Financial Vanguard 24 February 2014

FEBRUARY 24, 2014

Sanusi-led CBN lacks corporate governance — FRC •No board approvals for financial transactions •Investment in Islamic liquidity management had no board approval •Governor as chairman of board, error of law

By OMOH GABRIEL, Business Editor

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HE Central Bank of Nigeria under the leadership of Lamido Sanusi was accused of lack of corporate governance by the

Financial Reporting Council in its report to the President on the CBN. The report signed by Jim Osayande Obazee, FRC's Executive Secretary, said that there was very weak corporate governance in the CBN as transactions that needed board approval were carried out in the apex

bank without such approvals.

Recall that the Lamido Sanusi-led CBN had removed some bank executives on the basis of lack of corporate governance.

The FRC report on CBN stated: “A number of transactions and even of a financial nature were carried out

without board approvals as no board approvals were provided as requested. This shows a very weak corporate governance of the CBN and clear evidence that statutorily allowing the CBN Governor to be both the chief executive officer of the bank as wnepotismell as chairman of the board is the greatest error made in the Continues on page 18

168.05

-0.75

2,934.00

-16.00

16.63

0.3

109.66

-0.64

102.09

-0.66

CURRENCY BUYING CENTRAL DOLLAR POUNDS EURO FRANC YEN CFA WAUA

SALES CONFERENCE: From left: Mr Ben Ofungwu, MD, ISN Products Nig Ltd; Mr Paul Uduk, MD, Vision Talents; Dr Don Anyanwu, Executive Director, Marketing, ISN and Mr Tosin Lawrence, Application Specialist, Roche System at the ISN 2014 Sales conference held in Lagos on Friday. Photo by Lamidi Bamidele.

154.75 258.123 212.1777 173.8764 1.5102 0.3053 238.3459 RENMINBI 25.4025 RIYA 41.2601 KRONA 28.4279 SDR 238.7638

155.25 258.957 21 2.8633 174.4382 1.5151 0.3153 239.116 25.485 41.3934 28.5197 239.5352

SELLING 155.75 259.791 213.5488 175 1.52 0.3253 239.8861 25.5676 41.5267 28.6116 240.30

CBN Exchange rate as at 21/02/2014 C M Y K

18 — Vanguard, MONDAY, FEBRUARY 24, 2014

Cover Story

Vocation & technical education – a key to improving nigeria’s development. PART 1

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Sanusi-led CBN lacks corporate governance — FRC conception of the CBN act 2007.

According to the Financial Council Report, the board approval for the equity investment in the shares of International Islamic Liquidity Management Corporation of Malaysia to the tune of N0.743 billion is also not provided. The share certificate is also to be provided as it seems that section 34 of the CBN Act has been violated.

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t said that the date of the board approval of the apex bank's financial statements was not disclosed.

It further disclosed that in the CBN response, "Your Excellency is therein informed that the management letter on the financial statement is yet to be discussed by the Board Audit and Risk Management Committee. This is contrary to section 3 (b) of the CBN Act 2007. This is supposed to take place, considered by the Board and decision taken."

Accounting issues identified usually lead to adjustments in the financial statements before the approval of the board is secured on the accounts. It said that a number of issues on the draft management letter can testify to this.

According to the Council, what this means is that the financial statement submitted by the CBN Governor to the President was not approved C M Y K

by the governing board of the apex bank.

The Financial Reporting Council report on CBN 2012 account further observed that the Financial statement was highly abridged with poor disclosures of transactions and events that are of financial nature. The breakdown provided to some

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Continued from page 17

The breakdown provided to some items seems to be allocation of figures to arrive at predetermined numbers

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items seems to be allocation of figures to arrive at predetermined numbers.

Giving clear instances, it said the breakdown of loan provisioning amounting to N586.703 billion has figures that seem more like figures to ensure that the total is arrived at. Therein is staff loan of N34,789,071; bankers’ payment of N900; National Biotechnology Development Agency of N1051. It also contains CBN contributory pension fund of N122,562,355. This should not have been accounted for

under this classification. It also contains figure for Wema Bank - N50,061,710,108 and AMCON - N500 billion without the unsubstantiated balance of N236,521,506.05.

A breakdown for the Center for Excellence contains several invoices with amounts that are identified simply as ‘others.’

The report said that AMCON made a loss of over N2.4 trillion and also had a negative total equity of over N2.3 trillion at the end of 2011.

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MCON’s 2011 accounts were signed by the board on 8 October 2012. This is to the full knowledge of the CBN since it owns 50 per cent of AMCON share capital and has directors on the board of AMCON. It said that the CBN rightly explained that AMCON’s bonds are giltedge securities of the Federal Government of Nigeria (FGN) {in their response, 7 (d )} but did not disclose to Mr. President that a large portion of this sovereign instrument is to mature by December 31st 2013 and the inability of FGN to fulfill the guarantee may affect credit risk rating of Nigeria negatively.

The fact that it was not budgeted for in 2013 by the FGN coupled with the fact that the CBN was even expecting N713 billion therefrom, were enough reasons for the leadership of the CBN to have drawn the Continues on page 19

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LAUNCH: From left, ProfessorOladipupo Olujimi Akinkugbe,Chairman of the occasion; Dr Erinosho A. Eniola, Head of Research and Statistics, Lagos State Ministry of Health; Prof.

Folasade Ogunsola, Provost, College of Medicine, University of Lagos, with Dr Ojji Dike Bevis, Senior Lecturer, Faculty of Health Sciences, University of Abuja and Tarek Rabah, Area Vice-President, Middle East & Africa, Astrazeneca at the launch of Astrazeneca Nigeria Research Grant in Lagos. PHOTO BY AKEEM SALAU.

echnical education is a planned programme of courses and learning experiences that begins with exploration of career options, supports basic academic and life skills, and enables achievement of high academic standards, leadership, preparation for industry-defined work, and advanced and continuing education.

Vocational education and training prepares learners for careers that are based in manual or practical activities, traditionally non-academic and totally related to a specific trade, occupation or vocation.

In other words, it is an “education designed to develop occupational skills.”

A breakdown for the Centre for Excellence contains several invoices with amounts that are identified simply as ‘others’

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Vocational and technical education gives individuals the skills to “live, learn and work as a productive citizen in a global society.”

Technical and vocational education has been an integral part of national development strategies in many societies because of its impact on productivity and economic development.

Despite its contributions the leaders of Nigeria have not given this aspect of education the attention it deserves, and this is one of the reasons for the nation’s underdevelopment. This article focuses on the dearth of skilled technical and vocational manpower in Nigeria and argues that technical and vocational education holds the key to national development.

Every facet of the economy has been affected by lack of skilled technicians. The financial sector lacks

technicians to regulate the banks and to develop financial software to properly tackle the rising fraudulent activities in the banking sector. Without security, development is impossible in a society; no nation can sustain its democracy if the citizens lack confidence in the police. The police violate the citizens’ human and civil rights and lack forensic laboratory and fingerprint technicians to conduct criminal investigations. And due to poor training, military officers are known to beat up the citizens who challenge their powers and go scot free for their inhumane actions.

The danger posed by environmental pollution and fake drugs is alarming. The less educated in the society lack the skill to manage AIDS, cancer and diabetes among other serious health problems.

One wonders what the nation’s health minister and the 36 state health commissioners are doing to tackle these issues. Every good citizen is aware that the neglect of technical and vocational education is socially and economically injurious, because it is robbing the nation of the contributions the graduates would make on national development. For that Nigeria is today wearing the toga of a poor state.

Although technical and vocational education seem deficient in ‘citizenship or leadership training’ (Friedman 1982). It provides students with “life skills to become productive entrepreneurs as it engenders creative and innovative ideas, enlarge the economic pie, and increase personal freedom. Most of the so-called “expatriate engineers” who are being paid millions of dollars to build Nigeria’s roads and bridges are graduates of technical and vocational colleges. Yet the leaders do not take technical institutions seriously.

Nigeria’s current preoccupation with university education reduces economic opportunities of those who are more oriented toward work than academic. Not everyone needs a university education.

Vanguard, MONDAY, FEBRUARY 24, 2014 — 19

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igeria stands the risk of several millions marching out one of these days saying they need jobs to keep body and soul together.

Nigeria’s unemployment figure is alarming and growing by the day. It is very easy to conceal this fact in figures by saying that unemployment is 23.9 per cent. The question to ask the authorities is 23.9 per cent of what, of the total population or of the work force? Either way, the figures are alarming and need urgent action on the part of the government.

In 2011, Nigeria's population stood at 164.38 million. Of this, the labour force stood at 67.256 million out of which 51.181 million are said to be employed and 16.074 million are unemployed. Going by official data, the unemployment figure which stood at 12.44 million in 2009 rose to 13.9 in 2010 and further to 16.74 million in 2011.

But this particular government seems not to be in any position to quickly resolve the unemployment situation in the country. Every q u a r t e r , government reels out figures of the growth in the e c o n o m y .

Economic growth presupposes e c o n o m i c expansion of production that requires additional hands.

This is not the case. It is a known fact that unemployment has become a major problem for most countries across the world.

In the USA for i n s t a n c e , unemployment has increased from 5 per cent in 2007

to 9 per cent in 2011 which gives the Obama administration sleepless nights. That of Spain has risen from 8.6 per cent to 21.52 per cent as a result of the debt crisis in Europe; UK, from 5.3 to 8.1 per cent. Unemployment in Ireland currently stands at 14.3 per cent from 4.8 per cent, Latvia from 5.4 per cent to 16.5 per cent, Greece with all its debt trouble from 8.07 per cent to 18.4 per cent and Italy from 6.7 per cent to 8.3 per cent.

The average unemployment rate for the Euro zone is 10.7 per cent. Within the African continent, unemployment has risen with South Africa, Africa’s largest economy having a higher rate than Nigeria at 25 per cent, Angola at 25 per cent, Botswana at 17.5 per cent, Egypt at 11.8 per cent, and Kenya at 11.7 per cent. The population of each of these countries is far lower than Nigeria’s.

The Nigerian situation is peculiar in that if the available resources are better managed and utilised, the country will not face this level of youth unemployment.

An unemployment ratio of 23.9 per cent of total population will mean that over 38 million Nigerians are unemployed; of the work force means that 16 million a r e unemployed.

T h e s e figures are more than the number of available data did not capture persons living the number of Nigerians of in Lagos, working age that dropped out Kano and at secondary school level for about the various reasons and entered population of the job market in the rural and G h a n a urban areas.

A recent survey by the (24,223,431); B e n i n National Bureau of Statistics' R e p u b l i c reveals that women are ( 9 , 3 2 5 , 0 3 2 ) getting married later than they and some used to in the past, resulting other African in a sizeable number of these c o u n t r i e s . women that would have gotten According to married and stayed out of the the National labour market by being Bureau of housewives, entering the S t a t i s t i c s , labour market pending when

Unemployment: A ticking time bomb

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M a n y Nigerians who are lucky to keep their jobs in management positions a r e confronted daily with CVs of applicants, most of t h e m women

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they get married. This implies that housewives are not included in the official figure of unemployment in the country.

