictions are being inflicted on the nation by politicians in uniform and those in flowing gowns through half- baked policies. Most of these policies, once they favour the ruling class, become self perpetuating. In the preStructural Adjustment Programme (SAP) era, when Nigerians who planned to travel abroad approach their bankers for foreign exchange, they were given such monies in traveller ’s cheque. There was no direct cash sale in foreign exchange. Then it was not common to see dollars or pounds in cash. It was only from those returnees that such foreign exchange in cash was found. The value of the naira was strong and a very good means of storing value. But electronic cards be issued when SAP was introduced, with traveller’s cheque. The question is; what is a in the bid for the country to traveller’s cheque? earn foreign exchange that It is a preprinted, fixedwas scarce then the CBN allowed exporters to open amount cheque designed to domiciliary account, hotels allow the person signing it and restaurant were also to make an unconditional given the node to charge payment to someone else as foreign guest in dollars. In a result of having paid the more recent time the CBN issuer for that privilege. ordered banks to pay They were generally used by Nigerians who are people instead of cash as beneficiaries of fund transfer many businesses used to in the denominated foreign accept traveller’s cheques as currency. If a traveller ’s currency. Coupled with this is the cheque was lost or stolen, fact that the CBN shot itself they could be replaced by in the foot with the wrong the issuing financial monetary policy of cash sales institution. Their use has of dollars to Bureaux de been in decline since the change. Over time, because 1990s as alternatives, such of the heavy depreciation of as credit cards, debit cards the naira as a result of the and automated teller introduction of market machines became more determined exchange rate, widely available and were Nigerians started preferring easier and more convenient dollars to naira as the for travellers. Traveller’s cheques before economy became awash with the dollar. This would now were sold by banks and not have happened if the financial specialists to apex bank had continued to customers for use at a later insist that those who do not time. Upon obtaining use direct fund transfer, custody of a purchased
CBN: What has become of traveller’s cheque? Now that in Nigeria the dollar has become a second currency thus undermining the sovereignty of Nigeria and the legal tender status of the local currency, the naira, what is the CBN waiting for to reintroduce the use of traveller’s cheques in the country?
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supply of traveller ’s cheques, the purchaser immediately wrote his or her signature once upon each cheque, usually on the cheque’s upper portion. This helps to protect them if they are stolen. The purchaser will also have received a receipt and some other documentation that should be kept in a safe place other than where he or she carries the cheques. A traveller ’s cheque can usually be replaced if lost or stolen (if the owner still has the receipt issued with the purchase of the cheques showing the serial numbers allocated). When wanting to cash a traveller ’s cheque while
making a purchase, the purchaser was required in the presence of the payee, to date and countersign the cheque in the indicated space, usually on the cheque’s lower portion (if at a restaurant, it may be helpful to ask the waiter to watch and wait for this to be done. Applicable change for a purchase transaction would be given in local currency as if the cheque were bank notes. Traveller ’s cheques are available in several currencies such as U.S. dollars, Canadian dollars, Pounds sterling, Japanese yen, Chinese Yuan and Euro; denominations
usually being 20, 50, or 100 (x100 for Yen) of whatever currency, and are usually sold in pads of five or ten cheques, e.g., 5 x 20 for 100. Traveller ’s cheques do not expire, so unused cheques can be kept by the purchaser to spend at any time in the future. The purchaser of a supply of traveller’s cheques effectively gives an interestfree loan to the issuer, which is why it is common for banks to sell them “commissionfree” to their customers. The commission, where it is charged, is usually 1-2% of the total face value sold. The question is; why has the CBN jettisoned the use of traveller ’s cheque in favour of cash sales? The CBN is where most banks get their traveller’s cheques from in the days when they were in use. Now that in Nigeria the dollar has become a second currency thus undermining the sovereignty of Nigeria and the legal tender status of the local currency, the naira, what is the CBN waiting for to reintroduce the use of traveller ’s cheques in the country? Will this not help its cashless policy? Will this not ensure stability in the foreign exchange market if Nigerians do not have direct access to dollar cash? Will the value of the naira not be enhanced? Is the cashless policy restricted to the use of naira? CBN please think.
Cover Story Continued from page 18
by the Director, Financial Policy and Regulations Department, Chris Chukwu, set maximum single deposit amount of N20,000 and N50,000 for Low and Medium Value Accounts respectively. The policy also pegged maximum cumulative balance for Low Value Accounts at N200,000 at any point in time and a maximum cumulative balance of N400,000 on the Medium Value Account. However for the High Value Account, no limit was placed on cumulative balance. The circular explained that the policy became exigent after the CBN recognised that access to basic banking facilities and other financial services was
Customers flay CBN’s bank account categorisation policy necessary in achieving the policy on financial inclusion. The CBN in the circular advised banks to adopt the new KYC requirement, adding that the proposed deposit limits was meant to reduce the risk of money laundering and financing of terrorism, noting that the Low Value Accounts are subject to close monitoring by the financial institutions and less scrutiny by bank examiners. The CBN said the Low Value account can be opened at branches of banks by a prospective customer or through banking agents and no amount is required for opening. However, such accounts prohibit international funds transfer. Furtheremore, the Medium
Value Accounts can be opened face to face at any branch of a bank by agents for enterprises or by the account holder, but the accounts are strictly savings with no amount required for its opening. Also, where cross-checking of client’s identity cards information is not completed at the point of account opening, withdrawal would be denied.
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he CBN added that for the High-Value Accounts, banks are required to obtain, verify and maintain copies of all the required documents for account opening. Accounts are to be opened at the bank branches by physical presence of the prospective
customer and the accounts can be both savings and current. However, for mobile banking products, the account attracts a maximum transaction limit of N100, 000 and daily limit of N1 million. However, such products are subject to the CBN Regulatory Framework for Mobile Payments Services in Nigeria. Banks are required to have a robust, effective and efficient anti-money laundering/combating financial terrorism (AML/ CFT) solution with screening tools in place that will monitor the various thresholds. “All accounts, no matter how low the transaction or the risks, must be subjected to continuous suspicious transactions
monitoring by financial institutions which will determine when incremental KYC requirements need to be provided by the customers,” the circular said, adding that the CBN would ensure the establishment of appropriate processes and procedures for the purpose of monitoring compliance with the regulatory framework The circular said that noncompliant financial institutions would be sanctioned in line with the provisions of extant laws and regulations. According to the apex bank, 64.1 per cent representing 56.3 million adult Nigerians do not have access to financial services, hence the policy is designed to bridge the gap. C M Y K
20 — Vanguard, MONDAY, FEBRUARY 11, 2013
Business & Economy BRIEF Total set to get Tanzania oil, gas exploration licenses
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anzania is set to award exploration permits to Total SA, Europe’s third-largest crude producer, to search for oil and gas in the East African country, Energy and Minerals Minister Sospeter Muhongo said. The company, based in Paris, “has approached us and we are going to issue licenses to Total” to explore in Lake Tanganyika, on the border with Democratic Republic of Congo, Muhongo said in an interview yesterday in Cape Town. The permits will be issued in the “next few months,” he said. BG Group Plc, a U.K. explorer, and Statoil ASA, Norway’s biggest energy company, are among companies searching for gas in Tanzania, where an estimated 33 trillion cubic feet of the fuel has already been found. Along with neighboring Mozambique, where explorers made the biggest discovery of the decade, more than 100 trillion cubic feet of reserves have been found, enough to meet global demand for a year. Tanzania plans to create a sovereign wealth fund that will use growing oil and gas revenue to finance development projects in East Africa’s second-biggest economy, Muhongo said. The fund may also invest in company shares to accumulate wealth, he said. “We should have a fund whose accessibility is somehow very restrictive and the utilization of the resources are for good intentions,” Muhongo said. The government has “just” completed a second draft of a policy document for the gas industry that’s aimed at improving revenue management, Muhongo said. After feedback from the general public and companies has been incorporated, parliament is expected to vote on the policy, which hasn’t been updated since 1980, before the end of the year, he said.
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Financial misstatement: KPMG cautions on weak disclosure, manipulated estimates BY MICHAEL EBOH
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from old to new and that disclosed changes are generally understandable. He said big ticket items affected in the account should be determined, while the impact of the changes on expectations by stakeholders should also be evaluated. He advised audit committee members on the need to evaluate the impact of IFRS adoption on key performance indicators and drive management to manage expectations where
significant changes occur and also evaluate the extent to which incentives may encourage fraudulent financial reporting. He said, “Audit committee members should receive relevant training on IFRS to ensure sufficient level of knowledge for discharging duties and keep knowledge current. “Having a profound knowledge of the business is a key element of understanding and
interpreting IFRS financial statements. Understand the story behind the financial performance your companies are reporting. “IFRS involves judgement. Audit committees should understand areas involving estimates and their effect on reporting results. “Audit committee members must ask probing questions and have frank discussions with management and auditors.”
