CBN releases 2013 controversial report by Vanguard Media Limited

JUNE1, 2015

CBN releases 2013 controversial report Earned interest of $29m from external reserves Forex inflow rose to $146.2bn, outflow $43.4bn $28bn spent on importation of goods By OMOH GABRIEL

he Central Bank of Nigeria (CBN) weekend released the 2013 annual report that led to suspension of former governor, Sanusi Lamido Sanusi. The Financial Reporting Council of Nigeria had raised issues with the accounts, saying it needed some detailed explanation as required in the International Financial Reporting Standards. It was on the basis of issues raised by the Council that the former CBN Governor was suspended. However, the CBN said that it has formally released its audited financial statements for 2013 and 2014 and has fully adopted the International Financial Reporting Standards (IFRS) for the financial statements. The CBN annual report said the bank made a total earnings of $0.29 billion (N44.41 billion), from the external reserves in 2013 representing an increase of 7.1 per cent over the level in 2012. According to the CBN, in order to earn additional income from the external asset management programme, the CBN signed a Master Securities Lending Agreement with JP Morgan Chase to participate in its securities lending programme. The custodian was allowed to lend the securities purchased by the fund managers to eligible borrowers in accordance with the guidelines. It said that total earnings from the securities lending operations from the inception of the programme in December 2007, amounted to $54.93 million, of which $1.36 million was realised in 2013, representing a

decline of 41.8 per cent, compared with $2.33 million earned in 2012. The released financial statements indicate that the net income of the bank for 2013 amounted to N209.6 billion while that of 2014 was N35.4 billion out of which 80 per cent have since been remitted to the Federal Government of Nigeria in accordance with the Fiscal Responsibility Act. The balance of 20 per cent was also transferred to the Reserves within the bank.

The report said that the bank in 2013, recruited 771 personnel, consisting of two executives, 427 senior and 342 junior staff. This was made up of 276 female and 495 male. The bank, however, lost the services of 27 staff through death; 15 through voluntary retirement; 72 through mandatory retirement; and 10 through resignation. Furthermore, the appointment of nine staff was terminated, while 27 were dismissed. The staff strength stood at 6,594,

compared with 5,983 in 2012. The report said: “Available data showed that total foreign exchange inflows through the economy rose by 22.9 per cent to $146.27 billion in 2013. Of this, inflows through the CBN and autonomous sources amounted to $41.07 billion and US$105.20 billion and accounted for 28.1 and 71.9 per cent, respectively. A disaggregation of the inflows through the autonomous sources showed that invisibles accounted for $98.53 billion; non-oil exports, $6.31 billion; and external account, $0.36billion. The invisibles comprised over-the-counter purchases (OTC) and domiciliary accounts which amounted to $62. 93billion (63.9per cent) and $35.60 billion (36.1 per cent), of the total, respectively. Continues on page 22

LAUNCH - From Left: Chief Executive Officer, Etisalat Nigeria, Matthew Willsher; Managing Director, Guaranty Trust Bank, Segun Agbaje; and Chief Marketing Officer, Etisalat Nigeria, Angelone Francesco at the launch of “GTEasySavers” powered by Etisalat and GTBank which held at Guaranty Trust Bank headquarters on Tuesday, May 26, 2015 C M Y K

22 — Vanguard, MONDAY, JUNE 1, 2015

Economy Inaugural speech focused, reassuring — Experts By Babajide Komolafe

MEETING - From left: Mr Yaw Nsarkoh, MD, Unilever Nigeria PLC; Mr Paul Polman, Global CEO, Unilever; Martin Uden, British Deputy High Commissioner; Mr Thomas Griffin, MD, Control Risk, West Africa and Mr Bruno Witvoet, Executive Vice-President, Africa, Unilever during a breakfast meeting with Unilever Global CEO in Lagos.