Women globally have become very active in the labour market. So in Nigeria, any woman who is lucky to hook a man drops out of the labour market. But the truth is that almost every married woman that I know is looking for one job or the other. Many Nigerians who are lucky to keep their jobs in management positions are confronted daily with CVs of applicants, most of them women. Due to

improvement in female education, women are not only getting married later but also, are increasingly becoming more insistent on financial independence and consequently entering the labour market and demanding more jobs than previously.

Besides, families with previously just one working member are being forced to send other members of the family, particularly housewives, into the labour market to look for work to supplement household income.

The banking sub-sector, due to the on going reforms and consolidation has sent several hundreds of workers into the labour market. The sector, instead of generating employment, is shrinking.

The manufacturing sector is worse off. The number of persons in paid employment at the end of 2010 in the cement manufacturing subsector stood at 3,318, compared to 4,142 in 2009, a decline of 19.9 per cent. At the end of 2009, the number of workers engaged in the cement industry stood at 4,289 but this dropped to 3,658 by the end of 2010, meaning 631 persons either lost their jobs or switched jobs away from the cement manufacturing industry.

The overall implication of this is that the economy is not growing fast enough to absorb existing job seekers not to talk of the several millions that join the labour market annually. If this government is serious with its transformation agenda, it must target and implement more job-creating projects.

Cover Continued from page 18 attention of Mr. President to the matter in accordance with section 2 (e) of the CBN Act 2007.

The Council in its report said: “Your Excellency is invited to note that the explanation provided by the leadership of the CBN is unsatisfactory.

Accordingly, your Excellency may wish to take the necessary steps to brief the Senate on the matter and on the financial implication in the immediate future as

Sanusi-led CBN lacks corporate governance — FRC T AMCON’s bond falls due and the sovereign guarantee called thereto; exercise the powers conferred on Mr. President by section 11 2 (f) of the Central Bank of Nigeria Act 2007 or invoke section 11 2 (c) of the said act and cause the CBN governor and the deputy governors to cease from holding office in the CBN.

he Financial Reporting Council further recommended that the President should direct the council to carry out full investigation of the activities of the CBN, in accordance with section 62 (3) of the Financial Reporting Council of Nigeria Act no 6, 2011 within a period of 90 days or in accordance with section 11

4 of the CBN act 2007. It also asked the President to decide that those found to be culpable be prosecuted accordingly.

The Council further said: “It is important that quick and decisive action is taken so that the opposition to the Federal Government does not take advantage of the information and use it against the government that your

Excellency was aware of the lax in CBN and allowed it to stay for political reasons. It is also important that the CBN governor and or the deputy governors do not decide earlier than your Excellency as they may resign their appointment to foreclose the action of the Federal Government and whatever action taken thereafter shall be regarded as politically motivated.

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20 — Vanguard, MONDAY, FEBRUARY 24, 2014

Interview

What are these strategies?

Our strategies are very clear, first is that we have to strengthen our core brands like Guinness and Harp. We want to make sure that we create and sustain an advantaged growth consumer, in other words, in terms of distribution within just being able to create an intensity of distribution that enables what we call an arm's reach availability. Every time a consumer goes out to look for any of our brands, we don’t want him having to stress himself to reach our brands. We want to leverage our expertise in relation to building scale, so we’ve introduced new brands in the market and that will really excite the consumers. We’ve got the strategy around creating sort of a bigger, stronger efficiency in our core structure, to be able to invest in the business is exactly one of the things that we are doing. And finally, at the end of the day, the most important thing I say to people is that whatever strategy you come up with, you’ve got to have the talent to support it, so guaranteeing our strategies and our plans with the right talent is very big for me. In a nutshell, it is really about brands, innovation, consumers, cost efficiency and talent.

From what you have said, you are refocusing and reengineering; is that what informed the result you’ve just released?

The result that we’ve just released is a function of several things, first, is that we’ve got a very rich portfolio of brands C M Y K

My focus is to stren gth fundamentals of Gui nne L

ast Thursday, the Managing Director of Guinness Nigeria PLC had a chat with Financial Vanguard in his office. He spoke about the half year result of the company, strategies being put in place to reposition Guinness for better performance and others. Excerpts:

By OMOH GABRIEL, Business Editor that are adored by consumers in the different categories. When you think about brands like Guinness, Harp and Malta Guinness, they are the brands that are really adored by the Nigerian consumers.

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owever, what we’ve seen in the last six months of the result that we are announcing, is a softness in demand, primarily, partly on account of the dip in the discretionary income of consumers but also as a result of the fact that perhaps we have been aggressive or bullish with our pricing, that’s just one part of it. Secondly is the fact that we are seeing a down trading in the market by way of consumers going for more affordable, cheaper brands in the market today.

Our brand as Guinness Nigeria typically plays in the premium and mainstream and so over the years, we haven’t built scale in the value segment which is the low end where so many others are and therefore we are seeing an opportunity there. So our inability to play strongly in that segment obviously affected our performance. The last thing that really impacted performance in the result that we’ve just announced has been the challenges that we still have with our distribution because where our brands exist, where they get to, people love us; people drink our brands. Like I said before, our brand is the most adored.

You only drink a brand that you see easily and therefore, if you flip over those challenges that I have just talked about, then you get the reasons why we are confident that the business will turn around because the aggression

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an you give us a background of yourself, where you are coming from and where you are now. I am not talking about Guinness but you as a person...

I am fairly well known to most people around Nigeria. For those who may not know me, I am Seni Adetu, the Chief Executive of Guinness Nigeria. I have resumed now for about 18 months and in that period, we’ve made big strides for Guinness Nigeria Plc. My vision for the company clearly, is to build a company that is seen and respected as best performing; most trusted and respected company in Nigeria, which is my ultimate goal. At this point in time, what we are doing is to set the foundation, the platform to enable that happen. And I have always said to people that holistic delivery of two sorts of three pillars enables you claim you are the best in the country.

Guinness has been around for a while. Are you saying you are laying a new foundation or you are reengineering for a different purpose?

Just like I said, it is more like building a platform for the future. Guinness has been in this country for over 50 years and has been incredibly successful in that period and so what we are doing now is to build the platform to accelerate the trajectory of success of Guinness Nigeria. The market environment is changing, the competitive environment is changing; our focus now is to strengthen the fundamentals of Guinness Nigeria in a way that we are able to leverage the opportunities that are showing up in the market and address some of the challenges that we are beginning to see in the market.

A dip of a quarter or half will not make people who have signed up a long-term partnership with us to be worried about their shares

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around pricing and the fact that we were price disadvantaged versus our competitors in the market place, have been addressed. We did a price rollback in October; we went up in October and we rolled back the price of Harp and Malta Guinness in January.

The price disadvantage that we had against competition has been addressed. The other point is really around the value brands that I talked about before. Now, we have a brand called Dubic which is intended to explore the opportunity within that segment where people are buying their beer for N150.00, so our Dubic should really serve that purpose for us.

There is real intense work going on to help us address small distribution challenges, especially when it comes to things like outlet coverage; how we cover the outlets, the off trade account, where typically you see them in the open markets, that is an area we haven’t played effectively as we would have liked to, things like rural distribution and so on. That is why we believe that if we address all those opportunities, the head room for growth for Guinness Nigeria is very solid and that is what keeps us motivated.

Hope I am not mistaking you for Nigeria Breweries; you have an outsourcing distribution network before, is it?

The outsourcing in the sense that we used third party before, and that is what we are still using.

You are having problems with it?

No! I am not suggesting that.

What are these third party distribution challenges?

The challenges are in terms of the reach and the strength so you could argue that though we have third party operators who we call distributors, we need more distributors especially for rural areas. So if you are going into the hinterlands, the level of availability of our brands is sort of lower than what you get in urban areas like Lagos, Abuja and Port Harcourt, and that is the area we are working on. It is not all; I say this with emphasis, not to suggest that we are not happy with the distributors that we have, we are just saying that perhaps, there is an opportunity for us to move further into rural areas as some of our competitors do. Remember that some of our

competitors actually acquired some businesses which were in the rural areas whereas we have taken the consolidation model approach where we have big breweries that we invest in, there is no right or wrong; they both have their pros and cons but the important thing is that whether it is one brewery or 10 breweries, you want to make sure that when a consumer calls at an outlet to ask for your brand, the brand is indeed available. That is the project that we are working on, so this is an opportunity, I should say and not a challenge in the way that you see it.

Vanguard, MONDAY, FEBRUARY 24, 2014 — 21

Interview

Does this challenge in distribution have anything to do with the security situation in the North-East?

Certainly, if you look at the North, there are parts where you can go freely requesting for an alcohol drinks company, and there are parts that today, for security or other reasons, you have to probably limit your movement and your penetration. Our job as businessmen is to find ways to work around these challenges and create opportunities for ourselves in the sense that if you don’t shape your destiny, circumstances are going to shape it for you. This is really about us shaping our destiny and the future

of Guinness Nigeria.

What is the acceptance level of your Dubic and Alvaro in the market?

One our strengths and the biggest basis of joy for us is in the quality of our innovation. Some of the new brands that we have put in the market in the last 18 to 24 months have done very well, brands like Sinapp, Dubic, and Alvaro. Alvaro to a lesser extent, because it is brand new in the market, but Dubic is doing very well, it is the brand that will enable us to really play well in the value segment that I mentioned before, the N150 price point. What we are doing now is really wrapping up distribution for the brand with a view to ensuring that we are competitive. For Alvaro, it is our first entry into soft drinks; keep malt in a separate category. We have good reasons to believe that, that brand is going to be a big winner in Nigeria.

Let’s go back to the performance issue, what are you expecting as reaction of shareholders as well as directors of the company?

The good news is that the board of directors of the company understands that we are really building a platform for long-term success of the company.

We have the absolute confidence of the board of directors and the shareholders in what we are trying to create for the company. We believe that a year from now, the success story will be absolutely amazing on account of the big changes that we are making now and structurally, the things around pricing strategy and portfolio strategy and root consumer strategy. We are very clear of what we want to do, we lay on top of that our innovation strategy which is broken, and then you begin to see the reasons why we have confidence. The board is very familiar with this, they are confident and are really backing the management and local team.

•Seni Adetu

What impact does this have on your shares? Nigerians are interested in value, once prices are going up, everybody is happy and when it is beginning to show downturn, people get scared; are you not afraid that investors will begin to dump your shares?

Not at all! The business that we run is not a one day or one month business.

Secondly, it is a business that has a rich heritage of strong performances over the years. Our brands are still the most adored. When you talk about what marketers call brand equity, our brands are still the strongest in terms of brand equity. These are the reasons to believe that for the long-term, it has to be very successful. A dip of a quarter or half will not make people who have signed up a long-term partnership with us to

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ooking at the result, it seems to suggest that you are losing market share to your competitors, especially like you said the lower end priced products...

It is so difficult to say who is gaining share or who losing share.

(Cuts in) Why? The sources of data that we have are not completely foolproof and what you see companies reporting, certainly, is in the net sales revenue and you

•Seni Adetu

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gthen the nness Nigeria

be worried about their shares.

If your investment is longterm, we are saying that we have confidence in the shareholders; they are in the game for the long run and they are absolutely staying the course.