PMG Professional Services has called on shareholders and audit committee members of public companies to properly scrutinize the financial statements of companies, especially under the new International Financial Reporting Standards, IFRS, dispensation, to identify weak disclosures, manipulated estimates and non-usage of fair values, saying these are signposts of fraudulent financial reporting,. Speaking at the KPMG/ Nigeria Shareholders’ Solidarity Association’s annual seminar for audit committee members in Lagos, Mr. Femi Awotoye, Partner, Audit Services, KPMG, said under the IFRS, companies are required to present their results and tell the full story behind the results. According to him, manipulated estimates are the biggest financial fraud that can be recorded in an IFRS financial statement, notably in areas of loans, provisioning for loans and debtors among others. He said, “Audit committee members should ensure that they understand all significant From left: Chief Commercial Officer, Etisalat Nigeria, Mr. Wael Ammar; Winner of Etisalat estimates; how have estimates Prize for Innovation 2012 (Most Innovative Product/Service), Mr. Olaseni Odebiyi and Chief historically matched up with Executive Officer, Etisalat Nigeria, Mr. Steven Evans, at the 2013 Etisalat Prize for Innovative actual and the extent of the use Press Conference, held at Four Point By Sheraton, Victoria Island, Lagos, of models. “Audit committee members should find out if some estimates are recorded as audit adjustments or not even recorded and should seek to understand how minor change By 2016, the Microsoft Microsoft’s wider 4Afrika in assumption can change the By EMEKA AGINAM initiative, a new effort through 4Afrika Initiative plans to results.” which the company will help place tens of millions of He further stated that in the Microsoft, the global actively engage in Africa’s smart devices in the hands of new IFRS dispensation, missing disclosures will be software giant has announced economic development to African youth, bring 1 million its global African small and medium easy to detect, adding that plans to commit about N12 improve enterprises (SMEs) online, weak disclosures as regard billion to the African market competitiveness. As a first critical step toward up-skill 100,000 members of financial risk management as part of its initiative to help may point to fraudulent improve the continent’s increasing the adoption of Africa’s existing workforce, global competitiveness. smart devices, Microsoft and and help an additional reporting. The plan was announced at Huawei introduced the 100,000 recent graduates According to him, under skills for IFRS, regulators identify the launch of the Microsoft Huawei 4Afrika , a full develop omitted disclosures as fraud 4Africa initiative Tuesday in functionality Windows Phone employability, 75 percent of sign. That is, there is Lagos. The event also follows 8 which will come pre-loaded which Microsoft will help the introduction of Huawei with select applications place in jobs. something to hide. Speaking to IT Journalists Awotoye urged shareholders low-cost Windows Phone 8 designed for Africa. The Huawei 4Afrika phone, during the introduction of the and audit committee members device in seven African which is the first in what will initiative, Onyeje, General to ensure an internal markets including Nigeria . The phone will initially be be a series of smart devices Manager, Microsoft Nigeria coherence between the different components that available in Angola, Egypt, designed “4Afrika,” will be said with optimism that the make up the annual report and Ivory Coast, Kenya, Morocco, targeted toward university capacity building project also evaluate processes used Nigeria and South Africa students, developers and would help youths to be first-time smart phone users globally competitive. to obtain information, later this month. The low-cost Windows to ensure they have affordable “It is a model for job ensuring that sufficient Phone 8 device powered by access to best-in-class creation. It is all about making disclosures are made. He further advised that the Microsoft is expected to drive technology to enable them to Africa globally competitive. member of the audit committee smartphone penetration on connect, collaborate, and We want to create skills. We access markets and want to create innovation. ensure that a link is formed the continent. The launch forms part of opportunities online.
Microsoft commits N12b to help Africa in global competitiveness
Vanguard, MONDAY, FEBRUARY 11, 2013 — 21
Business & Economy BRIEF
By GODFREY BIVBERE
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perators in the maritime industry are divided over the planned concession of all marine operations presently the only function carried out by the Nigerian Ports Authority (NPA). Meanwhile the Senior Staff Association of Nigerian Ports Authority has kicked against the concession plan of the Bureau of Public Enterprises (BPE). Senior Special Adviser to the President on Maritime matters, Leke Oyewole, told Vanguard that he does not have details of the planned concession but stressed that if the plan is in the interest of the nation then it should be done. He said if it will improve the fortunes of the maritime industry, it should be concessioned. However, the National President of the Association of Nigeria Licensed Customs Agents (ANLCA), Prince Olayiwola Shittu, who was apparently angered by the idea, said “they should concession our lives. They are not working at it whether the one they did before is working.” Shittu noted that the plan is an avenue for politicians to help themselves. He explained that indigenous ship owners who are supposed to be helped have been abandoned, same thing with the issue of Cabotage which is still ineffective years after it was passed into law. On his part, President of the Senior Staff Association,
Einhorn sues Apple, marks biggest investor challenge in years
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L-R: Mr Jean-Pierre Breton, Finance Director; Mrs Chinwe Udo-Daris, Human Resources Director; Mrs Anne Ezeh, Communications Manager; and Mr Marcel Hochet, Country President; all of Schneider Electric Nigeria at the First Nationwide Company Meeting held in Lagos.
Operators differ on Marine Service Concession Comrade Umar Omeiza Jimoh, said the decision of BPE, which was communicated via a letter addressed to the Managing Director of NPA and dated Janaury 18, 2013, has no legal backing and it would amount to re-concessioning of already concessioned services under public private partnership. According to Umar, “the move by BPE to snatch marine/harbour ancillary services from NPA has no legal backing and the port activities enable NPA to involve PPP in all her service.
BPE should remember that the terminals concesioned (PPP) by BPE, NPA and other government agencies was done under the Port Act of 1999. Based on the above premise, we believe BPE is suffering from reactive declining syndrome.” He noted that NPA is healthy and is carrying out all these services beneficially for the nation and there is no need for BPE to plan for the concessioning of the services. He advised BPE to stay off NPA and beam its search light on areas it has not performed better.
“NPA is healthy and we are on top of maritime business. BPE should flash its search light on areas it has not performed well like Nigerian Telecommunications Limited (NITEL), Power Holding Company of Nigeria (PHCN) etc and should leave NPA alone.” He described BPE as fronting agent for some cabal in the government. To the labour leader, the concession exercise, if carried out, would lead to security threat, loss of government revenue and high cost of services, mass sack and denial of common user facilities in the ports.
APM Terminal flags off $135m final development phase for Apapa Terminals BY GODFREY BIVBERE & EDIRI EJOH
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roup Chief Executive Officer of the AP Moller-Maersk Group, Mr. Nils Andersen, last week performed the groundbreaking ceremony for the N20.9 billion ($135 million) terminal yard redevelopment and expansion of the largest container terminal in West Africa, the APM Terminals Apapa. The project, which is the Phase 3 of the modernization and upgrading of the APM Terminals, includes terminal yard redevelopment and expansion including new staff amenities and customer service building, acquisition of container handling equipment, implementation of new terminal operating systems and a new Customs C M Y K
container inspection facility. He stated that the project will include development of new container stacking areas such as the old Sunshine Oil and Dangote Cement areas, which were part of the original Apapa concession but not handed over to APM Terminals until recently. “The project will also convert the terminal to full RTG (yard crane) operations, and includes purchase of many items of container handling equipment, a new customer service building, new employee amenities buildings as well as office for Nigeria Customs, and a new Customs container inspection area. The project will also include state of the art terminal control systems including a satellite based container positioning system,” he said. Andersen disclosed that the investment has become
necessary in order to ensure there is sufficient port capacity for container operations in Lagos “at least until 2017.” He said the project will entail US$135 million of investment bringing the total capital investment since the start of the concession in 2006 to a total of US$330 million. The APM Moller-Maersk CEO stated that the fresh investment will “make the Apapa Terminal the largest and most modern terminal in West Africa with a capacity of 1.2 million TEU per year. “It will benefit the people working in the terminal, who will have better, safer conditions, it will be good for the environment, because pollution will be reduced, and it will further enable Nigerian business to import and export goods and products.
“Apapa has already for years promoted trade and development and attracted customers, making it the busiest terminal in West Africa. This is another important step in this exciting journey. “Many efficiency measures and modernisations have been carried through in recent years, lifting the productivity and developing safety and transparency, so much so that we use it as a best-practice example for terminals in other growth markets. We hope and believe that Apapa will continue to be a terminal we can all be proud of,” Andersen stated. The AP Moller-Maersk boss said the expansion shows that the Nigerian economy is still growing and has potential for more growth, he concluded
pple Inc last week Thursday confronted its first major challenge from an activist shareholder in years as hedge fund manager David Einhorn’s Greenlight Capital filed suit against the company and demanded it dole out a bigger piece of its $137 billion cash pile to investors. The unusual move comes as the world’s largest technology company grapples with a tumbling share price, mounting competition in the smartphone and tablet markets and concerns about its ability to produce new breakthrough products. Einhorn, a well-known short-seller and Apple gadget fan, said in an interview with CNBC that the company harbored a “Depression-era” mentality that led it to hoard cash and invest only in the safest, lowestyielding securities. Apple nearly went broke in the 1990s before Steve Jobs returned and engineered a sensational turnaround, with products such as the iPhone and iPad that became musthaves for consumers around the world. The company ’s near-death experience has led Apple to be exceptionally conservative with its cash. Last March, just months after Jobs’ death, Apple responded to a barrage of investor criticism over its large cash hoard by initiating a quarterly cash dividend and a share buyback that would pay out $45 billion over three years. At the time, Apple was sitting on $98 billion in cash. Einhorn’s lawsuit filed in U.S. District Court in Manhattan targets a proposal by Apple to eliminate from its charter “blank check” preferred stock. The board now has discretion to issue preferred stock but is asking shareholders at its annual meeting on February 27 to vote on a proposal that would first require shareholder
22 — Vanguard, MONDAY, FEBRUARY 11, 2013
Banking & Finance BRIEF FG approves fiscal policy measures for 2013 BY PETER EGWUATU
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he Central Bank of Nigeria (CBN), weekend, said the Federal Government has approved new fiscal policy measures for the country with effect from January 1, 2013. In a circular released by the CBN and signed by Director Trade and Exchange Department , W.D Gotring, the affected products include : Sugar, Rice , Aircraft , Solid minerals, Public mass transit, Polymers of Polyethylene and Polypropylene and Amorphous Pet Chips. According to the CBN, For SUGAR : Machinery and Spare parts imported for the establishment of local sugar manufacturing industries shall attract Zero per cent duty. Sugar cane to Sugar value chain investors shall enjoy a 5 year tax holiday; Raw sugar (H.S Codes 1 7 0 1 . 1 1 0 0 . 0 0 1701.1200.00 ) shall attract an import duty rate of 10 per cent plus levy of 50 per cent while refined sugar (H.S Codes 1701.9110.0-1701.9990.0) shall attract an import duty rate of 20 per cent plus a levy of 60 per cent. For RICE: Husked Brown Rice (HS Code 1006.2000.00) , semi milled or wholly milled rice , whether or not polished or Glazed (H.S Code 1006.3010.00) shall attract an import duty rate of 10 per cent plus a levy of 100 per cent. For Air craft: All commercial Aircraft space parts imported for use in Nigeria shall attract import duty rate of zero per cent and zero per cent import VAT. For Solid Minerals : Machinery and Equipment imported for the development of the solid minerals sector shall attract an import duty rate of zero per cent and zero per cent import VAT. For Public Mass Transit: Import duty rate on Completely Knocked Down (CKD) components for Mass Transit Buses of at least 40 -sector capacity have been reduced from 5 per cent to zero Per cent to encourage the production of mass transit vehicles in Nigeria C M Y K
BY BABAJIDE KOMOLAFE
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R Services (Credit Bureau) Plc has announced the introduction of the CreditRegistry SMARTScore, Nigeria’s first credit bureau score. For the first time a statistically-based credit score has been developed exclusively for Nigeria and is as a result of several years of evaluation, development and commitment from our subscribers to improve data quality. The use of statistical methods to help manage multiple decisions is commonly known as scoring. Scoring is based on the use of mathematical models to predict the odds of future results. Credit scores are used to help predict the credit behavior of customers and determine the creditworthiness or probability of not defaulting. Scoring systems have been around for decades to enable bankers, insurance underwriters, service providers, retailers and many other institutions to make instant approval or rejection decisions. Credit scores are determined by a variety of characteristics such as payment history, outstanding debt, type of credit exposure, new credit enquiries, number of delinquencies, etc. Scoring systems are designed on a simple premise that past behavior predicts future behavior. Hence, credit scores are not the only deciding factor in making lending decisions and in fact creditors can decide to override a score based on relevant information not considered by the scoring system. Overall, in
Senator Pat Toomey, of the United states of America representing Philedepia; Tayo-Balogun Jnr Executive Director, E- marketing solutions, Daniel Thompson, Marketing Consultant, Spotlinks Media Communications at the second annual Pennsylvania society reception of the league of 1789 for professionals and emerging leaders held in New York.