CBN releases 2013 controversial report Continued from page 21 “Aggregate foreign exchange outflows through the economy rose by 17.9 per cent above the level in 2012 to $43.64 billion. The development was attributed to increased Dutch auction utilisation, national priority projects and external debt service by 27.9, 4.3 and 2.3 per cent, respectively. In addition, $1.00 billion was transferred to the Nigeria Sovereign Investment Authority (NSIA) account during the year for investment. “Overall, a net inflow of $102.63billion was recorded in 2013, compared with US$81.99 billion in the preceding year. Foreign exchange inflows through the CBN fell by 12. 2 per cent to $41.07 billion in 2013. The inflow from oil exports declined by 13.1 per cent on a year-on-year basis, occasioned by oil theft and pipeline vandalism in the Niger-Delta, which affected the oil production and volume of crude oil exported. “The non-oil component of the inflow through the bank also declined by 3.3 per cent, compared with the level in the preceding year. An analysis of the latter showed that wDAS/ rDAS purchases and interest earnings on reserves fell by 98.6 and 47.6 per cent respectively, from the levels in 2012. Other official receipts rose by 29.0 per cent above the level in 2012 to US$2.97 billion, while receipts of $0.99 billion was realised from the issuance of sovereign Eurobond. In contrast, outflows of foreign exchange through the bank rose by 20.0 per cent to $42.32billion in 2013 driven by the 27.9, 4.3 and 2.3 per cent increases in outflow through wDAS/ rDAS utilisation, national priority projects, and external C M Y K

debt payments, respectively. Further analysis showed that wDAS/rDAS and inter-bank sales rose by 33.8 and 136.1per cent, to $25.52billion and US$3.94billion, respectively, reflecting increased demand at the spot segment. The wDAS/ rDAS-Forward, swaps, and BDC sales, however, fell by 71.6, 51.1 and 4.3 per cent, respectively, from the levels in 2012. “Other official payments” were 22.2 per cent below the level in 2012 and amounted to US$5.27 billion. “The decline was driven largely by the 38.9 and 34.1 per cent reduction in miscellaneous outflow and the Nigerian National Petroleum Corporation/Joint Venture (NNPC/JVC) Cash calls funding, respectively. Under this category, the NNPC/JVC cash calls accounted for 64.6 per cent, while miscellaneous outflow was 1.3 per cent of the total. Furthermore, payments to international organisations and embassies, parastatals and for estacode rose by 40.9 and 11.2 per cent, and accounted for 12.3 and 21.8 per cent, respectively, of the “Other Official Payments”. Drawings on

The bank now has full IFRScompliant financial statements for the years ended 31st December 2013 and 31st December 2014

L/Cs fell by 23.4 per cent and accounted for 1.0 per cent of total outflows through the CBN.

he external debt service and out-payments for the national priority projects, however, rose by 2.3 and 4.3 per cent and accounted for 0.7 and 0.2 per cent, respectively, of total outflows through the bank. Overall, a net outflow of $1.25 billion was recorded through the bank in 2013, compared with a net inflow of $11.53 billion in the preceding year. 2013 annual report said “Sectoral utilisation of foreign exchange in 2013 rose by 28.8 per cent to $54.2 billion over the level in 2012. Visible trade imports, at $28.1 billion or 51.8 per cent of the total, declined by 2.4 per cent, compared with $28.8 billion in 2012. Outpayments on invisible trade, however, rose by 96.4 per cent to $26.1 billion or 48.2 per cent of the total, compared with $13.3 billion in 2012”. It further said: “Analysis of visible trade imports showed that foreign exchange utilisation for the agricultural, industrial and mineral subsectors grew by 23.1, 11.5 and 10.5 per cent to $0.3 billion, US$8.4 billion and US$0.4 billion, respectively, from the levels in 2012. Manufactures, food products, transport and oil sub-sectors, however, declined by 10.3, 7.4, 15.4 and 5.5 per cent to US$4.2 billion, $5.1 billion, $1.5 billion and US$8.2 billion, respectively. Foreign exchange utilisation under invisible imports was driven largely by financial sector services, which accounted for $22.2 billion, representing an increase of 123.3 per cent over the level in 2012. Out-payments for Continues on page 23

conomic experts have described the inaugural speech of President Mohammadu Buhari as focused and reassuring. They said the inaugural speech though commendable, is not a speech on the economy. Commenting on the inaugural speech, Managing Director/Chief Executive, Financial Derivative Company Limited, Bismark Rewane said, “It was a very good speech. It was focused. It dwelt on the key issues. The speech was more of a governance speech, addressing core areas of governance. He talked about blocking leakages and the war against corruption. I think there would still be a speech on the economy after he has studied the handover notes.” In his comments, Managing Director/Chief Executive, Partnership Investment Plc, Mr. Victor Ogiemwoyin said, “The President’s speech was very comprehensive on what our current problems are and was very forthright in admitting that the economy is at a low ebb. “He has also assured us that the problems are not insurmountable. These are reassuring words and will bring confidence to Nigerians. There is a feeling that the problems also present opportunities to deal with long standing issues that require political will. “We expect immediate and rapid policy decisions to address the economic issues already identified like the power situation and unemployment. We expect a sophisticated government that will focus on e-government to help reduce possibilities of corruption and streamline procedures with greater transparency.” According Mr. Emeka Madubike, Chairman, Association of Stock broking Houses of Nigeria (ASHON), inaugural speech dwelt on the problems that have been confronting the nation. “What we need now is the grace of God to see us through this trying time.” In his inaugural speech, President Buhari identified insecurity, pervasive corruption, the hitherto unending and seemingly impossible fuel and power shortages as the immediate priority for his administration. He also blamed the country’s poor economic performance over the decade on the poor power situation. He said, “At home we face