In an economy of our type, pricing strategy becomes critical and if your price is high or unreasonably high, especially compared to competition, it is no rocket science that there will be impact on volume

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cannot deduce from net sales revenue who is gaining or losing share. What we know is that we have perhaps the most balanced portfolio in the market and it is the richness of our portfolio that will enable us to win in the longterm. In a nutshell, I as a leader of the team, I am confident that we are clear on the issues that we face in the quarter, that is the period that we reported. We are very clear on the strategies that will enable us turn that around so that we see improvements going forward and we are confident in the team that we have. They have got the capability to help us in winning this market. So all that we are doing now is reengineering some parts of our business to enable us to win in the future and that is the game that we are playing.

I was reading an analysis done by FBN Capital, and it was trying to suggest that the unit volume of stout which is your flagship, has declined, the unit volume of harp has also declined, how and what is your reaction to this?

I have no idea what they have seen, because we typically do not report on unit basis.

(Cuts in) From what they wrote, they said it was a conference call discussion.

We have an investors' call and I am

saying to you that I lead an investors' call and we never talk of unit volumes.

Now, it is not impossible for somebody to look at the net sales and call it a unit volume or assume that the net sales are down marginally. What we do know is that these are brands that have been in the market for over 50 years. The performance of a quarter or a half in six months, does not change the fact that these brands are the most loved brands in Nigeria. We are very clear that the aggressive pricing that we applied on the brands in October, slowed down the performance and that is why we are confident that having got the prices right, we are better placed to grow the brands. We all know that in an economy of our type, pricing strategy becomes critical and if your price is high or unreasonably high, especially compared to competition, it is no rocket science that there will be impact on volume and that is why I am saying with emphasis that we have reviewed our pricing strategy, we have got it right and we expect to see changes in our brands.

As a Nigerian managing an outfit like Guinness when you meet your colleagues, how do you feel and what do you tell them?

First, I feel privileged to lead a company that is this big and not just that it is big but one of the biggest in Nigeria and one of the biggest globally. But I will like to suggest that it is a job that I have been long prepared for. This is my fourth managing director role, in that regard, I have not gotten to the seat by accident, it is something I have been prepared for. Sometime in 2012, I was actually voted for by Forbes as the CEO of the year in East Africa and the last job that I did in East Africa was actually as big as Guinness Nigeria. I feel we’ve got the right leadership and I have got the right team without a doubt. We have really positioned this business to win the mark up term, I just want you to watch the space.

C M Y K

22 — Vanguard, MONDAY, FEBRUARY 24, 2014

Banking & Finance

UK public finances show £4.7bn surplus

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Dollar firms, Swedish data pushes crown to two-month low

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he dollar rose against a basket of currencies on Friday, on track for its first weekly gain in three weeks, boosted by higher U.S. yields and data that underpinned hopes for sustained economic strengthening.

But an unexpected drop in Swedish consumer confidence knocked the crown to a twomonth low against the euro and a six-week trough against the dollar. The data kept alive expectations the Riksbank may cut rates to support the economy and ward off falling price pressures.

The focus of the currency market, though, was the dollar’s recovery, which in part drove the Chinese yuan to its lowest in four months in the offshore market. The number of Americans filing new claims for unemployment benefits fell last week, suggesting the labor market continues to pick up steadily despite recent severe cold weather.

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IKOYI CLUB & HERITAGE BANK: From left, Executive Director, Heritage Bank, Mrs Mary Akpobome; past chairman, Tennis Section, Ikoyi Club 1938, Mr. Wale Opejin and Past Treasurer, Ikoyi Club 1938, Olusola Adeosun, during Heritage Bank Grand Slam Team Championship held at Ikoyi Club 1938 in Lagos.

CBN: A transition in trial and error

By BABAJIDE KOMOLAFE

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entral banks play critical roles in the society. They control money supply and manage the economy to ensure stable prices, macroeconomic growth and stability of the nation’s currency.

Rationality is one of the critical features of economic agents. Economic players, be it individuals, organisations, whether in the local grass root markets, or in the sophisticated financial markets, seek to behave rational, in response to reality. In the markets, there is little or no room for sentiments; be it religious, political or ethnic. This is because basic human needs themselves don’t have regard for such sentiments.

When you are hungry, you look for food. It does not matter to you if the person selling the food belongs to your ethnic group or your political party or come from your village. When you go to the market, you buy whatever you need, from whoever offers the best quality at the best price.

This is the domain of central banks all over the world. The economy which they are mandated to manage has little or no regard for sentiments. They are to ensure stability of prices, which always obey the law of demand and supply (ceteris paribus). Be it interest rates, prices of goods and services, exchange rates, they always obey the law of demand and

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overnment finances for January showed a surplus of £4.7 billion, the Office for National Statistics has said.

That was less than the £6 billion surplus recorded a year ago. For the financial year-todate, government borrowing was £90.7 billion, which was £4 billion lower than at the same point a year earlier.

January usually records a surplus due to high tax receipts, but in most other months the government borrows more money than it receives. The total pile of government debt now stands at £1.24 trillion, equivalent to 74.6 percent of the UK’s total economic output.

The ONS figures are initial estimates and are subject to revision. They exclude the effect of bank bailouts. The £1.3 billion fall in January’s surplus when comparing with a year earlier was down to higher government spending. Tax receipts from VAT and stamp duty were up slightly, but this was offset by a fall in receipts from income and corporation tax.

According to the Office for Budget Responsibility (OBR), the difference “mainly reflects the fact that central government expenditure was £0.7 billion higher... Receipts were little changed from last year”.

We cannot, however, blame him, we, especially the Presidency and the Senate, were the ones that chose to appoint an outspoken and a radical personality to be CBN Governor

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supply. That is why central banks must do their jobs, take their decisions based on rationality and reality, bearing in mind that in the economy and in the financial markets, you can control the input, you cannot control the output.

You can decide on any action, but you cannot decide the result or consequences.

The import is that, central banks should not make decisions on the basis of trial and error. It must be based on time tested and proven principles and procedures of economic management.

It is for this reason that so much power is reposed in the enabling law of central banks around the world. It is also for this reason that employment of staff and top management of central banks are based on competence, merit, maturity and balance. In developed countries, such appointments are made with

little consideration for sentiments of any kind. That is why a Canadian can be appointed as the Governor of the Bank of England, and a woman as Chairman of the Federal Reserve.

Furthermore, such appointment is made with significant consideration for the need for continuity and stability of central bank, knowing full well, that the economy and financial markets generally hate instability.

While some countries have mastered these important facts, and hence, ensured that the sanctity of their central bank is not sacrificed for anything or sentiment, in Nigeria we are still learning. We are still experimenting and the Sanusi saga is part of the experiment. From June 4, 2009, when he was appointed, to the developments of last week, we have been witnessing the result of the last experimentation in the appointment of a CBN Governor.

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ut the outcome is not surprising. For those who knew Mallam Lamido Sanusi very well before he became CBN Governor, all the actions and utterances he had made during his tenure would not be surprising to them. In 2008, when he was still an Executive Director with First Bank, he was invited to present a paper on risk management to the annual workshop organised by the CBN for finance correspondents in Calabar.

He not only presented a

brilliant paper, he also criticised the CBN, his host, for its response to the banking crisis. Further, during his confirmation hearing, Sanusi dismissed the ten point agenda of the President who nominated him.

The truth is that Sanusi had always been an outspoken and a radical personality. He is never afraid to speak openly against anybody. He is not afraid to take radical decisions. As CBN Governor, these qualities have helped and hurt the nation. In his quest to fight inflation and stabilise the naira, he took decisions never taken by any CBN Governor. But he also made utterances that no central bank governor would dare to make.

We cannot however blame him. We, especially the Presidency and the Senate were the ones that choose to appoint an outspoken and a radical personality to be CBN Governor. But is not a mistake, rather it was an experimentation. And we are experiencing the result of that experiment.

And we would continue to experiment until those at the helm of affairs come to terms with the facts stated above, that central bank is not an institution that should be subjected to sentiments, whims and caprices of any individual or group.

Now the most dangerous outcome of the Sansui saga, which is even worse for the economy is to go to the extreme of appointing a personality with absolute opposite personality of Sanusi, or a situation where the staff and management of the CBN become too quiet and fearful such that they are reluctant to take bold decisions in response to economic reality. While these may be good for the interest of some people and groups, the long term effect can be calamitous. We must remember the economy does not have regard for sentiments and political considerations.

While the President has done his bit by nominating another bank chief executive as the next CBN Governor, the onus now lies on the senators, the elected representatives of the people to do their job, and ensure that the appointment is not an extension of our trial and error approach to determining who should manage an economy that has no regard for sentiments and hurting experimentation.

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Corporate Finance

US stocks gain, treasuries drop on global factory data

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.S. stocks rose as betterthan-forecast growth in an American manufacturing gauge tempered concern about the global economy and a $19 billion purchase by Facebook Inc. sparked deals optimism.

Treasuries fell and the yen gained, while shares in emerging Europe dropped.

The Standard & Poor’s 500 Index (SPX) rose 0.6 percent to 1,839.47 in New York, climbing back to within 10 points of an all-time closing high. Yields on 10-year Treasuries gained two basis points to 2.76 percent. The MSCI EM Europe Index declined 0.5 percent. Japan’s currency strengthened against 10 of its 16 major counterparts, climbing 0.2 percent versus the euro. The S&P GSCI gauge of 24 commodities slipped 0.1 percent as gold lost 0.3 percent while natural gas gained for a third day.

A report from the Labor Department showed fewer Americans filed applications for unemployment benefits last week. The Markit Economics preliminary index of U.S. manufacturing increased in February.

China’s manufacturing dropped to a seven-month low and a factory gauge for the euro region unexpectedly slipped, according to data compiled by HSBC Holdings Plc and Markit.

Europe stocks little changed as Stoxx 600 trims loss

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uropean stocks closed little changed, trimming losses in the final minutes of trading, after data showed Chinese manufacturing shrank for a second month and Federal Reserve minutes signaled stimulus cuts will continue.

BAE (BA/) Systems Plc plunged the most since October 2008 after predicting profit will drop as much as 10 percent this year. Randstad (RAND) Holding NV tumbled 11 percent after reporting quarterly results that missed estimates. TUI AG dropped 5.4 percent after one of its largest shareholders sold a 15.7 percent stake in the company. Technip SA rallied the most since July 2009 after saying its profit margin will increase next year.

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COMMISSIONING: From left, Divisional Head, General Services, Wema Bank Plc, Mr. Fola Ajanlekoko; Head of Commercials, Leadway Assurance Company, Mr. Tunji Amokode; Senior Special Adviser to Lagos State Governor on Justice, Mr. Lanre Akinsola; Group Managing Director, Cryslad Group, Mr. Banjo Onanubi and General Manager, Cryslad Group, Mr.Kunle Olayemi during the commissioning of trucks, warehouse, and launching of Kasstul water in Lagos.

UBA Capital eyes dominance of financial services sector

By NKIRUKA NNOROM & WILLIAM JIMOH

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BA Capital Plc has r e i t e r a t e d commitment to leverage its four principal lines of business to gain leadership of the financial services industry.

The new Group CEO, Oluwatoyin Sanni, who stated this while ringing the trade closing bell at the Nigerian Stock Exchange, NSE, to introduce the new management, listed the four lines of business to include investment banking, trusteeship, asset management and stock broking.