CreditRegistry introduces 1st credit bureau scores in Nigeria developed economies, credit scores are the norm and creditors use such techniques to instantly evaluate customers for product offerings thus enabling fast easy access to credit to improve standard of living and stimulate economic growth.
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hief Executive Officer, CR Services, Mr. Taiwo Ayedun, he says “With the introduction of credit scores to the Nigerian financial industry, banks can now integrate this world-class
instrument into their risk architecture whether for monitoring risk, segmenting or evaluating new applicants for credit. With the introduction of SMARTScore, organizations can improve risk management, reduce loan processing time and market their products much more effectively. Overall, SMARTScore enables creditors to identify risk in a standard and concise manner across all loan portfolios.” CR Services (Credit Bureau) Plc is Nigeria’s pioneer and leading credit
bureau company. Today, CR Services is trusted with Nigeria’s largest credit information database of over 12 million borrowers (Individual and Corporate) which includes credit and profile information from deposit money banks, primary mortgage institutions, microfinance banks, finance houses, leasing companies, development finance i n s t i t u t i o n s , telecommunication companies and other service providers.
Stanbic IBTC conference to provide opportunity for investors to invest — David Borha By PETER EGWUATU
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tanbic IBTC Holding has disclosed that its forth coming West Africa Investors’ Conference will provide opportunity for both foreign and local investors to invest more in Nigeria. The Managing Director, Stanbic IBTC Holding Plc, Mrs. Sola David-Borha, who disclosed this at the weekend in Lagos, said that the conference is the 4th of its kind for the Standard Bank Group. According to her, “ It is a milestone in investors’ conferences as it demonstrates the importance that Stanbic IBTC and Standard Bank Group attach
to it as this will help to link up investors with various businesses in Nigeria . It will enable them identify opportunity that they can invest in both equities and debt instruments. We are very happy to host the conference. In his own remark, the Chief Executive Officer, Stanbic IBTC Stockbrokers, Mr. Oladele George Sotubo, said, the conference will be a four day event. It will start th st from 18 of February to 21 of February 2013. We will start the conference in Accra, Ghana. To open the conference in Ghana will be the finance Minister of Ghana. From 19th of February the conference will move to Lagos, Nigeria and the venue is at Federal Palace Hotel, Victoria Island.”
Commenting on the dignitaries expected at the conference, Sotubo said, “We expect both regulators and operators in the financial sector and they will rob minds together on issues that affect the economy and capital and money markets. Companies that are listed and those seeking quotation on the Nigerian Stock Exchange (NSE) are expected to be there. This will give them opportunity to have one on one meeting and discussion. Christpher Kolade will be addressing investors at a cocktail and at the dinner we shall be having our Chairman, Atedo Peterside. He will be telling investors on what the Federal Government has for the country as it affects the power sector. The forum
will provide opportunity to foreign investors to know more about their investment and where the market is at present and would likely be in years to come.” The theme of the conference, he stated is “The West African market enabling the next level”. We want to get more of the retail investors to get them participate or invest in the FGN Bond. We have provided platform for bondholder to enter and exit. Our position as a Standard Bank Group is that any investor can have opportunity to invest in any market of its choice, even Ghana economy is opening up and investors need to know about it. We are in Ghana and other countries” he noted.
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Coporat e Finance
Value of Equities appreciates by N267bn By CHINEDU IBEABUCHI
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quities listed on the Nigerian Stock Exchange last week maintained upward trend, as total market capitalisation appreciated by N267.43 billion. Specifically, the market capitalisation opened at N10.37 trillion, rising by 2.78
per cent to close at N10.65 trillion. Also, another market indicator, the All-Share Index rose by 2.78 per cent or 901.63 points to close at 33,313.49 points from 32,411.86 points. Between January 1 st and close of trading last week, market capitalisation has risen by N1.69 trillion while
the All share Index has risen by 5234.68 points. Analysts at Proshare Investment Company attributed the impressive performance in the market to anticipation of corporate results, but warned that profit-taking might check progress in coming weeks. A review of last week’s activities showed that equities extended its uptrend on Monday by 0.84 per cent to open the week on positive note as investors remained optimistic. Also, the key benchmark indices climbed further on Tuesday and Wednesday as prices rose by 1.16 per cent and 1.20 per cent gain respectively. However, market declined by 0.72 per cent on Thursday due to sell pressure by investors scrambling for profit towards last minute of the session on the back of i n c r e a s e d speculative trading. S u b s e q u e n t l y, equities sustained healthy breadth on Friday as market traded above the line despite increased volatility to end the week with aggregate
gain of 2.78 per cent.
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eventy-one equities recorded price appreciation compared with fifty-three equities that recorded appreciations last week. These were led by Wema Bank plc, which appreciated by 59.78 per cent to close at N1.47 per share from N0.92 per share. It was followed by Royal exchange Assurance Plc with a gain of 52.46 per cent to close at N0.93 per share. While Aiico insurance Plc rose by 45.24 per cent to close at N1.22 per share, among others. On the contrary, John Holt Nigeria Plc recorded the highest price loss, depreciating by 13.58 per cent to close at N1.40 per share. This was followed by Eterna Oil Plc, which declined by 9.94 per cent to close at N4.17 per share. While MCNICHOLS Nigeria Plc lost 7.41 per cent to close
at N0.75 per share, among others. During the week 3.572 billion shares valued at N24.692 billion in 39,321 deals were trade in contrast to a total of 2.813 billion shares valued at N22.188 billion traded in 33,123 deals penultimate week.. The Financial Services sector sustained its dominance as the most active during the week, contributing 70.75 per cent, 66.16 per cent, 58.71 per cent to the total equity turnover volume, value and number of trades respectively in 2.527 billion shares valued at N16.338 billion exchanged hands by investors in 23,085 deals. In addition, 1,670 units of FGN bonds valued at N2.087 million were traded during the week in 41 deals. However, there were no transactions in the State/Local Government Bonds and Corporate Bonds/ Debentures sectors.
Shares of consumer goods' companies are overpriced-Rewane NKIRUKA NNOROM
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anaging Director, Financial Derivative Company, FDC. Mr. Bismark Rewane has warned that the shares of companies in the consumer goods sector of the Nigerian Stock Exchange (NSE) are showing signs of overpricing. He gave this warning in the February edition of his monthly Economic News and Review adding that future earnings of many consumer goods company can no longer support their share prices. Rewane also called for close monitoring of the activities of market makers to avoid a build of bubble in the capital market. It would be recalled that the NSE said that close monitoring of activities of market makers in relation to performance of their core mandate would not commence until the completion of the roll out period, expected to last for six months. The roll out period, which is already in its sixth month, has seen the NSE including 43 different stocks in the list of stocks being managed
by market makers. Rewane noted that doubts about the true impact of the market makers were being raised following the ‘element of pumping and dumping’ being experienced in the market already. He, however, assured that although there are echoes of asset bubble, but the market was far from one He further stated that many stocks are trading at fair value or above fair value as investors add to their portfolio in anticipation of release of 2012 full year financial results of companies, as well as those of first quarter of 2013. He said though the stock market had witnessed the highest bullish run in the month of January, the first in eight years, he affirmed that a disappointing earning season may dampen the positive trend being recorded, while adding, “We expect a few misses when the earning season starts.” “The index return of 13.44 percent is one of the best in the history of the exchange as the All Share Index, ASI, reaches its highest point since December 2008. Current run is backed by fundamentals and global fund flow to equities and emerging markets,” he stated. C M Y K
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Interview
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r. Abimbola Olayinka, Managing Director/ CEO of Resort Savings and Loans (RSL) Plc, and President of Mortgage Banking Association of Nigeria (MBAN), in this interview spoke on reforms of the mortgage sector, plans by RSL to recapitalise and the proposed Liquidity Facility Company being spearheaded by MBAN to deepen the mortgage sector. Excerpts. Journey of RSL so far We have come a long way. By the end of this year, we will be twenty years old. Resort has been able to grow from one single branch to about 13 offices nationwide. We have 5 offices in Lagos, 2 in Abuja, 1 in Jalingo, 1 in Yola, 1 in Ekiti and 1 in Port Harcourt and 1 in Abeokuta, making 13 branches in all. All our branches are networked and we are running 24/7, our systems are seamless and online real-time. We have also effectively deployed our debit card system, and interface effectively into the epayment platform and with our debit card, you can make withdrawals through ATMs on any bank’s ATM nationwide, including ours. We have grown our deposit base to N2 billion and that is going to grow heavily this year. As of last year, our audited third quarter result which we sent to the Stock Exchange was in excess of N100 million profit before tax. By next month, subject to the approval of the regulatory authorities we would be coming out with an offer. We are going to raise about N3.5 billion in form of both rights issue and public offer, although this is subject to regulatory approval. So when they give the green light we will go ahead because it is regulatory authority induced, based on the new CBN guideline that for you to be a National mortgage bank, you must have a capital base of N5 billion. We intend to be among the first five mortgage banks in the country. Currently we are among the first ten. Extension of deadline for PMB recapitalisation We’ve been on this for the past 2, 3 years, so they’ve given the mortgage sector enough time for us to know what to do. And a lot of my colleagues are either going through mergers right now to meet up with the requirement with those who have scaled through. Some will like to stay as a state mortgage bank which is at N2.5 billion. So I strongly
The mortgage sector is the future of Nigeria’s economy — MBAN President
NHF disbursement by Resort Savings For us, in terms of disbursement, total disbursement from FMBN is in excess of N800 million as at the last count. And when you talk of total number of people that have benefited from the scheme through us, I’d say it’s going to be in excess of 400 people so far. But in terms of processing, we have in excess of 3,000 that we are currently processing with FMBN, which if we are going to put together it will measure up to about N8 billion, that is in terms of the processing that are in their system already, but the ones that have got disbursed are N800 million. Importance of the mortgage sector to the economy The mortgage sector is the future, whether we like it or not, it’s the future. It’s just that we have a lopsided policy in place here. Out there in Europe and the US, mortgage banks are the biggest banks. It’s just out here that the reverse is the case. Because everybody needs a roof over their head and mortgages are the inthing over there. We also have some negative cultural beliefs here. But all those are being changed right now. The mortgage sector is a place to invest in. It’s a long-term investment but I can guarantee you that there is a steady, stable stream of income coming from the mortgage sector, because there is nothing you can get wrong in bricks and mortar. Once the house is there, even if the houses are not being lived in by you, you can rent it out. There will be a stream of income. Nigerian Mortgage Company (NMC) and interest rates The mortgage sector has
•Abimbola Olayinka, MD RSL & MBAN President
There is a steady, stable stream of income coming from the mortgage sector, because there is nothing you can get wrong in bricks and mortar
some peculiar problems. One of them is long term funds, another one is liquidity, interest rate, foreclosure laws, land use act, so many. But we in the mortgage sector decided that let’s take one and deal with it. What is the key problem and one of the major problems is liquidity. If I have N5 billion and book mortgages of N5 million, if I give out 1000 mortgages, N5 billion is gone. And when I spend everything on mortgage, what happens after that? So, we said that liquidity is the key thing, we need to create a vehicle which after creating a primary mortgage, we can now offload those mortgages onto that vehicle and the vehicle will create liquidity, inject funds back by buying the mortgages off me and then
be able to contribute about 5 percent to GDP and if all these things we are talking about are put in place, the focus will change. If we can achieve 5 percent of GDP, we have gone a long way. And the impact of this will reflect on the economy, because the value of things will change. Can higher capitalisation help the mortgage sector? When you are better capitalised, it helps in your business and then you have capacity to absorb shock, because we are in the banking system, and there will always be shocks. Let’s look at it, the CBN capitalisation plan, technically what is N5 billion, divide it by 150, that is just about $32 million, when the banks are in billions. It’s just the beginning. So ultimately in the next few years, I think the focus will shift towards the mortgage sector. That’s where to invest in.