enormous challenges. Insecurity, pervasive corruption, the hitherto unending and seemingly impossible fuel and power shortages are the immediate concerns. We are going to tackle them head on. Nigerians will not regret that they have entrusted national responsibility to us. We must not succumb to hopelessness and defeatism. We can fix our

There is a feeling that the problems also present opportunities to deal with long standing issues that require political will.

problems. However, no matter how well organized the governments of the federation are they can not succeed without the support, understanding and cooperation of labour unions, organized private sector, the press and civil society organizations. I appeal to employers and workers alike to unite in raising productivity so that everybody will have the opportunity to share in increased prosperity. The Nigerian press is the most vibrant in Africa. My appeal to the media today – and this includes the social media – is to exercise its considerable powers with responsibility and patriotism. My appeal for unity is predicated on the seriousness of the legacy we are getting into. With depleted foreign reserves, falling oil prices, leakages and debts the Nigerian economy is in deep trouble and will require careful management to bring it round and to tackle the immediate challenges confronting us, namely; Boko Haram, the Niger Delta situation, the power shortages and unemployment especially among young people. For the longer term we have to improve the standards of our education. We have to look at the whole field of medicare. We have to upgrade our dilapidated physical infrastructure.

Vanguard, MONDAY, JUNE 1, 2015 — 23

Buhari, watch out for the cabals W

hen in 1999 P r e s i d e n t O l u s e g u n Obasanjo assumed office as President of Nigeria, one of his intentions was to create a state-backed Nigeria enterprise that could compete with multinationals anywhere in the globe. So, Mr Obasanjo encouraged what came to be known as Corporate Nigeria. Many enterprising Nigerian businessmen were brought close to the seat of government. Many used the opportunity to carve for themselves business empires. Instead of seeking sectoral benefits for the organised private sector, they sought concessions and waivers for their businesses and cronies. Down the line, members of Corporate Nigeria floated Transnational Corporation of Nigeria. Nigerians thought that these men will seek the overall benefit of the nation and make the company work. Rivalries and board squabbles crippled Transcorp and it had to be sold out. When Yar’adua became president, many of these big boys who are today’s cabal, almost went bankrupt and could not pay their bills. Unfortunately, President Yar ’adua took ill and eventually died. At the death of Yar ’adua, these men resurfaced and rallied round President Jonathan. They were not only close to the President, they became members of his economic team. Instead of seeking the welfare and general progress of the nation and the economy, they once again went in for the kill.

This time in the name of membership of Economic Management Team, they shared available positions and took over the commanding heights of the economic sector where they operate. Those in the oil sector became oil merchants. Importation of petroleum products took the place of local refining. They imported and sold to government and fuel subsidy became a racket and jobs for the boys. The President and the Minister of Petroleum Resources were taken hostage by the selfish and anti-people advice from these self-styled overnight economists. Instead of insisting on reviving the refineries, they saw it better and cheaper to import petroleum products all in an attempt to enrich themselves. Tank farms sprung up here

If the refineries were working and all the depots and storage facilities were in order, no cabal could have had the effrontery to hold the nation to ransom

and there. At the last count, over 82 portfolio businesses were importing fuel and claiming subsidy. President Jonathan at a point not knowing what to do to these men, called them a cabal that has hijacked the fuel importation and distribution process. This cabal last week showed their true colour in the name of oil marketers by holding the nation to ransom. They refused to distribute fuel on the ground that government owed them. What was at stake was the fact that there was an exchange rate differential of about N159 billion. The same oil marketers and depot owners who are the creation of successive administrations in the country got together to sabotage free flow of fuel in the country. These men who were the principal actors in the fuel scarcity saga were driven by profit and inordinate ambition to unduly benefit from fuel subsidy fund. In the bid to make money, oil marketers and depot owners threw caution to the wind and stood between the people and free flow of fuel in the country. This explains why the country was enmeshed in scarcity of the product with attendant fuel queues at filling stations few weeks to the crucial inauguration of a new government. To show the extent this cabal has entrenched themselves in the system, Nigerian National Petroleum Corporation (NNPC) is now using private depots to store fuel, a development that gives owners of the facilities undue advantage to create