She stated that the new management has adopted some key initiatives that would drive its operations going forward as well as help the company to attain the set goal.

The key initiatives, according to her, include internal processes, legal expert across all spheres of operations, new IT system deployed among other schemes.

Her word, “UBA Capital is leveraging on a formidable team of experts, and we are wellpositioned to continue delivering world-class financial and investment services to our stakeholders. As a publicly-listed company on the NSE, our shareholders can be

assured of high standards of disclosure and transparency, in addition to our superior performance in investment banking, trusteeship, asset management and securities.”

“In the coming week, we will unveil a series of leading and industry shaping initiatives which will redefine the financial

services landscape, deliver significant value to our stakeholders and clearly set UBA Capital apart from our competitors.

“In addition, we are repositioning ourselves in such a way that we can deliver the best of services to our clients as one integrated financial services group and that means that it

gives greater ease of doing business from one part of the business to another.

“The same documentation and information will be made use of for a client to be able to do business with us in all line of our business; this implies that you will be managed as a client from single point in terms of customer services, reporting, account opening, documentation and external relation.

“Now, we are able to do this through the group shared services we are deploring, which are underpinned by the state of art system that we have developed, which is largely in-house based.”

Continuing, she said, “Our initiatives include repositioning as well as expanding our activities even beyond Nigeria into West Africa and gradually to the entire continent. But for this year, our focus will still be significantly on this market because we think it gives a room to create value.”

In January, UBA Capital announced the appointment of frontline capital market operator, Oluwatoyin Sanni as the new Group CEO, and veteran banker Chika Mordi as Chairman. Comprising investment banking, trusteeship, asset management and securities arms, UBA Capital has emerged in recent years as a clear market leader in each of these areas. In her statement to the floor, Sanni unveiled the group’s plans for accelerated growth and sector leadership this year.

Expert emphasizes role of capital in business start-ups

By NKIRUKA NNOROM

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he Managing Director of African Capital Alliance, ACA, Mr. Okechukwu Enelamah, has said that funding is one of the key things an entrepreneur requires when setting up a new business.

He made the remark while speaking on “Sources of Capital for SMEs: the Options and Requirements”, at the weekly radio programme organised by the Fidelity Bank, saying that start-up capital could be sourced from ‘family, friends and foes’.

Much as capital is important to starting a business, Enelamah said that potential investors should not focus solely on how to raise capital, but must spend quality time to plan and think through the business before starting up so as to increase their success rate.

“In the industry, people

talk of the three Fs, - family, friends and foes. People typically start off with their own savings, with family, friends and foes - those who are prepared to support them any way as an act of trust.

What they all have in common is relationship with the entrepreneurs when they are building their businesses.”

However, “To increase your odds of success, one of the most important things is proper planning and execution because planning is where the business comes in. For a lot of people, when I say planning, here, I mean the ability to think through and it may be a fancy business plan but it has to be well conceived.”

The ACA boss explained that people naturally go to sources where they have existing relationships to access funds because they do not have track records that could help them access institutional capital. “From

there, they can move to the next stage and with the right legislation and encouragement in the arena they find themselves, they can always rise and thrive and then we can also come in to aid them rise to the next level.

But they have to make the bold step of starting up first,” he said He also stressed the need for human capacity development to enable entrepreneurs attract the right kind of personnel to their business, saying, “In execution, I would say the most important thing is to have the kind of people around you that will increase the odds of success. An entrepreneur may bring the idea, but he may need a general manager that brings traditional general management skills to organise the team. If he can’t afford that, then he might need somebody else that complements him because two heads are better than one”, he said.

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Commodity index

Micro-Finance

Feb 14-Feb 20, 2014

Microfinance has become commercialised — CBN Stories by PROVIDENCE OBUH

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he suspended Governor of the Central Bank of Nigeria, CBN, Mallam Lamido Sanusi, has said that microfinancing in the country is commercialised.

Meanwhile, he described “women” as a big industry, urging banks to take advantage by initiating programmes targeted at them.

Sanusi said this at a lecture. “This economy needs low interest money, we need it for infrastructure, manufacturing, agriculture and others. In the last five years, the central bank has put on the table, N800 billion single digit long-term funding for these areas.

We put up a N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) called micro enterprises.

“Microfinance has become too commercialised, there is need around microfinance that

VISIT: Vice-President of the Institute of Chartered Accountants of Nigeria (ICAN), Mr. Chidi Ajaegbu (5th left) flanked by Council members of the institute and management team of the Niger-Delta Development Commission (NDDC) during a courtesy visit by ICAN team to the Commission. somehow, if you don’t give poor people education, healthcare, agriculture, if you allow a private sector microfinance bank to lend the money at 40 per cent interest rate, they will get out of value chain.

“Microfinance only works within a programme development environment, what we did was to provide the funding for MfBs to onlend at very low rate of interest but tied to developmental projects, agricultural training,

Nigeria’s software developers best worldwide — Expert

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n expert in the outsourcing sector has identified Nigerian software developers among the best in the world.

The expert, President of Association of Outsourcing Practitioners of Nigeria (AOPN), Dr. Austin Nweze, buttressed his point by saying that the system is an informal system that is functional and some have travelled to bring knowledge back.

“Knowledge is mobile; you can sit any where and do what you want to do.

Our young ones are making it on software because this is the age.

According to Nweze, “Nigerian software developers are among the best in the world, a lot of programming software is shifting to Nigeria, we need to capitalise on that and give them support that they need, so that we can focus on these things.

If you are manufacturing

car, for instance and you can manufacture tyre, the whole economy will be turned around.

capital, community training, etc. We go to training centre, we loan to the graduates of the centre but 60 per cent will to go to rural women.

“I want banks to come up with programmes that are targeted at women, out of all the people who have borrowed from Nigeria banks today, how many of the businesses are owned by women, let them research and find out the nature of businesses that women go into. Every weekend in Lagos, there is a big wedding and they buy Aso Ebi. How many women get access to credit? How many of the banks have thought of how the aso ebi market is financed. We can look into that business and make it grow."

Oxbridge Club elects new exco

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xford and Cambridge Club of Nigeria has elected new Executive Committee members to run its activities in the year.

The club conducted the election during its annual general meeting held in Lagos at the weekend, according to a statement by its secretary, Mr. Michael Orimobi.

The statement further said membership of the Oxford and Cambridge Club of Nigeria is open to any resident of Nigeria, or Nigerian, who matriculated at either the University of Oxford or the University of Cambridge in the United Kingdom.

The Club continues to build a reputation for intellectual thought leadership, attracting leaders from the business, diplomatic and academic cadres to its events.

Members of the newly elected Executive Committee are: Mr. Akinfela Akoni (President); Dr Timi Austen-Peters (Vice President); Mr. Uche Okoli (Vice President); Mr. Michael Orimobi (Hon. Secretary); Mr. Ike Chioke (Hon. Treasurer); Ms. Adeola Egbeyemi (Membership Secretary) and Mr. Adekunle Adebiyi (Social Secretary).

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30 — Vanguard, MONDAY, FEBRUARY 24, 2014

Homes & Housing Finance

Lagos commences issuance of e-C of O

FMBN’s e-collection platform boosts NHF by 200% From N700m to N2.2bn monthly

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he Lagos State government has pioneered the issuance of electronic certificate of occupancy (e-C of O) in Nigeria, with the issuance of e-certificates to 55 plot owners under various government land schemes in the state.

Gov. Babatunde Fashola, while presenting the documents to the first set of beneficiaries, said that the migration from the paper title to electronic was the government’s response to the problem of document counterfeiting.

He said the illegal printing of the “Yellow Paper” by some unscrupulous people has affected the reliability of the paper C of 0 as a legal title to properties in the state, noting that the new electronic title was to eliminate fraud in the system and ensure efficient land administration in the state. “This new electronic document is more secure as it is designed to eliminate cloning and issuance of documents that are not genuine,” he said.

Also speaking at the presentation ceremony, Mr. Hakeem Muri-Okunola, Permanent Secretary, Lands Bureau, said the issuance of the e-C of O was faster and less cumbersome, adding that applicants who fulfill all necessary conditions will be issued the document within 45 days.

US fixed mortgage rates inch up

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verage US rates on fixed mortgages rose this week but remained near historically low levels.

Mortgage buyer Freddie Mac said the average rate for the 30-year loan increased to 4.33 percent from 4.28 percent last week. The average for the 15-year mortgage edged up to 3.35 percent from 3.33 percent.

Mortgage rates have risen about a full percentage point since hitting record lows roughly a year ago. The increase was driven by speculation that the Federal Reserve would reduce its $85 billion-a-month bond purchases. Deeming the economy to be gaining strength, the Fed proceeded last month with planned reductions of its bond purchases, which have helped keep long-term interest rates low.

The housing market is expected to deliver another year of solid gains, helped by an improving economy.

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Stories by YINKA KOLAWOLE

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he introduction of electronic collection platform by the Federal Mortgage Bank of Nigeria (FMBN) has significantly boosted collections from contributors to the National Housing Fund (NHF) by more than 200 percent monthly, from N700 million to N2.2 billion.

Managing Director, FMBN, Mr. Gimba Ya’u Kumo, stated this when the NHF e-card was formally unveiled by President Goodluck Jonathan in Abuja. He said the introduction of the ecollection platform has not only improved the Fund’s collections but has also assisted to ensure transparency and accountability. “The NHF e-Card is a huge step forward in delivering the advantages of speed, accuracy, transparency, accountability and superior customer experiences to NHF contributors.

“We have begun to harvest the benefits of the NHF e-Collection Platform, especially in the volume of NHF collections. For instance, the rate of NHF collections rose significantly from about N700 million to over N2.2 billion per month. We estimate a further 100 per cent increase in monthly collections to achieve about N4 billion per month before the end of 2014.

“The bank (FMBN) in June 2013 launched the NHF e-Collection Platform to ensure proper recordkeeping, transparency and accountability for NHF collections. The platform prevents the flagrant violation of the NHF Act and unlawful practices by employers who fail to effect statutory deductions, remit deductions to the FMBN or provide remittance schedules by which contributors’ monies are easily misappropriated,” he stated.

The e-card is a form of identification card bearing the contributor ’s name, participation number and photograph. It also enables the holder to access records of his/her contributions using any of the

information technology channels such as Automated Teller Machine, Point-of-Sale terminals and the Internet and print out a statement of account at a computer workstation around the world.

Also, the NHF card can be used as an e-wallet to stash extra cash for purchases via POS terminals or online. But only the extra cash, excluding the NHF funds, can be spent.

Meanwhile, the total NHF collections now stands at N118.8 billion, with N66.8 billion of the amount collected

over the past three years. As at March 2013, about N100 billion had been disbursed to 73,676 eligible contributors with repayment standing at about N1.7 billion. Of this figure, about N40 billion was disbursed by FMBN to primary mortgage banks (PMBs) for the financing of housing development for 22,246 beneficiaries, while about N60 billion was granted as Estate Development Loan to some private developers, state-owned housing corporations and the Federal

Housing Authority (FHA) for the construction of 36,348 houses nationwide.

President Goodluck Jonathan, while launching the card, reiterated the the critical importance of housing to the economy of a nation.