believe that between March and April, we will have these sorted out. So we will not talk about extension, it’s a done deal and we need to be well capitalised to move the sector forward. All things being equal, at the end of the day, we’ll probably just have maybe about 25 mortgage banks from the current number in excess of 70.
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By YINKA KOLAWOLE
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they can now pull the mortgages back together in terms of mortgage-backed securities or mortgage bonds and offer it to the capital market so investors can also invest in it. That is the primary aim of that company, to create liquidity. We are collaborating with IFC, World Bank, Federal Ministry of Finance, and Central Bank of Nigeria (CBN). The initiative came from MBAN and that vehicle should become operational by the third quarter of this year. Initially, the statutory plan is to start with about 20 billion and then it will grow. It’s going to be far more than that, on a yearly basis it will grow. Mortgage contribution to GDP Our focus is that within the next five years, we should
On interest NHF rate, any hidden charges? The rate is six percent. We borrow from FMBN on your behalf at four percent. We carry all the risks, so the only spread we have is two percent and even that two percent does not even exist. Out of that two percent, I make one percent provision on all risk assets. Statutorily, I pay about 0.5 percent to NDIC as premium, so where is the spread really. Basically, you don’t have more than 0.5 or one per cent, so mortgage banks are allowed to charge some processing fees in processing the NHF. The interest rate is fixed, it’s six percent and the processing fee is a one-off fee, you don’t keep charging it. Safety of raising funds from capital market Right now, I believe confidence has been restored to the capital market. We all lost money three years ago, everybody has moved on. There has been capital appreciation in the market, on the average now we would be having an excess of 20 per cent. It’s been growing everyday and I don’t see it coming down again because now the stocks are properly priced. The worst case is over for the market, it’s just for us to see the boom. Also, we by virtue of being a PLC, we needed to get a clearance at our AGM. We had our AGM in November and our shareholders gave us the go ahead. So we already have in excess of 12,000 shareholders and they’ve given us the nod and we are going ahead. So people are already prepared to fund the rights issue and the public offer.
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Housing & Homes Finance BRIEFS Lagos Commissioner lists challenges of mass housing
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agos State Commissioner for Housing, Bosun Jeje, has identified the issue of project cost, standard of job delivery and time constraints as some of the main challenges of mass housing development in this part of the world. He stated this in Lagos at a forum for stakeholders in the housing sector recently. “There the urgent need for us to find ways of reducing cost, maintain standard, build functional and sustainable structures with dignifying aesthetic and finishing, yet deliver within the shortest possible time,” he said. Jeje stressed that many countries have put considerable efforts into the optimisation of the construction industry, ranging from reduction of energy consumption to the lesser use of materials and labours, all of which are aimed at reducing the costs as well as time of construction.
RSL extends charity to less privileged By EBUN SESSOU
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esorts Savings and Loans Plc has expressed readiness to always cater for the less privileged in the society in ways that will put smile on their faces. Managing Director of the mortgage bank, Mr. Abimola Olayinka, stated this when the bank paid a courtesy visit to Little Saints Orphanage and the Lagos State Old People Homes in Lancaster Avenue Sabo Yaba, Lagos. He said the move is one of the firm’s ways of promoting corporate social responsibility, adding that the visit was a show of love for people who needed to be showed love. “There is a need for us as a bank to show love and care for people who don’t have the privilege that we have. Our visit was more of a solidarity visit and a show of our love for people who needed to be showed love. RSL is committed to promoting shelter for Nigerians.”
•Housing development like this require intervention funding
Mortgage financing: Experts advocate use of idle funds STORIES BY YINKA KOLAWOLE
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ome experts in the built environment have called for the pooling of idle funds in the nation’s economy to provide low interest mortgage financing, as a possible way of enhancing homeownership in Nigeria and thus reducing the huge housing deficit in the country. They posit that such is not a new consent as it is practised globally where idle public funds are used to finance construction of governmentsubsidised housing. They lamented that mortgage financing is yet to have any significant impact in the country, arguing that the sector is a potential national income earner. Speaking at the recent inaugural members’ dinner and cocktail night of the International Real Estate Federation (FIABCI), Mr. Joe Idudu, a past president of Nigerian Institution of Estate Surveyors and Valuers (NIESV), noted that currently, mortgage finance contributed less than 1 percent of GDP in Nigeria, which contrasts sharply with what obtains in some emerging markets. He specifically declared that idle funds such as unclaimed dividends are needed to address the appalling state of mortgage finance in the country. “The major problem of mortgage today is that it is too expensive to manage as interest rates are very high. What we need is seed money such as idle funds like unclaimed dividends to serve as buffers to bring down the rates,” he said. Idudu remarked that all
efforts by government to reform the mortgage sector has been largely unsuccessful because there are not enough funds being injected into the sector to assist in driving it. He recalled that some measures introduced by the Central Bank of Nigeria (CBN) in 2006 in order to galvanise the sector over a period of five years could achieve the desired results because of paucity of funds available to operators in the sector. In the same vein, mortgage banks operators and estate developers have been courting the federal government to encourage the investment of a chunk of the
pension funds running into about N3 trillion in the mortgage sector. Managing Director of Sun Trust Savings and Loans Limited, Mr. Mohammed Jibrin, noted that being a long-term funds, the pension funds is best suited for investment in the mortgage sector which is also long-term in nature. “The Pension Reform Act, 2004, has made it possible for people to have a contributory pension scheme in place. The pension industry has an estimated N2.4 trillion of pension funds under management. These are mostly long-term funds and are the most qualified to support the mortgage industry in attaining its
millennium development goals. But these funds, understandably, are mostly locked up in government treasury bills and bonds. “These (pension) funds have to be unlocked and made available for the real estate sector. This is because the funds are basically, as I pointed out, long-term and you may not have the problem we experience today in terms of mismatch in the maturity profile of the loans we grant, because mortgage loans are long term as against the deposits we take that are mostly short-tenured. If you do an actuarial valuation of the pension funds managed by the PFAs (Pension Fund Administrators), the minimum average number of years the money will remain with the PFAs is about 20 years. This is what we call long term money. This is the type of money you expect should go into the housing and mortgage sector,” he stated. Jibrin asserted that mortgage bank operators have been in constant dialogue with key functionaries in government on the development. “There have been varied meetings and position papers to this effect. Minister of Housing and Urban Development, Ms. Ama Pepple has been holding stakeholder meetings with the sector. She has set up committees, and the Federal Mortgage Bank has been providing the necessary support to this effect. I am aware that the Minister of Finance and the Coordinator of the Economy, Dr. Ngozi Okonjo-Iweala, is committed to and looking at the housing sector as a catalyst for growth and employment generation. I know that the Housing and Finance ministers have been working together to ensure that the housing sector is jump-started seriously this year. It is on top of their radar.
Nigerians among top Dubai property investors D
ubai has long been the regional hub for the oilrich Gulf States, but the ambitious city state is never one to rest on its laurels. The emirate has for years been touting itself as the central node for 2 billion people, spanning the Middle East, the subcontinent, central Asia and eastern Africa. Now, even West Africa, an eight-hour flight away, is on its radar. Paris and London have long been the hub for western African states, but Dubai is now giving these established centres a run for their money. Emirates airline’s DubaiLagos flight is renowned for constantly being packed. Some banks, such as Standard Chartered, have chosen to cover some business lines in sub-Saharan Africa from its regional headquarters
at Dubai’s financial centre. Luring talent to the comfortable Dubai lifestyle is easier than some African postings, while reaching various outposts of the continent can be easier from the city’s thriving airport than other hubs, such as Johannesburg and Nairobi. As Chinese and Asian firms chose Dubai for their regional headquarters, often these businesses are not only targeting the Gulf, but looking to use the city as a launch-pad into sub-Saharan Africa as well. And the investment flows are going both ways. According to the Financial Times, an Abu Dhabi based newspaperThe National, reports that Nigerians are flooding Dubai’s property market, especially as it starts
to show signs of recovery after four years in the doldrums. It isn’t exactly a new trend. Even at the property market’s nadir, after the real estate crash wiped more than 50 per cent off average valuations in the autumn of 2008, Nigerians were known as likely buyers. One real estate agent said at the time that Nigerians were the only nationality buying properties as the market went into free fall. And the Nigeria-Dubai property love-in is still going strong as the property market in general improves. Jones Lang LaSalle in a recent second-quarter report noted that villa prices in Dubai had risen by around 20 per cent over last year, while apartments in popular buildings are flat on the year.
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Insurance Insurance companies have entered the pension business with some level of aggre s s i o n ; h o w e v e r, stakeholders are warning that the CPS should be handled with caution if it must survive
How the CPS is brewing cold war between insurers and PFOs
By ROSEMARY ONUOHA
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The competition A major bone of contention is the de-marketing by marketers of both sectors, even as PFOs are accusing insurers of a higher level of de-marketing. Managing Director of Leadway Pensure PFA,
•Remi Olowude, Chairman, Nigerian Insurers Association
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he Contributory Pension Scheme, CPS, introduced by the Pension Reform Act, PRA, 2004, seeks amongst others to ensure that every worker receives his retirement benefits as and when due. Accordingly, the Act requires a Retirement Savings Account, RSA, holder upon retirement to access the balance of his RSA through programmed withdrawal or through annuity. The programmed withdrawal pays pension over an expected life span while annuity pays pension for life. An annuity for life can be purchased from a life insurance company licensed by the National Insurance Commission, NAICOM, with monthly or quarterly payments. In other words, annuity is a regular income received from an insurance company in consideration for payment of premium. Whereas the Pension Fund Operators, PFOs, have commenced programmed withdrawal since 2005, the insurance companies only commenced annuity programme in 2010. However, with the entrance of insurers into the pension market, there is a stiff competition for who will control a larger chunk of the market with fears that the insurance companies are not playing fair. The insurance sector is known for its stiff and cut throat competitive business environment, with high level unprofessionalism just to get business at all cost. It is with such knowledge in mind that operators in the pension sector have called out to the National Pension Commission, PenCom, and NAICOM to up their regulatory mechanisms so that the CPS does not die.
•Dave Uduanu, Chairman, Pension Fund Operators
The market is so large that I am disturbed at the desperation by our marketers in the field and it actually sends a wrong signal to customers. I have had customers come to me worried of the desperation and aggression that marketers have shown them
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Mrs. Ronke Adedeji said “The market is so large that I am disturbed at the desperation by our marketers in the field and it actually sends a wrong signal to customers. I have had customers come to me worried of the desperation and aggression that marketers have shown them and I think the desperation is more on the insurance side because the PFAs already started the product and we are at a position of comfort until the insurance companies joined us and the desperation is really a cause for concern.” While stating that insurance marketers promise outrageous offers to customers, Adedeji said “I have heard of commissions that are so large and some
people say that the additional lump sum they are offered is actually the insurance agents sharing their commission.” Also reacting to the allegation that insurance companies promise to give loans to retirees if they patronise them, Adedeji said “On the issue of loans, my thinking is that it will be illegal to offer loans based on someone’s pension. The Acts actually prohibits using your pension fund as credit for a loan.” Managing Director of Pension Alliance Limited, Mr. Dave Uduanu also said that it is illegal to grant loans on retirement benefits. “The law says you cannot grant loan on retirement benefits, so whether it is warehoused with pension
fund administrators or insurance companies, it is wrong. The regulator should go against this development,” Uduanu stated.
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he way forward On the way forward, Adedeji said that some kind of regulation or guidance should go into commissions which insurance companies give to their agents. According to her, “There is need to have a long term view of the market, we should focus more on sustainability and building credibility. Let’s not forget that there are people out there who still believe that the scheme will not work, so we don’t need to position ourselves in such a way that we let it fail. Adedeji called on regulators of both sectors to carry out joint inspection when it comes to annuity, adding “So far both regulators are not doing that and I want to encourage them to do joint inspection.” She also called for the creation of pension custodians to manage annuity saying, “When you have a custodian what you have done is that you have
given ownership or tied the assets to an independent body. This body is independent from those who manage the assets and so what you have done is reassign the assets and separated them from the risks that the managers may be exposed to. This is Nigeria and we have seen financial institutions come and go and so it is important for us to put this additional safeguard into the industry.” According to her, the regulators should employ the use of sanctions where it becomes necessary. For Uduanu, annuity funds should be held by custodians. “All pension funds, whether it is programmed withdrawal or annuity, should be held with custodians. “If we want to sanitise the industry, it is something that we have to do. It means that you cannot invest the funds in something that does not make sense because the regulator will not allow you to that. The custodian will only allow you to invest the assets in accordance with the guideline,” Uduanu said. Uduanu also said that the guideline on 25 per cent additional capital by owners of pension fund custodians should be applied to insurers. He said “The banks that own pension fund custodians are now required to bring 25 per cent additional capital for the pension funds that are in their custody, I don’t think that there is such guideline for insurance companies. That is what solvency margin is supposed to address. That is something that restrains small insurance companies from going to sell annuity. So between PenCom and NAICOM, they should look at it and review the guidelines accordingly.” However on the insurance side, Managing Director, Capital Express Assurance, Mrs. Bola Odukale, said “I would desire a situation where at some point in time, we are able to come to a point where the issue of pricing is looked into so much so that we can have an environment where pricing is safe and not a situation where one man is killing the other.”
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Agric BRIEF FG to distribute flood-tolerant rice varieties to farmers, says Seeds Council DG
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he Federal Government will soon start distributing floodtolerant rice varieties to farmers, says Mr Olusegun Olatokun, the acting Director-General of the National Agricultural Seeds Council (NASC). He said that the council was working closely with the International Rice Research Institute (IRRI), Philippines, to facilitate the distribution. We realised that, that flood actually dealt with peasant farmers dastardly. That is where we now introduced this flood tolerant varieties that when you plant it, in case we now experience another flood, that variety can stay under water for two, three weeks. “And when the flood recede, the thing comes back and still produce and yield quantity. We were able to link up with International Rice Research Institute (IRRI) in Philippine and they helped us. “We are still linking up with them; we are even going to understudy their own management of that flood tolerant varieties.
FAO Food Price Index remains unchanged in January
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he FAO Food Price Index held steady at 210 points in January 2013 after three straight months of decline. Increases in oil and fats prices offset lower cereals and sugar quotations while dairy and meat values remained substantially unchanged. The pause in the Index’s decline tallies with a significant upward revision in FAO’s latest forecast for 2012 world cereal production. This is now estimated at 2 302 million tonnes - 20 million tonnes up on December’s forecast. FAO’s monthly Cereals Supply and Demand Brief noted that the revision mostly reflects adjustments to maize production estimates in China, North America and the European CIS countries. But even at the new level, global cereal output would still be 2 percent down on the 2011 record crop. Early prospects for 2013 cereal production point to increased world wheat output.
L-R—Dr Kenton Dashiell, Deputy Director General, Partnership and Capacity Development (IITA); Godwin Atser, Communication Officer (IITA); and Professor Timothy Olagbemiro, Vice Chancellor of Bowen University during a courtesy visit to IITA in Ibadan. Bowen University presented a plaque in recognition of IITA’s support to the university.
Post Harvest losses: Africa loses food valued at $4b annually BY JIMOH BABATUNDE with agency reports
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n international workshop on post-harvest losses rose from it meeting in Kenya last week with a report that Africa loses food valued at over USD 4 billion dollars every year as a result of postharvest inefficiencies across the staples agricultural value chain. Ms. Anne Mbaabu Director of Markets at the Alliance for a Green Revolution in Africa (AGRA) called on governments to urgently invest in systems that will lead to a huge reduction in post-harvest losses and increase income levels of actors across various agricultural value chains. “Post-harvest losses significantly endanger the livelihoods of stakeholders across the value chain by reducing valuable incomes and profitability,” Ms. Mbaabu said. “Research has shown that a reduction of just one per cent in post-harvest losses can lead to a gain of USD 40 million annually. Imagine the impact if we are to reduce the losses by just two per cent,” she said. Participants at the meeting hosted by AGRA, in partnership with Bill & Melinda Gates Foundation, agreed that postharvest losses are a major contributor to food insecurity in Africa and there is an urgent need to mitigate the negative impacts across the agricultural value chain. They decried the fact that there is very little data to demonstrate the real impact of post-harvest losses
in Africa. AGRA President Jane Karuku called on African governments to take bold actions towards reducing the high level of post-harvest losses across the continent noting that value chain actors and particularly small holder farmers were losing potential incomes through systemic inefficiencies. “If we are serious about breaking the cycle of poverty, we must develop efficient systems for ensuring that the food we produce is properly stored, transported and marketed,” she said. “At AGRA, we are keen to work with various partners to come out with viable approaches to address this critical issue because we would like to see the emergence of more efficient value chains. This would ultimately benefit the smallholder farmer who is our primary focus.” The workshop reviewed the outcomes of the first phase of a study that seeks to establish the levels of post-harvest losses along the stages of the value chain in 11 countries across Africa including Ethiopia, Ghana, Kenya, Malawi, Mozambique, Zambia, Tanzania, Burkina Faso, Nigeria, Uganda and Mali. The study targets various staple crops including maize, rice, cassava, sweet potatoes, sorghum, millet and grain legumes such as cowpeas, soybeans, groundnuts and beans. The study seeks to determine the status of post-harvest losses and storage at various levels including the farmer level, aggregation centers and in grain traders’ stores. It seeks to determine the major factors that cause post-
harvest losses, identify local postharvest management practices and come up with recommendation for improving storage structures. The participants discussed the methodological challenges of collecting reliable and comparable data on the magnitude to postharvest losses and the different factors contributing to them. Participants called for more harmonized data collection methodologies to ensure that comparable losses of quality, quantity and economic losses. “ We need stronger interorganizational collaboration to benchmark current approaches and ensure more reliable estimation of post-harvest losses in the continent,” Dr Irene S. Egyir, the lead Researcher for the study said. “At the moment, though there are many studies available, the lack of a standard methodology from country to country makes it difficult to compare the date and draw conclusion.” Meanwhile, Malawi’s Principal Secretary for Gender, Dr. Mary Shawa has said that Africa urgently needs to find ways of scaling up the involvement of women in various agricultural value chains if the continent is to reduce poverty among its smallholder farmers. Speaking at an international conference on Gender in Lilongwe, Dr. Shawa said that the African agriculture sector can only achieve its full potential if the important role played by women in agricultural value chains was acknowledged, appreciated and supported.