He called for a strong collaboration between the newly established Nigerian Mortgage Refinancing Company (NMRC) and the FMBN will stimulate affordable mortgage financing to reduce the cost of housing in Nigeria.

•Housing development under Lagos Home Ownership Mortgage Scheme

‘Why entrepreneurs should invest in real estate’

By NKIRUKA NNOROM

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n expert in the property market has advised budding entrepreneurs to take advantage of opportunities in the real estate sector to grow their income, describing the sector as investors’ haven.

Chairman/CEO, Genesis Group of Companies, Ichie Nnaeto Orazulike, made the call while speaking at Fidelity Bank’s SME Forum, in Lagos.

Speaking on “Growing a Diversified Group of Businesses” at the forum, Orazulike said that the property business is one area where investors can expect to recoup their investment within a short period of time because of the high return on investment (ROI). He advised Small and Medium Scale Entrepreneurs (SMEs) desirous of growing their businesses to make conscious efforts to tap into the huge property market in the country even as they plough back the excess funds into their business.

“Naturally, as you grow your

business and develop it, the best thing to do with the excess which the business didn’t absorb is to invest it in real estate,” he said.

Orazulike, who is also a director in Fidelity Bank Plc., said he veered into business immediately after his National Youth Ser vice Programme (NYSC)

essentially because he wanted to do something different. He said that real estate is an investment he would advise every entrepreneur to take on, noting, “real estate, as far as I am concerned, is the best for value. It will grow over time; outlast you and generations to come.”

Ogun moves to standardise property documentation

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gun State government is poised to assist property owners with no valid land documents to regularise their property/land documents with the introduction of the “Homeowners Charter Program”.

The State Ministry of Urban and Physical Planning said the move will help rebuild the state by providing adequate data for medium-term planning – provision of hospitals, roads, schools and other public infrastructures to the residents of the state. To this end, the state government promised to waive all accrued penalties while fees will be discounted.

It said the scheme became expedient because a GIS Satellite mapping of the state forecasts that the state is replete with sizeable numbers of undocumented properties and houses with no building plan approvals, C of O’s and other relevant documents.

The ministry however makes it clear that some properties are not eligible for participation in the scheme.

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32 — Vanguard, MONDAY, FEBRUARY 24, 2014

Insurance

Pension assets to hit N4.2trn by year end — PenOp Stories by ROSEMARY ONUOHA

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hairman of the Pension Fund Operators of Nigeria, PenOp, Mr. Misbahu Yola, said that the pension industry expects subscribers to the Contributory Pension Scheme, CPS, to climb to over 6.2 million in the 2014 financial year.

Yola who made the assertion at a media briefing in Lagos said that the industry also expects pension assets to grow to over N4.2 trillion by year end.

Yola stated that the CPS currently has about 5.9 million contributors, as against 5.7 million as at December 2013, while

pension assets stand at N3.9 trillion.

According to Yola, the pension annual growth projection stands at 20 per cent and due to exit of some workers from their employments, the projected income for 2014 should be about N500 billion.

He said, “We expect that by the end of 2014, the pension assets should be around N4.2 trillion to N4.3 trillion.

The number of contributors will be above six million.”

Yola disclosed that PenOp is working with the National Pension Commission (PenCom) to introduce the pension scheme into the informal sector.

He however stated

that the current amendment to the Pension Reform Act will take care of this challenge, such that the informal sector can be incorporated into the contributory pension scheme.

“It is not easy because so many things are not in place. Even the identity issue is a thing that would hinder the

smooth take off of the initiative in the informal sector. ” While stating that the number of subscribers will keep on increasing as long as more employers and employees are embracing the scheme, Yola noted that the pension sector expects more compliance from the private sector.

Yola however regretted that the transfer window cannot commence because there is still a lot to be done on the biometrics database, stressing that, as soon as the industry gets the biometrics right, the transfer window will be open.

The PenOp Chairman noted that most state governments are yet to fully embrace the CPS promising that pension operators, in alliance with PenCom, will continue to persuade state governments to

Staco gross premium hits N6.8bn, begins new head office complex

By FAVOUR NNABUGWU

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he Board of Staco Insurance Plc said it has acquired two properties adjoining its present head office location for the construction of UltraModern head office complex even as the company grossed N6.8 billion.

The Chairman of the company, Dere Otubu disclosed this at the th 18 Annual General Meeting (AGM) that the company needs to adequately capitalize in order to compete favourable in the Nigerian Insurance Industry.

Focused on strengthening its operations and taking advantage of emerging opportunities in the business environment, Staco Insurance plc has ploughed back over N300 million profits generated in 2012 financial year. This according to the company would enable its boost growth for enhanced shareholder value.

Staco Insurance in the 2012 financial year recorded a written gross premium of N6.8 billion C M Y K

as against N6.48 billion in 2011, despite the challenging operating environment.

The company ’s net premium written also increased from N5.99 billion in 2011 to N6.28 billion in 2012, while the underwriting result was N3.12 billion in 2012 as against N3.06 billion achieved in 2011.

STACO’s profit before tax and exceptional item rose to N310.76 million in 2012 from a loss of N462.97 million in 2011.

The adoption of International Financial Reporting Standards (IFRS) in the preparation of financial statements equally n e c e s s i t a t e d adjustments that impacted on the capital base of the insurance company during the out gone year.

Dere Otubu, chairman of the Company who disclosed this at its th 18 Annual General Meeting held in Lagos said the Company has ploughed back the profits recorded in 2012 to promote growth and position the company strategically for the ever increasing competition in the financial services sector.

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key into the scheme, as it is better for retirees and the economy as a whole.

“The major challenge we have is that some state governments are yet to key into the scheme.

The Pension Act of 2004 does not make it mandatory on state governments to choose the contributory pension scheme. They have the liberty to create pension schemes of their own.

What we can do is moral suasion, which the operators are currently doing,” he stressed.

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BRISTOL HOTEL REVIVAL: Lagos CBD gets a boost Everything that is done in this world is done in hope”, Martin Luther, 1483-1546, German Reformer.

(VANGUARD BOOK OF QUOTATIONS).

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he regular readers of this page must forgive me for postponing, once again, the continuation of the series on the INHERITORS – the second generations of Nigerians who allowed great enterprises bequeathed to them to crumble. The next would have been the LAWSON Group of Companies, among which was the ECOBANK, once headed by Mr Kolapo Lawson. The slide down the greasy slope of misfortune for the group started several years ago. But, this is not the time for that.

This is the time for celebration, once again, by old Lagos boys who remember when Bristol Hotel was the

place to go for unparalleled enjoyment. At the height of its fame, it was easily the best hotel in the Central Business District, CBD, of Lagos and simply delightful.

But the years have not been too kind to Bristol and it had become a victim of one atrocious management, after another, until it became a beehive of illegal activities, con men, and dope peddlers.

With the demise of Bristol Hotel, Lagos lost its last

prestigious hotel in the CBD. And, that unfortunate transformation rendered Lagos CBD the only one without a decent hotel in the whole world.

The implications are too numerous to describe. But, let me point out a few. The quick lunch, at a familiar but decent hotel, which saved millions of busy executives from sudden debt on account of stress, was no longer possible — once the high class hotel closed its

doors to top class clientele and became a haven for robbers and money-changers. To have a decent lunch these days, the top executives of UBA, First Bank, Union Bank, CBN, FCMB, WEMA, etc have to get in their cars and head for V.I – a time consuming endeavour.

Similarly, those working late and who must have a quick bite to eat were also handicapped in this way.

Staff of the banks and other

businesses, coming from outstation, have also been forced to lodge elsewhere – other than Lagos Island. That meant having to commute to the Island everyday, suffering from the imminent traffic hold-up, while in Lagos.

Those days will soon come to an end. Once Bristol reopens for business, they can lodge in Lagos Island and stroll to their assignments…..

MORE ON THAT LATER.

OKONJO-IWEALA: Killing us softly with debt “Every hero[ine] becomes a bore at last”, Ralph Waldo Emerson, 1808-1882.

(VANGUARD BOOK OF QUOTATIONS p 90).

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r Ngozi Okonjo-Iweala, like most of us who studied in America, and undertook elective courses,

must have read about Emerson. When she came in 2003, ostensibly to teach us a lesson that Nigeria as a nation should avoid the debt trap, we believed she was sincere. Even when she overpaid our Western creditors, who we later learnt, foisted her on us, we still gave her credit for helping us to escape the debt trap.

But, “what does corrupting time not diminish?”

asked Horace, 65-8 B.C. Today, we have on our hands a Minister of Finance who has been part of the conspiracy to return us to the debt trap.

Sometimes, one wonders if the measure she introduced in 2003 was really her own or was either handed to her from the World Bank, or, God forbid, plagiarized from another economic guru. The fact is; the Dr Okonjo-Iweala of 2014 bears no resemblance to the 2003 version; they only bear the same name. One might even find oneself indulging in the satanic thought that there might have been some sort of identity theft.

Has somebody

kidnapped the “real” OkonjoIweala and are we now dealing with an impostor?

Just in case you think this is all crazy stuff, please take a look at these graphs and figures representing the mounting domestic debt situation and the frightening debt servicing burden this country now experiences.

Later, I will reveal the external debt situation. And the situation is getting worse.

Is this any way to run a Ministry of Finance?

Since, as the Chinese say, “a picture is worth more than a thousand words”, there will be no comment from me.

Judge for yourself.

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Campari projects cultural heritage in 2014

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very year, Campari, an alcoholic drink marketed by Brian Munro Limited in Nigeria, and manufactured by Gruppo Campari comes with iconic calendar. The 2014 edition of the Calendar looks at global celebration of cultural heritage as its main focus. This year, the theme for the calendar is: “ W o r l d w i d e

Celebrations”, each page(month) of the calendar focuses on a unique festival from a number of different cultures around the world. Through this intriguing features, Campari intends to highlight how cultures around the world have become more global than ever before, and reinterprets each celebration through its

spirit made of passion, style and charisma.

The Campari Calendar is one of the world’s iconic artistic calendars.

Distributed in international Limited edition of only 9,999 copies, it is a small, collectible luxury for the few that receive it, and is a tribute to the world class talents and photographers that make it come to life every year.

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Business & Economy

BY FRANKLIN ALLI

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IGERIA is set to replicate the success story of One Local Government One Product (OLOP) opportunities it borrowed from Japan to boost jobs and rural economy in all states of the federation over the next three years.

Bature Umar Masari, Director-General of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), who disclosed this during an interactive session with Industry correspondents in Lagos, said: “OLOP is based on a borrowed idea from Japan which has seen them developing economically and otherwise.

“The pilot projects have been conducted in Kano and Niger states, using rice, groundnut oil, leather products , yam and sheanut, and based on the lessons learnt from the pilot projects, SMEDAN is now implementing the programme in all states of the federation and local government areas within the next three years, under the National Enterprise Development Programmme, NEDEP. It is being implemented by SMEDAN, Industrial Training Fund, ITF, and the Bank of Industry.

He explained that OLOP focuses on identifying products with competitive and comparative advantages in each of the local government area in the country.