Vanguard, MONDAY, FEBRUARY 11, 2013 — 35
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rom the first annual Nigerian Economic Summit Group, introduced by Chief Ernest Shonekan, in 1992, till today, the complex issues summarized as development had been on the front of the national agenda. Development, apart from leading to improved economic, social, political and personal welfare was expected to lead Nigeria towards what many had regarded as our own manifest destiny. Often stated but not yet realized, was the notion that it would make our country the largest economy in Africa and truly make Nigeria the giant of Africa. Several reasons have been offered to explain the gap between the dream and the reality. Out of all the multiple causes of our low development, despite our universally acknowledged potential, perhaps, the single most important is the change from collective cake baking to cake sharing. Permit me to use an analogy which should drive the point home, especially at this time when we are embarking on reviewing the 1999 constitution – which like all the military imposed constitutions, had merely aided in fostering our underdevelopment.
Nigeria’s arrested development; from Baking to sharing cake Imagine, if you can, a set of kids to whose fathers had rolled up their sleeves and worked, tirelessly, to raise them well; gave them the best education at the time; taught them the lessons of thrift and hard and differentiated work; inculcated the spirit of selfreliance; and, above all, left a society where crime did not pay. Each household (read region) competed with the others for progress because theirs was not a society where “Wealth without work” (apologies to Ghandi) was celebrated. During the era, their communities were growing as far as any in the world. Poverty was negligible because idleness was abhorred; there was dignity of labour; a university professor was as highly paid as a Permanent Secretary and there was near food selfsufficiency. That was Nigeria until 1966. There was true federalism anchored on the principle of derivation. The Western Region, which then included Edo and Delta, established agricultural research institutes to diversify its export base and to produce intermediate products. The Eastern Region went all out to find markets for its coal. The North was famous for the
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“Destiny is not a matter of chance; it is a matter of choice. It is not a thing to be waited for; it is a thing to be achieved”. William Jenning Bryan, 1860-1925. (VANGUARD BOOK OF QUOTATIONS p 38).
In a nation of bakers, where everybody is, to a great extent, selfreliant, there is very little fear of being “cheated”; in a nation of sharers, the suspicion is pervasive. Indeed, it is inevitable that more for A means less for B, C, D
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groundnut pyramids and for leather tanning – among other things. Agriculture was truly the backbone of the Nigerian economy and since each region’s revenue was a function of how much it earned, cake sharing was out of question. The first military coup, apart from the lasting damage it did to our corporate political existence, also introduced centralization of
revenue and “cake sharing”. That, by itself, would have retarded our growth and march towards economic greatness. The discovery of crude oil in large volumes exacerbated the problem such that, today, only a few of the states created from the balkanized regions can survive on their own internally generated revenue. The sudden influx on huge oil revenue had blinded successive military regimes to the dangers ahead as we moved from three regions to thirty-six states – about thirty of which depend on the federally allocation revenue. Our transition from cake bakers, a productive group, to cake sharers, a consuming collection of beggar states, had all but guaranteed that economic progress would be retarded and the struggle for political supremacy will intensify. Unfortunately, it has not yet dawned on us that murderous political struggles can never allow the sort of cooperation which can promote rapid economic growth. Bad politics is killing the nation more than anything else. In a nation of bakers, where everybody is, to a great extent, self-reliant, there is very little fear of being “cheated”; in a
nation of sharers, the suspicion is pervasive. Indeed, it is inevitable that more for A means less for B, C, D etc. Furthermore, it is even killing all the incentive to be self-reliant. Let me again give an example. South Africa is blessed with large deposits of coal; so is Nigeria. On the eve of our independence in 1960, both South Africa and Nigeria generated a great deal of their power from coal. Today, about 15% of South African power supply, now about 45,000MW or 6,750 MW comes from coal. That is 2,500MW more than Nigeria generates from her hydro and gas fired power plants. The Jonathan government which had been asking us to clap, for providing 4,250 MW, will probably declare a public holiday and expect us to dance in the streets if they ever achieve 6,750 MW. Yet, power generation in Nigeria started with coal. But, no sooner did oil revenue become the mainstay of our economy than we abandoned coal powered plants. Instead of learning about new developments that could have made coal an option for generating power, we scrapped it.
Business & Economy
R-wells announces mother’s day celebration plan
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-wells Media and Advertising Company Limited has announced plans for its Mother ’s Day celebration, with a view to making mothers understand their place in the society. The company, producers of Health Monitor, My Tomorrow Young Scholars and Tripple M TV programme, said that the fiesta tagged “Celebrating Motherhood” is scheduled to hold on March 9, 2013, at the National Theatre, Igamu Lagos, where issues concerning mother ’s would be discussed. Activities lined up for the day include: Memories of my mother; Women empowerment; Health Monitor workshop; Mothers in nation building; outstanding mothers recognition, among others.
Speaking at the mother ’s day fiesta media parley, to formally announce the event, Managing Director/ Chief Executive of R-wells, Mrs Jibe Ologeh explained that the celebration, prompted by mother ’s world segment, a programme by R-wells is to show that mothers are not just ordinary people but extraordinary people. Ologeh said, “Over the years, Mothers were being celebrated in churches in accordance with certain beliefs, norms and cultural heritage and other religious places, but we have come out to say no, let’s celebrate mothers in a very well order of inclination. However, the roles of mothers go beyond the Churches, thus, we are celebrating mothers across all
religion. Mothers Day Celebration has been universally accepted as a day when Mothers are celebrated and appreciated for their unflinching role in the family, society and nation at large.”
She however, urged the government to participate by assisting the initiative with fund, just as she beckoned on well meaning Nigerians for sponsorship. General Manager, R-wells,
Mr. Robie Ukah said, “There is hope for mothers in Nigeria and that is why we are celebrating, the essence of this programme is to let the mothers know who they are.
Slow down in MfB Associations' activities
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ctivities in various micrfinance banks' associations at the state and zonal level have dropped since the beginning of the year, National Association of Microfinance Banks (NAMB) said. NAMB attributed the slowdown to apprehension on the part of operators as regards the consequence of the pronouncement of Other
Financial and Supervision Institutions Department, OFSID. It would be recalled that the apex regulator gave December 31, 2012 as deadline for all MfBs operating in the nation to recapitalize to remain Unit, State or National microfinance Bank. Accordingly, NAMB said, “MFBs are apprehensive because of the pronouncement of the OFSID. They even fail
in sending their staff for the Certification programme and they are not paying their annual dues. State Governments are beginning to withdraw their patronage of MFBs. Branch closure will reduce the reach out to extend financial services to the poor and Underbanked in Nigeria. This will further compound the crime rate in the country.”
36 — Vanguard, MONDAY, FEBRUARY 11, 2013
FP Advert
Vanguard, MONDAY, FEBRUARY 11, 2013 — 37
Advertising, Media & Marketing
We need more youth entrepreneurs in Nigeria — Intel year when all these technology and entrepreneurship training will come to a halt? What is the target? In terms of number, how many students are we looking at? We are just starting, so we can’t be talking of stopping. Our focus is not really the numbers. Our focus is on the impact. Now we’ve started in Lagos, we are going to go from Lagos to the entire South West and then to the South East, and then we scale up. What we are doing is to have a pool of master trainers, Senior Master Trainers who have been trained across the country. So, as we scale to those parts of the country, those master trainers will conduct the training in their own locality. So ultimately, our target is to have an Intel technology & Entrepreneurship Trainer, in every State of the Federation where there is National Youth Service.
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r. Osagie Ogunbor, Corporate Affairs Manager of Intel Corporation, West Africa in this interview reveals why the firm is training fresh graduates on technology and entrepreneurship to enable them set up businesses rather than seek for jobs as part of its Corporate Social Responsibility (CSR). Princewill Ekwujuru reports.
From what you have just said, there appears to be recognition of the critical role in the case of technology, how important is entrepreneurship in this phase? What do you think the training will bring to the nation particularly? Well typically, entrepreneurship is everything to them at this moment. They are coming out of Universities and they are at a critical point in life where they have to take life changing decisions; Are they going to look for jobs, Are they going to set up their own businesses, What are they going to do? Now we know that hundreds of thousands of graduates are coming out every year. We also know that we have very few vacancies and job opportunities for them. What that means therefore is that year
Mr. Osagie Ogunbor
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Why is Intel engaging in this training venture? As you can see from today’s training, this is a bit different from what Intel is typically known for. Before now, Intel was engaged with training of teachers. Indeed in the last five years, we have trained over a hundred thousand teachers in Nigeria and over Ten million globally. So that used to be our focus, but now, we are beginning to see that the reality on ground is that there are other areas that need attention. In Nigeria, you know there is a huge problem of unemployment, there is a huge problem of social restiveness. We believe that the root cause of some of these things is the fact that youths are not properly equipped with the right skills especially in the use of st technology in the 21 century workplace and business environment. We therefore thought it was a worthwhile decision to use our platform to provide some sort of Technology and Entrepreneurial Training for these youths who are just coming out of college and that’s how we came about the training for youth corps members. This is a pilot scheme starting in Lagos and over the months and years it is going to become a National programme.
In those days, when you start a job, you are given pen and paper and files, today, when you start a new job, you are given a computer either a desktop or a laptop
in, year out, you are having hundreds of thousands of graduates who have nothing to do. So we are saying to them that rather than have a fixation on looking for jobs, there is an option to actually set up their own business, to be an employer of labour rather than being a figure looking for work. So that’s the first option. The second option is that even when you decide to work in a formal environment, you need to be equipped to be able to survive in that formal environment. In those days, when you start a job, you are given pen and paper and files, today, when you start a new job, you are given a computer either a desktop or a laptop. Today’s graduates have to be technologically equipped to be able to function in that kind of workspace. So it means that even if you want to work, if you don’t have the kind of technological training which we are giving now, you cannot fit in. If you were taught in your University using analogue method, sitting down and
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taking notes, you come to the office and you don’t know how to boot a computer, you will not be employable and that’s a critical problem. We’ve got graduates who are not employable. So what we are doing is equipping them to be one, employable and two, Should they not want to work, have the necessary skills to be able to set up businesses and run it. We have got loads of them who have Uncles and relatives who can actually give them seed capital to start-up businesses. But again, do they have the basic know-how to run these businesses profitably so that they themselves are able to take care of themselves and even employ more people, the economy gets better for it, more people are employed, tax income increases for government and the economy is better for it.