“SMEDAN borrowed the OLOP concept from Japan in

12 rice vessels to berth at Lagos ports

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TALENT HUNT: From left, Otunba Fatai Olukoga, Special Adviser to the Lagos State Governor on Education; Mrs Sewanu Amosu, Director, Private Education, Lagos State and Mr Eric Birhiray, Bobo Food and Beverages at the Bobo Kids with Voices grand finale held in Lagos.

Nigeria goes for Japan's OLOP model to boost jobs, rural economy April 2009 to revitailse the rural economy, improve employment opportunities and alleviate poverty in rural areas. This was based on the One Village, One Product (OVOP) movement implemented in the Oita Prefecture in Japan. The governments of both Nigeria and Japan agreed to implement a technical cooperation programme beginning in February 2010 to verify implementation

methods and institutional arrangements for the promotion of OLOP,” he said.

He disclosed that the first batch of cooperative bodies set up under the NEDEP will get approved funding before the end of February.

“The approval for award of funds was obtained after the cooperatives’ business plans successfully passed the requisite assessment and evaluation of the Bank of Industry (BoI).

Why we want to hold tourism summit – FG …possibility of tourism police force coming

BY CALEB AYANSINA

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EDERAL Government has said that its proposed summit in the tourism sector was to create awareness and agree on implementable policy framework that would enable the country harness the potentials abound in the sector.

The Minister of Tourism, Culture and National Orientation, Chief Edem Duke, who gave the reason, yesterday, during a press conference on the forthcoming National Discourse on Tourism in June, in Abuja, also expressed the possibility of establishing Tourism Police Force to ensure maximum security of tourists.

The Minister explained that various issues ranging from multiple taxations, security challenges as well as the establishment of tourist site account to gather information that would be used in the economic planning would form the basis of the discussion.

According to him, “There are a lot of challenges and we have looked at the prospects of an urgent review of laws and regulatory frameworks.

“We have looked on how we can work with United Nations Tourism Organisation and World C M Y K

Travel Organisation Council to implement the critical element of National Tourism Master Plan, as well as re-engineering the Nigeria Tourism Development Corporation.

We will be looking at the strategy of upgrading our institute of hospitability to become the one stop regulatory body in this sector.

We have started with the idea of establishing tourist site account to be powered by the private sector; it is the platform that will help us in collating data which will help in economic planning policy development, and appraising the contribution of tourism to the national economy.

A number of our stakeholders have complained about multiple taxations in the sector, and this is something that I am sure we will be looking at in the course of developing the investment environment of tourism. A number of people have spoken about security challenges of tourism, and it’s our hope that we will be able to look at some of the suggestions of possible tourism police force.

“And so far, we have been able to cover 22 states within a period of three months and we have also formed as at the end of December 2013, 20, 111 cooperative bodies all over the country who are now very busy being guided

by SMEDAN to come up with bankable business plans. We have received and handed over those business plans that are ready to BOI which is a collaborating partner of the NEDEP programme with a view to providing financing for the enterprise of their choice along an identified product’s value chain.

And I believe that before the end of this month, these ones that have qualified will start getting financing from BoI,” he said.

According to him, some of the successful cooperatives with bankable business plans have already received letters of award from BoI. He explained that all developed business plans must come through SMEDAN before it goes to BoI who also in turn gives SMEDAN a copy of their assessment and evaluation of the cooperative, stressing that all these are done in order to minimise the

welve ships carrying rice are expected to arrive in the Lagos ports between Feb. 21 and Feb.24. The Nigeria Ports Authority (NPA) in its daily bulletin, Shipping Position, said on Thursday in Lagos that the ships would berth at ENL, ABTL and GONL all in Apapa quays. The NPA said the ships carrying bags of rice include Hector, Star Capella, Haci Ali Sari, Wariya Naree and Aqua Runner.

It said that other ships are also expected to sail in with containers of sugar, wheat, crude palm oil and general cargoes. The bulletin said there were no cargoes awaiting Customs clearance, while seven ships carrying petroleum products were waiting to berth at various terminals at the ports. It said that the ships carrying petrol and gas would arrive at new oil jetty — Single Buoy Mooring, Fishery Wharf and Atlas Cove Jetty.

$20bn missing funds: NPDC only received funds for capital, operational expenditure

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he Nigerian Pe t r o l e u m Development Company (NPDC) on Thursday in Abuja said it only received funds to cover its capital and operational expenditure from the Nigerian National Petroleum Corporation (NNPC).

Mr Victor Briggs, the Managing Director of NPDC, disclosed this at the Senate Committee on Finance hearing on the alleged missing $20 billion oil revenue.

Briggs was reacting to allegations by the Central Bank of Nigeria (CBN) that $6 billion out of the missing funds was paid to the company.

He, however, did not disclose the amount that the NPDC received from the NNPC for capital and operational expenditure.

Vanguard, MONDAY, FEBRUARY 24, 2014 — 35

Tax Matters

International Financial Reporting Standards (IFRS) tax implication - Part 2 IAS 11 - CONSTRUCTION CONTRACTS he current practice for determin ing contract revenue by FIRS shall be sustained. Only costs attributable to certified work done shall be allowed for tax purposes in line with provisions of CITA. Other incomes in the nature of incentive payments would be taxed accordingly.

The expected loss recognized as an expense shall be disallowed until the loss is actually incurred.

Interest received on advanced payment placed in an interest yielding account shall be treated as other income and be subjected to tax at the time it is earned.

Retention income shall be subjected to tax at the time it is earned.

Future cost shall not be allowable as expense for tax purposes IAS 12 – INCOME TAXES Taxpayers shall furnish FIRS with all deferred tax disclosures as contained in the standard.

IAS 16 – PROPERTY, PLANT AND EQUIPMENT (PPE) Land is not a qualifying capital expenditure under Schedule 2 of CITA, thus capital allowance is not claimable on land. Capital allowance claimed on land in error in prior years shall be adjusted for tax accordingly.

The entities should provide schedule of how they apportioned the cost between land and building.

Separation of historical cost of the land and building shall be at the proportion of the current market value of the land to building except where the historical cost can be easily ascertained.

Deferred Payment for PPE: Capitalised cost of PPE shall be based on the cost indicated on the invoice. Any imputed interest element charged as finance cost in the income statement shall be disallowed.

The company should provide the details of the imputed interest included in the cost of asset for necessary adjustments. Cost of employee benefits directly attributable to the construction or acquisition of the PPE shall be allowed for inclusion in the cost of the PPE. The schedule of such attributable staff costs should be provided.The cost of dismantling and removing the item of PPE and site restoration:

recognised for tax purposes each year shall be the amount incurred/realised.

Where land is on lease, the rental shall be allowed for tax purposes in line with Section 24 of CITA.

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rovision/estimate of cost of aban donment, dismantling, removing the item of PPE and site restoration shall not be allowed for capitalization with PPE. The cost shall only be allowable for tax purposes when it has been incurred, or if it is set aside in a funded sinking fund, provided that: i. Any company that has claimed deduction on any amount set aside for abandonment, dismantling, removal of items of PPE and site restoration shall not claim further deduction upon incurring the relevant expenditure except on amounts set aside for that purpose; ii. Any amount claimed in excess of that expended for the abandonment, removal of items of PPE and site

COMMISSIONING: From left, Mrs Adrianne Nwagwy,Head,Sustainability & Resposibility Guinness Nigeria Plc; Engr. Adegboye Benedict Ifedayo, Assistant General Manager, Production, South; Hon. Sheriff Anipole Executive Chairman, Ikorodu Local Government with Mr Sesan Sobowale, Director, Corporate Relations, Guinness Nigeria Plc and Ramakrishna Varma, Business Development Manager, WaterHealth Nigeria Limited at the Commissioning of the Guinness Nigeria funded Safe Water for Africa [SWA] Project,Sabo Ikorodu Lagos. PHOTO BY AKEEM SALAU.

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The turnover to be subjected to tax treatment under loyalty program shall be the payments made for both the consumed and deferred portion of the services

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restoration shall be treated as taxable income.

Exchange of Assets: a. Where there is exchange of dissimilar assets, the old asset shall be treated as a disposal with the sales proceed being the market value (price at arm’s length) of the asset. Balancing charge/allowance, Value Added Tax and Capital Gains Tax shall be computed accordingly. b. The cost of the new asset for capital allowance purposes shall be the market value of the old asset plus any cash consideration included in the exchange.

Revaluation Surplus/Deficit: a. Cost and Tax Written Down Value (TWDV) is the basis of capital allowance computation. FIRS shall continue to disregard all revaluation of PPE. Any revaluation surplus shall not be taxable while deficit shall not be an allowable deduction. b. Professional fees and valuation expenses relating to revaluation of PPE shall not be allowed for income tax purposes. These expenses should be separately disclosed. Where such expense is incurred prior to the sale, it shall be deductible from chargeable gains under Capital Gains Tax.

Componentization: Schedule/breakdown of componentized PPE inclusive of the basis for determining the value of each component shall be filed with the FIRS as it shall form the basis of capital allowance claims and applicable rates.

FIRS shall rely on Schedule 2 of the CITA in granting capital allowance on componentized PPE. For a component to be significant, it must be 20% and above of the total cost of the asset.

Taxpayers shall provide reconciliation between the total cost of PPE under GAAP and componentized cost of same PPE under IFRS for first time adopters.

Historical cost of components shall be provided by the entities.

Depreciation of land used as quarries and landfill: The Second Schedule of CITA does not recognise any form of land as qualifying capital expenditure therefore capital allowances will not be granted until the relevant tax laws are amended.

Spare Parts and Servicing Equipment: Stock of spare parts and servicing equipment should continue to be carried as inventory and expensed when consumed e.g. returnable containers. Where replacement results in improvement, the cost shall be added to the TWDV of the PPE while the carrying cost of the replaced part that was expensed in line with IFRS shall be added back in arriving at the assessable profit. Replacement cost shall be treated as allowable deduction if it does not result into improvement.

For assets reclassified to operating lease, paragraph 18(1) of Schedule Two of CITA which relates to rights to claim capital allowances on operating lease shall apply.

Also, FIRS Information Circular No. 2010/01 dated 12th April, 2012 (Guidelines On Tax Implications of Leasing) which relates to VAT and WHT shall apply. The lease/rental payments to be

ease of building: Where the build ing is on operating lease or finance lease, our existing tax treatment (FIRS Information Circular No. 2010/01 dated 12th April, 2012: Guidelines on Tax Implications of Leasing) shall be applied.

Sale and Leaseback Transaction that Results in a Finance Lease: The sales and leaseback transactions shall be treated separately for tax purposes and relevant tax provisions shall apply. This position is based on the provisions of FIRS Information Circular on Lease of 12th April, 2010 (Guidelines on Tax Implications of Leasing).

The disposal shall be treated in line with the provision of Schedule 2 of CITA on capital allowance, balancing allowance and balancing charge.

Gain or loss on disposal shall be subjected to the provision of Capital Gains Tax Act. The finance lease shall be treated separately in line with the above guideline on finance lease.

Yearly amortisation of profit on disposal into profit or loss shall be treated as non-taxable income.

Sale and Leaseback Transaction that Results in an Operating Lease: The existing tax treatment on disposal, operating lease, VAT and Capital Gains Tax shall be applied on the transaction. For tax purposes, the higher of sales price and market price shall be taken as the disposal value.

The actual lease rentals paid shall be adopted for tax purposes.

IAS18 – REVENUE In the case of deferred consideration where imputed interest is embedded in sales revenue, the entire value on the invoice will be subjected to tax.

However: Where the interest element is clearly shown and separated on the invoice, VAT should not apply to the interest portion.

Where the interest element is clearly shown and separated on the invoice, the interest element shall suffer WHT at the rate of 10 percent.

For income tax purposes, both the sales and financial/interest income constitute taxable income. The taxpayer must always disclose clearly the components of deferred consideration.

The turnover to be subjected to tax treatment under loyalty program shall be the payments made for both the consumed and deferred portion of the services. Revenue shall be recognized for tax purposes at the point of realization. VAT will be charged on total invoice value, whether consumed or deferred. Where there is exchange of dissimilar goods, the revenue shall be separately treated for tax purposes.

Where there is exchange of similar goods or services, the exchange will not be regarded as a transaction which generates income for tax purposes. The transaction will not be viewed as a case of supply of goods or services.

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36 — Vanguard, MONDAY, FEBRUARY 24, 2014

E-Commerce

MTN Nigeria, Ericsson in managed services deal

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RICSSON has signed a five-year managed services agreement with MTN, a leading telecommunications company with presence in 21 countries in Africa and the Middle East, for its Nigeria operations. MTN Nigeria is the largest mobile operator in Nigeria and West Africa with over 45 million subscribers. This agreement not only extends Ericsson’s managed services leadership across Africa, but makes Ericsson MTN’s largest managed services partner on the continent.

Under the contract, Ericsson will assume full responsibility of the management, optimization and field maintenance of MTN’s network infrastructure in Lagos, Abuja, Enugu, Port Harcourt and Asaba, which represents 75 percent of the network. With Ericsson taking over the day-to-day operations of the network, MTN is able to focus even more on its core business; providing a superior customer experience across all its network offerings.

Mr. Michael Ikpoki, Chief Executive Officer, MTN Nigeria, says: “This engagement with Ericsson is a logical step forward in our strategy execution and is consistent with our commitment to deliver a bold new digital world to our customers across Nigeria. Leaving the management and maintenance of our infrastructure to Ericsson will allow us to focus even more on adding value to the customer experience on our network. We consider this partnership a joint investment in the growth of the telecommunications industry in Nigeria and a great opportunity to strengthen ICT knowledge and specialization locally. Ericsson is the global leader in the managed services space and the right partner for us.”

MTN will retain ownership and full control of its network assets and continue to have responsibility for strategic design and planning, as well as equipment purchasing decisions.

Jean-Claude Geha, Head of Managed Services at Ericsson, says: “This agreement with MTN, Nigeria’s largest telecom operator, marks a milestone for Ericsson in Nigeria and in the region. In Managed Services, we bring our global expertise and experience to benefit our customers and ultimately their subscribers’ experience of the network.”

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UNVEILING: From left, Mr Tajudeen Fatai, Store Manager, Swatch; Mr Segun Ogunleye, Marketing Communication Manager, Smart Mark and Mr Usime Martin, Brand Manager, Swatch at the unveiling of 2014 Swatch Valentine collection held at Ikeja Shopping Mall, Alausa, Ikeja, Lagos on Saturday. Photo by Lamidi Bamidele

Konga coming with new market model to spur development Stories by JONAH NWOKPOKU

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igeria’s online r e t a i l e r, Konga.com, has said that the marketplace which it plans to unveil in March will drive economic development in Nigeria.

Konga said that the platform will revolutionise the way buyers and sellers interact, with a model that is more convenient for the seller and more attractive to the buyer.

It will create unlimited opportunity for the Nigerian entrepreneur, small business owner or even large business owner; and will serve as the great equaliser/nation builder, boosting employment, trade and powering economic growth and development in Nigeria.

The retailer noted that it has already changed the rules of participating in e-commerce in Nigeria through several novel offerings to customers, major investments in infrastructure and widespread education on the merits and convenience of online retail.

It explained that, “Konga is building a marketplace that will exponentially drive the adoption of e-commerce in the country through unrestricted yet structured participation, as well as novel platform security measures and guarantees that ensure buyers and sellers are protected and rewarded for participating.

“This new offering which will be launching in the coming weeks will cater to the

needs of not only big wholesalers/ retailers, but even the road side/ market traders in Surulere, Alaba, Aba, Onitsha, Kaduna, as well as enterprising individuals

across the country with amazing products but no hope of expansion or scaling.”

Konga’s Chief Executive Officer, Sim Shagaya,

explained that the new platform was inspired by the imperative for continuous innovation and the need to offer socially valuable services.

He said, “About a year ago, we realised that for our services to be really valuable to society, we had to build a platform for anyone, not just Konga, to sell and prosper. We launched this platform to a limited number of sellers and in that time, we have learned how to build a truly revolutionary Nigerian online marketplace. Today we are pleased to invite all Nigerian businesses great or small, designer or farmer, producer or trader, sole proprietorship or limited liability, - to sign up to this new platform Konga Marketplace.”

He added that the internet is changing retail around the world, and the winners will be those that embrace the internet revolution. Konga.com, he said, will provide the tools, awareness and security for entrepreneurs and businesses across Nigeria who wants to benefit from the immense benefits of expanding their businesses online.

CapitalSquare unveils platform to boost entrepreneurship

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apitalSquare has unveiled a platform targeted at fledgling entrepreneurs to showcase their products and introduce their services to target markets.

CapitalSquare is a membership-based coworking space in Lekki, Lagos, with a goal to make it easier for small businesses to do business by providing affordable office space, business resources, and learning and networking opportunities, thereby helping them grow in the process.

Tagged the ‘Demo Day,’ CapitalSquare said, the platform will provide opportunities for individuals who have created new products or services to showcase their products in order to raise awareness and grow customer base.

Speaking about the platform, Founder and Chief Executive Officer of

Capitalsquare, Modupe Macaulay said that the inaugural edition of the programme which will be coming up by March will involve three entrepreneurs presenting their projects in front of the media, investors, thought leaders in the startup ecosystem, and other entrepreneurs, in order to raise awareness, grow their customer base, increase investors’ interests and receive feedback on their products.

“Demo Day is something we came up with because we wanted to give something back to the startup and SME community here in Lagos.

There are so many businesses that would go much further if only more people knew about what they were doing, so we’re trying to make that happen,” she said.

“We’re still working on the agenda, but basically, we’ll have three people come up to give a short presentation and demo of their products,

followed by a question and answer session from the audience. There will also be time for networking, and hopefully people will leave having learnt something new, and having made some valuable contacts,” she added.

She explained that the event aims to, “Bring together, creators, who could be building anything from a mobile app to a broadway musical, to talk about their craft and showcase their creations. She said, “Entrepreneurs are encouraged to send in applications to present their projects. Three presenters will be selected at each edition of Demo Day, which will come up every other month, and a selection of the other applicants will also be showcased on the CapitalSquare blog and through media partners.”

Vanguard, MONDAY, FEBRUARY 24, 2014 — 37

Facebook to buy WhatsApp for $19bn

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F/P ADVERT

acebook Inc will buy fast-growing mobilemessaging startup WhatsApp for $19 billion in cash and stock in a landmark deal that places the world’s largest social network closer to the heart of mobile communications and may bring younger users into the fold.

The transaction involves $4 billion in cash, $12 billion in stock and $3 billion in restricted stock that vests over several years. The WhatsApp deal is worth more than Facebook raised in its own IPO and underscores the social network’s determination to win the market for messaging.

Founded by a Ukrainian immigrant who dropped out of college, Jan Koum, and a Stanford alumnus, Brian Acton, WhatsApp is a Silicon Valley startup fairy tale, rocketing to 450 million users in five years and adding another million daily.

“No one in the history of the world has ever done something like this,” Facebook Chief Executive Mark Zuckerberg said on a conference call on Wednesday.

Samsung’s new Galaxy to feature bigger, sharper display

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amsung Electronics Co. will release a new device with a larger 5.2-inch screen and sharper display than the current Galaxy S4.

The new phone, with an improved battery and camera, will be released about the same time as an upgraded Galaxy Gear smartwatch.

Samsung may start selling the new phone for less than previous models in the S series after encouragement by at least one wireless carrier.

Samsung is adding features to the latest version of its most-popular device as it tries to fight stalling growth for premium smartphones, new models from Apple Inc. and a plethora of Chinese competitors selling devices for as little as $100. The world’s biggest smartphone maker is releasing its new phone, which may be called the S5, after sales of the predecessor S4 unveiled last year fell short of analyst estimates.

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38 — Vanguard, MONDAY, FEBRUARY 24, 2014

F/P ADVERT

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Vanguard, MONDAY, FEBRUARY 24, 2014 — 39

Advertising, Media & Marketing

TV commercial as instrument of brand growth Laws of Service Excellence – Part One

Stories by PRINCEWILL EKWUJURU

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s the marketplace gets competitive for consumers,’ loyalty gets fiercer, lifestyle positioning becomes an increasingly popular approach among brand managers, especially in categories where functional differences are hard to maintain. By connecting with consumers on a more personal level, contemporary brand managers hope to break free from aggressive competition, thereby carving a niche for their brands through line extension that speaks to specific lifestyles.

Other brands like 5 Alive, Fumman that toe the TVC line to reach their target audience have been able to carve expected niche for themselves through the deployment of broadcast commercial.

Fumman projecting itself as the natural fruit juice tells much about the closeness of consumers to nature.

However, as lifestyle brands get recognition through the experiences they are associated with, their broadcast commercials are usually developed to draw attention to the positive emotion that is likely to accrue through experiences with the brand.

For instance, the new radio and TV commercials of Chivita Active from the House of Chi Limited resonates on the

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LAUNCH: From Left: Retail Customer Marketing Manager, Nokia West & Central Africa, Olajide Adeyemi; Head of Marketing, Nokia West & Central Africa, Debbie Shepard; Consumer Engagement Manager, Nokia West & Central Africa, Mayor Esiaba at the Nokia/Maggi Food Photography Night held to celebrate the launch of Nokia Lumia 1520 and Lumia 1320 during the Social Media Week at Terra Kulture in Lagos. benefits of consuming Chivita Active by people who desire a healthy and active lifestyle.

Although the brand can equally be enjoyed by all, it is targeted more at people who are eager to do more and get more out of life. This is because the brand contains six citric fruits juices and vitamin C. The citric fruit juices are Orange, Grapefruit, Lime, Tangerine, Lemon and Mandarine.

The radio commercial says it all: “Some days, you really just want to stay in bed to do so much in so little a time, just get active with Chivita Active.”

The commercial went on to say that Chivita Active helps the consumer get more out of life.

Star Lager becomes ‘Lite’

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he argument by marketing bookmakers that 97 percent of brand extensions don’t survive the first six months of their launch into the market cannot be faulted.

Many examples abound as posited by marketing professionals.

Nigerian Breweries, NB Plc, producers of the latest lager beer in the market: Star Lite, says they are aware of the failures of most brand extensions, but that a well laid strategic marketing plan has been mapped out to give the new beer a stronghold in the market, even as the brand has taken note of the pit falls of other brand extensions in the market.