Sir, you said at the beginning that the training is to come in phases, my question is will there be an end like a specific
Will this training be on specific areas or different areas? Basically, the curriculum for entrepreneurship is basic. It’s not an MBA as such what it does is to teach you the rudiments of setting up a business. What you need to do before setting up a business, what are the empirical meters that you must look into, what informs the choice of business you want to do? You know people just come out of school and say ‘well I think that baking is something I want to go into and it’s my passion and I must go into it. But in their locality, it might not be the most profitable business. So there are empirical indices to determine that. What is the competition for that business in your neighbourhood? What skill do you have, what is your unique selling point, what must you put in place so that you can become competitive? These are the basic skills we are teaching people and it’s not like they probably don’t know, but it’s just that we are bringing it to their consciousness now. And when you bring it to their consciousness, they begin to realize it. We have entered into partnerships with relevant NGO’s to enter these corps members into a business plan competition so when they are through with it, the final product of this training is that each person gets a chance to produce a business plan of their own business. They submit the business plan into the contest and 1,200 people stand a chance of up to winning 10m naira each, courtesy of the Federal Government. So first of all, you are being trained in Technology and Entrepreneurship, you then have a chance to even get the capital to start the business.
BRIEFS Niche IMC Joins ICOM+IN Network
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iche IMC, one N i g e r i a ’ s integrated marketing communications firms has joined the fast growing ICOM+IN, a global network of independent advertising and marketing communications agencies. According to information from the global network, Niche IMC becomes the ninth agency member of the rapidly growing ICOM+IN Africa Network, joining agencies in Angola, Ghana, Ivory Coast, Mozambique, South Africa, Tanzania and Zambia. With the appointment, Niche IMC, Lagos, will represent the network’s businesses and interests in Nigeria.
Valentine: Largest card to be displayed at Bon ‘Marche Festival’
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his year ’s edition of Strands Events will wear a new look this season as it is also dubbed “Bon Marche Fairstival”with the largest Valentine card in display. As a tradition with repute, the Student Trade Fair which runs its 8th edition seeks to actualize the vision of building an economy of endless opportunities. Speaking, Alafia Gbadebo, Managing Director, Strands Nigeria Limited organizers of the Bon Marche Fairstival, said the defining purpose of Bon Marche Fairstival is helping in creating economic opportunity for businesses to thrive. By promoting trade and investment we are promoting prosperity and a better world. In understanding the role of Youth as pacesetters in nation development, the need to evolve a platform such as this is inevitable.
38 — Vanguard, MONDAY, FEBRUARY 11, 2013
Tax Issue
Virgin Atlantic on offensive as Delta deal ends wilderness years
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irgin Atlantic Airways Ltd. will go on the offensive under new Chief Executive Officer Craig Kreeger as an equity deal with Delta Air Lines Inc. gives it the backing to take on bigger rivals, outgoing CEO Steve Ridgway said. Kreeger, a 53-year-old American, was appointed to the top position on Jan. 8, four weeks after Delta agreed to pay Singapore Airlines Ltd. $360 million for a 49 percent stake in Virgin, which is majority owned by billionaire Richard Branson. “There’s now a shareholder with a significant strategic interest in what Virgin Atlantic brings them,” Ridgway said in an interview. “We’ve been in fighting mode for the last four to five years. This should put us back on a growth trajectory.” The first task for Kreeger, who took over on Feb. 1, will be to expedite the twomonth old joint venture agreement with Delta, Ridgway said. The new CEO’s 27 years at AMR Corp., where he helped coordinate a joint venture between American Airlines and BA, should help him deliver on the new tie-up, he said. “He brings a wealth of experience at American in dealing and working with British Airways,” Ridgway said yesterday in London. “That’s what we need because we’ve got to put together this North Atlantic joint venture now and there is a set of skills there that Virgin needs to have.” Delta and Virgin are seeking antitrust immunity that would let them coordinate schedules and pricing and share costs and sales from 31 joint-venture flights over the Atlantic regardless of whose plane operates the route. They also will offer reciprocal frequent-flier benefits and use of airport lounges. The deal gives Delta a platform at London
Self assessment can drive tax growth in 2013 BY FRANK OBARO
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any tax jurisdictions now rely on selfassessment as the major means of tax collection; it has become a tax modern administration trend. Indeed it is now a measure of how up-to-date a tax authority is. By way of definition, it is a tax regime whereby the taxpayer is granted the right, by law, to compute his own tax liability, pays the tax due (at a designated bank, as is the case in Nigeria) and produces evidence of tax paid to the Tax Office, at the time of filing tax returns, on due date. On the part of the tax authority, it accepts the tax returns as filed, subject to completeness, and carry out audit in due course. Very much unlike an administrative assessment were the tax authority raises an assessment where a taxpayer has failed to file returns and pay taxes due on or before the due date or where there is an understatement of tax in the returns filed. With the taxpayer ’s assumption of the role of assessing self, an obligation arises for the tax authority to ensure that the taxpayer understands the procedures involved in tax administration and how to compute tax liabilities and complete tax returns (if the option is selfservice). In addition to taxpayer enablement, it is the responsibility of the tax authority to ensure compliance with all tax administration processes especially accuracy of declarations made and the timeliness of tax returns. In Nigeria, the Federal Inland Revenue Service (FIRS) introduced the self assessment regime in 1992 following the enactment of the appropriate law in 1991. The FIRS Board in exercise of the powers conferred on it by Section 61 of the Federal Inland Revenue Service (Establishment) Act 2007 with the approval of the Minister of Finance gazetted a Regulation dated 19 December 2011 modifying the processes and procedures for self assessment returns. The Regulations cover tax returns under the Companies Income Tax Act (CITA), Education Tax Act (ETA), Petroleum Profit Tax Act (PPTA), Personal Income Tax Act (PITA), National Information Technology Development Act (NITDA), and Value Added Tax Act (VATA).
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BRIEFS
Generally speaking, the adoption of self assessment principles reflects a desire to move away from in-house administrative assessment procedures in favour of more comprehensive and targeted approaches
However the method has not been as successful as envisaged. Many will argue that risk based audit which is a major feature of self assessment has not been not been fully optimized. Risk based audit assist in risk identification, analysis, assessment, evaluation and prioritization, with the predetermined risk ratios drawn from a risk framework, every tax return is subjected to risk analysis and assessment. This in itself is a departure from the government assessment of best of judgement where time and capacity impeded 100% audit. Under risk based audit, resources are applied to areas of risk in the order of the weight attached. Fundamentally, automation of the filing process will encourage taxpayers to file their returns independently instead of using the outdated administrative assessment or best of judgement. In this regard the Integrated Tax Administration System (ITAS) project being undertaken by the FIRS will play a key role. FIRS will need to fully exploit technology to endear efficiency in the process of
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Self-Assessment. Also for the benefits of Self Assessment to be fully optimized a more robust mechanism whereby compliance checks are conducted through risk based case selection for audit; In which case, all Tax returns have equal chance of being selected for audit. This approach is a demonstration of transparency in tax administration and is expected to encourage self disclosure and clearer disclosure benchmarks also need be to put in place. Another key driver will be to have a strong Audit and Compliance department that can ensure the validity of disclosure. Using the Australian Tax Office (ATO) as a global case study of the self-assessment system, the claims a taxpayer makes in their tax return are accepted by the (ATO), usually without adjustment, and an assessment notice is issued. Even though we may initially accept the tax return, the return may still be subject to further review. To ensure the integrity of the tax system, the law provides
the ATO with a period where it may review a return (and make sure all income has been included) and may increase or decrease the amount of tax payable. The ATO has powers to amend an assessment up to two years (or four years for taxpayers with more complex tax affairs) after tax become due and payable under the assessment. Where antiavoidance provisions apply, the period is four years. Where the avoidance is due to fraud or evasion, there is no time limit on amending the assessment. If the FIRS can push such laws through it will certainly ensure and endear voluntary and honest filing of returns. Generally speaking, the adoption of self assessment principles reflects a desire to move away from in-house administrative assessment procedures in favour of more comprehensive and targeted approaches to providing help and assistance to taxpayers, and to the systemic verification of reported tax liabilities through risk-based desk and field audits and computerized matching of income reports. In countries where self-assessment has been adopted, it has generally been initiated with the objective of improving overall compliance with the laws and increasing operational efficiency by collection of tax revenue on time, streamlining the system of returns processing and reducing the incidence of disputed assessments.
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elf-assessment ultimately reduces administrative costs for tax authorities and aided by modern technology, most economies have adopted the principle to drive down cost and ensure timeliness in filling return and Nigeria can benefit from this trending revenue collection system. Self-Assessment also reduces the discretionary powers of tax officials and reduces opportunities for corruption. However, self-assessment needs to be properly regulated and implemented, with transparent rules, an automated reporting process, and penalties for noncompliance and risk based assessment procedures for audit procedures. Also the FIRS need to embark on media sensitization campaigns to achieve a change in behaviour of both taxpayers and tax officials in favour of a taxpaying culture through strict application of sanctions. This way non-compliance will be dealt with timely and will be deterred. Internal and external stakeholders’ engagements will key in implementation and success of Self-Assessment regime.
Vanguard, MONDAY, FEBRUARY 11, 2013 — 39
International Business News BRIEFS
weeks. The Brent-WTI differential has grown since Enterprise Product Partners LP said Jan. 31 that capacity will be limited until late 2013 on its Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, the delivery point for New York crude. Brent’s advance to more than $117 a barrel has been driven by improving fundamentals rather than increasing risk premium, Stefan Wieler, an analyst with Goldman Sachs in New York, said in a report dated yesterday.
EU leaders to agree push for U.S. trade deal
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urope’s leaders will agree on Friday to push for a free-trade pact with the United States, according to a draft joint statement, putting the onus on the White House to respond to a proposal that would encompass half the world’s economic output. Major exporters Germany and Britain appear to have won support from the rest of the European Union at a summit in Brussels to reach a deal with Washington that many leaders hope will help Europe pull out of its banking and debt crises. According to the draft of the final summit statement obtained by Reuters, the European Union will give “its support for a comprehensive trade agreement” with the United States. “All efforts should be devoted to pursuing agreements with key partners,” EU leaders will say, putting the United States at the top of a long list including Japan and Canada. The EU leaders’ statement raises expectations that U.S. President Barack Obama may endorse the initiative next Tuesday in his annual State of the Union speech, which presidents traditionally use to lay out their priorities for the year. Obama and EU leaders tasked their trade chiefs in 2011 to look at whether it was feasible to agree a deal to further integrate the two blocs that already have low tariffs. A U.S.-EU draft proposal drawn up by EU Trade Commissioner Karel De Gucht and U.S. Trade Representative Ron Kirk is essentially ready. De Gucht, who went to Washington this week, has given strong signals that there is enough common ground to go ahead with negotiations. Talks could start in months, and while such negotiations are notoriously slow, both sides appear to want to agree on an accord quickly, possibly by the end of 2014.