The 4 volume alcoholic beer brand introduced a new crispy, truly refreshing and less filling beer as described by NB Marketing Director, Walter Drenth, during the trade

launch of the new beer in Lagos. Drenth further said that the beer is with an innovative temperature sensitive label, and a special cold protection crown cork which locks in coldness inside the bottle.

You work better, play harder and do so much more and success follows… so you want to stay active, drink Chivita Active.

The 60-second TVC opens with an executive meeting and moves on to a workout on the basketball court before panning on to a grueling photo shoot at a modeling session and ending the day on the dance floor. The TVC depicts an activity-packed day that is sustained by the perfect choice of refreshment for an active life style – Chivita Active.

Undoubtedly, individuals who enjoy active lifestyles often participate in energy-sapping activities that include meetings, recreation sports, outdoor hobbies and an active social life. Speaking on Chivita Active’s slogan,‘Be Active – Do More”, Managing Director of CHI Limited, Mr. Deepanjan Roy, said: “One thing we have always tried to do is provide our consumers with a complete & balanced range of fruit juice offerings, so that we are ready to fulfill their needs irrespective of whatever they may be, from the product or the lifestyle standpoint.”

Forte Oil rejigs ‘Doctor’ TVC to push products sale

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he age long Television Commercial, TVC, code named, ‘Doctor ’ of Forte oil Plc, formerly African Petroleum, AP, has been reintroduced into the lubricant segment of the market with prospects to push sale of its flagship engine oil brands: Super V and Visco 2000.

The new TVC is a shift away from the former which showcased a car that went to a doctor, which is a fueling pump machine to complained of its medical condition, where eventually the supposedly doctor diagnosed

it to have engine fatigue.

The doctor prescribed Super V and Visco 2000 engine lubricant which eventually relived it of its medical condition, a situation that prompted other vehicles to rejoice with it as it comes back to the road. Other of the products include Gear Oil 90, Gear Oil 140, Diesel Oil, Synth 10000 and Heavy The animated TVC reveals the power of the products to bring vehicles and generators back to life if used to service them, and the removal of slug from motor engine (s), a process that helps keep engines new and long lasting.

o you want to excel in service? Perhaps, you even want to build or manage an organisation that’s known for its excellence in service – an organisation in the mould of Marriott Hotels, Nordstrom, Southwest Airlines, Mayo Clinic and the rest. Well, I have some word for you. Over the next few weeks, we will look at some principles – I call them laws – you need to remember and apply to your advantage. You may, however, wish to ignore or break the laws – at your own peril (needless to say).

Let me state that what I intend to share with you is largely drawn from my book, 20 Universal Laws of Service Excellence. I believe there are more than 20 principles that should guide our quest for excellence in service; but I also know that any organisation that has fully internalised these 20 is already on its way! I don’t know of any organisation that won’t find the laws relevant.

The customer is the Boss

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n customer-focused companies, the products (services) and processes are tailored to suit the needs of the customer. Whatever the organisation does is geared to pleasing her. This, no doubt, is the first law in business. Business exists only when there is a customer for the organisation’s products and services.

So the customer is the ultimate boss.

Your frontline is the company

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n service, as in many other things in life, the part represents the whole. Whoever the customer meets does not only represent the company, but is the company. To the customer, if you’ve seen one, you’ve (probably) seen them all. The pitfall, however, is that an otherwise excellent service organisation may have its reputation sullied by the indiscretion of just one employee.

Service is driven by organisational culture

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n organisations built on service excellence, there is a deliberate effort to create a culture that is conducive to service. For instance, it is going to be very difficult to deliver exceptional service if the organisational culture dis-empowers employees such that for every single decision they must seek approval from superior officers. It is also going to be difficult to serve customers well if people see marketing and customer service as departments rather than roles for every employee of the organisation.

External service mirrors internal service

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ntil employees have a taste of good service within the organisation, it is a tall order to expect them to deliver it to customers. If you care for them, they most likely will care for your customers. If your organisation is a great place to work, employees are more likely to make your customers feel great too. Truth is that you cannot get excellent service from a bunch of poorly paid, overworked, maltreated, untrained and unmotivated employees. There is usually a correlation between the way employees feel about their place of work and the kind of service they render to customers.

Customer experience matters more than company communication

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rospects may sometimes rely on corporate communications and physical evidence to form impressions about the organisation, but actual customers rely more on their previous experience. To customers, experience with the company counts much more than the carefully (some say, seductively) crafted communications from the company. Their perception of service quality and the value delivered by the company carry more weight than anything the company has to say.

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40 — Vanguard, MONDAY, FEBRUARY 24, 2014

Email:lesleba@lesleba.com, lesleba@gmail.com Blog page:www.lesleba.com/blog2 Website: www.lesleba.com Tel:0805 220 1997

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Will more and efficient refineries reduce fuel prices? encouraged investors to establish private plants.

Incidentally, by 2008, over 18 licences had been issued to investors who had expressed interest in building new refineries. For example, in April 2008, a Guardian newspaper editorial reported NNPC’s Alhaji Abubakar Yar’Adua’s allegation that “16 out of 18 companies that were licensed in 2008… merely used the licences as a launch pad to seek contract for crude oil exports; they were not committed to building refineries”.

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ater in May 2011, the federal government and some Chinese investors also undertook to build additional refineries in Kogi, Lagos and Bayelsa States respectively.

Regrettably, so far, there is no apparent progress on this project. Later still, in July 2012, the Minister for Trade and Investment, Segun Aganga, endorsed a Memorandum of Understanding (MOU) between a partnership of private United States and Nigeria companies with the federal government. Under this MOU, six refineries were to be constructed in modular forms within 30 months, at a cost of $4.5bn; each refinery would process 30,000 barrels of crude oil daily, with expected total output of about 30m litres of fuel every day.

(See our article “Six New Refineries, But Not Yet Uhuru” of 13/7/2012).

Regrettably, once again, almost 24 months after the said MOU, there is nothing on the ground to indicate that

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he increasing length of queues lately in petrol stations nationwide may suggest that the erstwhile liberal availability of petrol may be threatened.

Consequently, many car owners now inevitably patronise the ‘black market’ in spite of the higher prices on offer, rather than wait endlessly in frustration at petrol stations! Invariably, marketers have blamed their inability to meet demand on shortage of supply; indeed, Major Marketers Association had earlier warned that they were yet to receive imports licences this year.

Additionally, the ability of oil majors to import seems to be adversely affected by extended delays in the payment of subsidy refunds on their fuel imports. The marketers have argued that delayed payment threatens the sustainability of their business, as the already thin margins become critically whittled down by heavy interest payments on bank loans obtained for fuel imports.

Indeed, a combination of the preceding factors has always induced fuel scarcity over the years.

In the above event, there have been several calls for the urgent turnaround maintenance of the four existing federal government refineries and the need for additional refineries to be built by both the private and the public sectors. Nonetheless, in keeping with this administration’s policy to promote higher efficiency and reduce wastage, by privatizing erstwhile corruption-laden and inefficient public utilities, government has refrained from contemplating direct funding or involvement in the establishment of new refineries, and has instead,

In reality, additional p r i v a t e refineries may not drastically reduce the current alleged annual subsidy payments in excess of N2 trillion

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the project has actually commenced. Observers of this development have suggested that the prevailing regime of subsidized fuel prices was actually the major impediment to these private investors’ aspirations, as the usual delayed payments of subsidy would inevitably cripple the sustainability of the project.

In view of the foregoing, therefore, it came as a surprise to most Nigerians that in spite of the perceived immovable hurdle of subsidies, Africa’s richest man, Alhaji Aliko Dangote, announced plans to establish a fertilizer and petrochemical plant with a complement of refineries in Ogun and Ondo states with the princely cost of about $9bn.

The ensuing question on everybody’s lips was why the evidently business-savvy Aliko Dangote would stake so much on a project where others have feared to thread, because of the spectre of subsidized fuel prices. See

our article “Refineries: Dangote to the Rescue?” of June 10, 2013 www.lesleba.com.

In an interview with ThisDay’s Simon Kolawole in September 2013, Dangote however, noted that “With or without deregulation, there is nothing stopping anyone from building a refinery; I am not a marketer. All I will do is buy crude oil at the market price, refine and sell to marketers at the market price.

I

t is marketers that will deal with subsidy! If government continues to subsidize, marketers can buy products from us and then collect the subsidy from government…. Don’t forget that when they go to foreign refineries to import petrol, they buy at the market prices before coming home to claim subsidy payments!” Indeed, in view of the attraction of the obvious potential of this strategy, Dangote earlier this month, also announced another plan to build additional refineries within the Lekki free trade zone in Lagos State.

Ultimately, we would certainly have increasingly more refineries that would more than cater for local consumption, with ample surplus for export to other African countries and elsewhere worldwide. The critical question, however, is whether or not more and efficient refineries would mean lower fuel prices without subsidy component domestically? The answer is a clarion no! At least, not

with the existing framework where a depreciating naira rate of exchange would automatically translate into higher fuel prices.

Thus, ultimately, domestic fuel price levels may only fall by a small margin of about 10%, from the imported brand as a result of savings from sea freight cost of imports. This may not be welcome news to most Nigerians, particularly the trade associations, who canvass for more government refineries because of their perception that fuel prices would be much cheaper with local production.

Certainly, a 10 percent reduction on locally produced fuel will not make significant difference to current subsidized prices; besides, with the awareness of the public’s sensitivity to any increase in fuel prices government may be reluctant to revive the social tensions caused by almost 100 percent fuel price hike in January 2012. In reality, additional private refineries may not drastically reduce the current alleged annual subsidy payments in excess of N2 trillion.

H o w e v e r, I have consistently argued for many years that fuel subsidy payments will only be eliminated with a stronger naira, which can become possible, if the CBN’s exchange rate strategy loyally defends the naira, by reducing the self-inflicted burden of surplus cash on the economy, whenever the apex bank increases money supply, when it substitutes fresh naira supply for monthly distributable dollar revenue.

Business & Economy Dufil to sample 8m consumers in 2014

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By PRINCEWILL EKWUJURU

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projected eight million consumers will be sampled by Dufil Prima Foods Industries this year with varying flavours of Indomie noodles nationwide, as part of the company’s efforts to continually ensure objective consumer feedback and satisfaction.

This projection came about as a result of the company’s desire to surpass last year’s 5,000,000 consumers sampled last year.

Speaking on this development, the Head of

Marketing, Dufil Prima Foods Plc, Mr. Manpreet Singh, affirmed that the company intends extending the sampling to the entire geo political zone in the country namely: North-Central, NorthEast, North-West, South-East, South-South and South-West.

He further stated that the intent behind the sampling exercise is targeted at creating excitement and increasing the emotional connection between the brand and its consumers, as a way of encouraging a store experience in the home of consumers.

“Sampling is a regular and continuous exercise that Dufil embarks on with the purpose of strengthening the existing bond between consumers and the brand. This serves as a feedback mechanism that affords consumers the opportunity to freely savor and experience the unique taste of indomie noodles while also expressing their sincere opinion about the brand,” said Mr. Singh. “In the long run, this will furnish us with valuable information towards making consumertailored adjustments to our products.”