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L-r: Emmanuel Ibeziako, Publisher/ Editor-in-chief of the Businessmen Journal Presenting the Businessmen Journal Night of 100 Stars Award Plaque to Mr. Austine Eenajemo-Isire, Managing Director/CEO, Standard Alliance Life Assurance Limited, a Subsidiary of the Standard Alliance Group While Mr. Nelson Egboboh, Head, Corporate Communications, Standard Alliance Group at S.A. Life Assurance Headquarters in Victoria Island, Lagos Recently.
Brent crude advances to nine-month high, boosts premium to WTI B
rent crude, headed for a fourth weekly advance, climbed to a nine-month high in London after strongerthan-expected trade data from China, the world’s secondbiggest user. Futures rose to more than $118 a barrel for the first time since May 3, boosting their premium to West Texas Intermediate (WTI) for an eighth day to the most in almost two months. China’s exports climbed 25 percent in January from a year earlier and crude imports increased to the highest level in eight months, customs figures showed. Oil markets will “remain tight” in the first quarter and may push prices above its forecasts, Goldman Sachs Group Inc. said. “The numbers out of China are good,” said Nic Brown, head of commodity research at Natixis SA in London, who forecasts that Brent will average $107.40 this year. “China appears to be significantly stronger than even we were expecting. This is a clear upside risk for oil prices.” Brent for March settlement advanced as much as $1.17, or 1 percent, to $118.41 a barrel on the London-based ICE Futures Europe exchange and was at $118.26 at 11:51 a.m. local time. Volumes were 41 percent
more than the 100-day average. The European benchmark grade’s premium to WTI futures widened to as much as $22.05, the most since Dec. 14. Crude for March delivery on the New York Mercantile
Exchange added 44 cents to $96.27 a barrel in electronic trading. The volume of all futures traded was in line with the 100-day average. Prices are down 1.5 percent this week, after advancing 14 percent over the prior eight
rices may exceed the bank’s forecasts, which for Brent futures are at $110 a barrel over the next three-tosix months, and at $105 in 12 months. For WTI, Goldman projects a level of $102.50 in three months, $105 in six and $97 in 12 months. China bought 24.87 million metric tons of crude more than it exported last month, according to data published on the website of the Beijingbased General Administration of Customs. That’s equivalent to 5.88 million barrels a day, the most since May, data compiled by Bloomberg show. Brent, the benchmark price for more than half the world’s oil, extended gains amid signs of increased tension in the Middle East and reduced supplies by Saudi Arabia. Iran won’t be coerced into holding direct negotiations with the U.S. about its nuclear program while being threatened and simultaneously squeezed by Western sanctions, Supreme Leader Ayatollah Ali Khamenei said yesterday.
Stock futures little changed after China, German data S
tock index futures were little changed last Friday following economic data out of China and Germany, though the benchmark S&P index appeared to remain on track for its first weekly drop of the year. Data showed Chinese exports grew 25 per cent in January from a year earlier versus a forecast of 17 per cent in a Reuters poll, while imports climbed 28.8 per cent, highlighting robust domestic demand. German data showed the country’s surplus in 2012 was at its second highest in more than 60 years, in an indication of the underlying strength of Europe’s biggest economy. Comments from European Central Bank President Mario Draghi about the strength of the euro has kindled concern about the euro zone economy and sent U.S. equities lower. U.S. economic data expected on Friday includes December international trade and wholesale inventories for December. Economists in a Reuters poll
expect a trade deficit of $46.0 billion versus a $48.7 billion deficit in November while inventories are expected to be up 0.4 percent versus a 0.6 percent increase in November. The S&P 500 has risen for five straight weeks and is up 5.8 per cent for the year. Its advance was helped by legislators in Washington averting a series of automatic spending cuts and tax hikes earlier in the year, as well as better-than-expected corporate earnings and data that pointed to modest economic improvement but no immediate change in the Federal Reserve’s stimulus plans. The index has found it tougher to climb in recent days as it hovers near five-year highs. S&P 500 futures rose 0.9 point and were slightly above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 13 points, and Nasdaq 100 futures added 4.5 points.
40 — Vanguard, MONDAY, FEBRUARY 11, 2013
Email:lesleba@lesleba.com, lesleba@gmail.com Blog page:www.lesleba.com/blog2 Website: www.lesleba.com
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he recognition of the abysmal depth of corruption in public office is probably shared by all discerning citizens of this country; consequently, some well-meaning Nigerians have prescribed the death penalty for anyone convicted of treasury looting! The obvious provocation of the recent slapon-the-wrist punishment to a civil servant for stealing over N27bn of Police Pension Fund may have prompted the call for more severe penalty! In reality, it will probably be impossible to find anyone, who has served in any Legislature in any part of the country who will come away with clean hands. The Legislators are therefore unlikely to enact laws that would prescribe extended prison terms or the death penalty for treasury looters. Thus, rather than the public fixation on the measure of punishment, it would probably be more sensible for us to identify and reduce those opportunities that would facilitate corruption in public office. In response to this challenge, we published an article with the above title in April 2008; the following excerpts from that piece still remain relevant if we truly wish to reduce the level of corruption in Nigeria. “Many years from now, historians may conclude that the most obvious defining feature of public servants in the first nine years of the third Republic was the art of ‘double speak’ or in plain language, the penchant for insincerity and deception.
Banking of public funds, corruption & double speak! “For example, in his first term in office, Obasanjo was totally against any form of constitutional review and anyone who expressed support for constitutional amendment was labelled a traitor and renegade. The nation, however, witnessed a total somersault when the same Obasanjo suddenly became the senior apostle for constitutional amendment so long as it accommodated the introduction of a third term in office for the incumbent! “Obasanjo’s administration also paid lip service to the adherence to rule of law…. In reality, the former President rode rough shod over any law or judgment that was not in consonance with his personal interest…. “The prevailing level of hypocrisy is probably most glaring in the area of government’s declared war on corruption. The series of revelations of the sordid and unpatriotic deals in the power sector; the mal-administration of the Petroleum Trust Fund; the huge fraud associated with COJA, the sale of undervalued government properties and common-wealth to cronies and party stalwarts, etc; the list of malfeasance is open-ended, and at the end of the day, there can only be one conclusion,
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For example, in his first term in office, Obasanjo was totally against any form of constitutional review and anyone who expressed support for constitutional amendment was labelled a traitor and renegade
and that is, that the trust Nigerians had in public office holders was woefully betrayed and the forbearance of our people became countenanced as foolishness. “In focused economies, worldwide, the Central Bank is the prime custodian of the nation’s wealth and treasury; the Central Bank is thus the banker to government! “Thus, if government and its agencies did what is expedient and appropriate by placing its cash deposit with CBN, financial control and audit of disbursements by MDAs would not only be facilitated, but also become more transparent, as the convenient instrument of irrevocable standing payment order, ISPO – a system which facilitates treasury looting with the conscious collaboration of
earlier deposited as naira allocations to the three tiers of the government by the same CBN!” Instructively, however, it may be more realistic to tackle the problem of corruption by reducing whatever fuels the oppressive excess cash in the system. The church rat, for example, remains lean and impoverished because there is not much to eat, while those rats in a bakery will become obese because of excess food in their habitat! We have ceaselessly indicted the CBN’s substitution of naira allocations for dollar revenue as the major instigation of excess liquidity, and ultimately also, for the expansion of the pool of slush funds; thus, the opportunities for blatant treasury looting would be significantly minimized, when our dollar-derived revenue is shared with the instrument of dollar certificates to constitutional beneficiaries. In other words, CBN’s monopoly of the foreign exchange market and the attendant product of systemic cash surplus is probably the major feed-mill for corruption for public officers.
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commercial banks, will become redundant. It would also be impossible for public officers to collect up front interest on MDAs deposits with commercial banks! “Similarly, the perennial problem of excess liquidity induced by the extended capacity of banks to injuriously expand credit whenever monthly allocations of the three-tiers of government are all paid in naira will be assuaged as less naira deposits will become available to instigate the scourge of excess liquidity in the system. “In the same vein, the CBN and Debt Management Office would have no excuse to condone unnecessary increase in the Nation’s indebtedness by borrowing back from the banks, funds, which were
SAVE THE NAIRA, SAVE NIGERIANS!
Business & Economy
Insurance: No premium no claim policy also applies to governments' MDAs BY GABRIEL OMOH, GROUP BUSINESS EDITOR & EMMA UJAH, ABUJA BUREAU CHIEF
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he new insurance policy that premium payment must be up-to-date before claims could be paid ALSO applies to government Ministries Departments and Agencies, MDAs, the National Insurance Commission has said. Speaking at the one-day seminar for Business Editors in Ilorin, Kwara state capital last week, the Commissioner of Insurance, Mr. Fola Daniel, insisted that the new policy applied to all insurance holders, be they public or private sector individuals and organizations. According to him, under the implementation of the C M Y K
provisions of Section 50 (1) of the Insurance Act 2003, “the receipt of insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless the premium is paid in advance”. “The policy applies to all. Those who default in payment of premium cannot enjoy claims. It does not work like that. In the past there were issues of people making claims even when they were not up-to-date in their payment of premiums. “In fact in the next one week or so, we will issue a circular to all governments organization on the application of the new policy. Some people have raised concerns how government agencies can
make premium payments regularly and completely at the beginning of each year but we are sure they can work round it by making available or setting such funds aside early enough in order not to default”. The strict application of the provisions of that section started in January. The NAICOM boss added that the policy became necessary to know the true financial position of each insurance company, as according to him, there were situations, in past, where it was difficult to know the true positions of some companies owing to unpaid premiums by policy holders. Mr. Daniel also said that the Financial Inclusion initiative of the President Goodluck Jonathan administration
per cent of Nigerians adults were insured leaving the larger population without any form of insurance policy whatsoever.
would receive a boost with the introduction of the microinsurance practice in the country. According to him, only 1
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