intrigue by a group of people engaged in a secret political agenda. T h e monstrous group tagged cabal is deeprooted in government, thus making input into the economic policy of the state through c h a n n e l s camouflaged as Organised Private Sector and Economic Management Team of the J o n a t h a n Administration. This is contrary to the makeb e l i e v e President Muhammadu Buhari posturing by scarcity of the product at their government that the groups whims. are faceless. They are not. NNPC shamelessly They are notable business abandoned its own depots tycoons in and out of and allowed them to rot while government. As long as the patronising depots owned by status quo remains, it is doubtful the cabal. Why did NNPC opt if any government would ever for private depot to store its muster enough courage to put a imported petrol? check on the cabal if it continues Besides, the Federal being errant. Government ought to have The muscle flexed last week by brought back the ailing the group has shown that it has refineries, by ensuring that the capacity to cause enormous their turnaround maintenance distortions in the polity if the was done. If the refineries were government of the day decides to working and all the depots and show any measure of altruism. If storage facilities were in order, things ever get out of hand, the no cabal could have had the cabal which is more of a creation effrontery to hold the nation to of government, could assume the ransom. Since the last days of dimensions of global notorious President Umaru Musa mafias. Yar’Adua of blessed memory, It is left for President the five-letter word ‘cabal’ has Mohammadu Buhari to decide become a popular syllable in how to handle this mafia before our political lexicon. It is a they cripple his government also. word that connotes a secret

Cover Continued from page 22 business, communication, education and transport services rose by 22.2, 31.9, 14.9 and 15.8 per cent to $1.3 billion, $0.5 billion, $0.3 billion and US$1.3 billion, respectively, over the levels in the preceding year. “Similarly, distribution and other services grew by 13.9 and 11.6 per cent to $0.1 billion and $0.3 billion, respectively, from the levels in 2012. Tourism, construction and engineering-related services, and health, however, fell, by 73.4, 22.0 and 11.8 per cent, to $0.02 billion, $0.09 billion and $0.002 billion,

CBN releases 2013 controversial report respectively, from their levels.

ccording to the CBN “The IFRS requirement implies that the financial statement of the CBN be consolidated with those of investee entities, namely Nigeria Export-Import Bank, Abuja Securities and Commodities Exchange, Bank of Industry, Bank of Agriculture, Nigeria Interbank Settlement System, National Economic Reconstruction Fund,

Financial Markets Dealers Quotation, African Finance Corporation and Agricultural Credit Guarantee Fund. “Thus, the bank now has full IFRS-compliant financial statements for the years ended 31st December 2013 and 31st December 2014, respectively. Hitherto, the bank’s financial statements had been prepared under the Central Bank of Nigeria (CBN) framework. Meanwhile, the adoption of IFRS by the CBN or any central bank the world over is not without

difficulties in view of a number of challenges that include the non-profit-oriented mandates of central banks in their roles of price and financial system stability and economic growth that could be contradicted by the application of some of these IFRS standards, which are for direct profit-motivated commercial entities. “Another challenge is the statutory constraints on the central banks. This explains why very few central banks have adopted the IFRS. Many of the

central banks which claim IFRS adoption did so partially within statutory constraints. The CBN was, however, able to work around these challenges to conclude a successful adoption of the IFRS. It is worthy of note that the CBN has been able to conclude IFRS adoption within a period of two years as global experience indicated that many of the IFRS adopting central or reserve banks took longer periods of time to conclude IFRS adoption”.

C M Y K

24 — Vanguard, MONDAY, JUNE 1, 2015

Business & Economy

13 ships arrive Lagos ports with food, petroleum products

hirteen ships carrying various products have arrived at the ports in Lagos, the Nigerian Ports Authority (NPA) has said. This is contained in the daily ‘Shipping Position’ published by the NPA, which was made available to newsmen. The NPA said that seven of the ships arrived with food products, including rice in bags, frozen fish and palm oil. It said that the remaining six ships sailed into the ports with petroleum products, including petrol, base oil and diesel. The NPA also said it was expecting the arrival of 35 ships at the Lagos ports from May 28 to June 17. According to the NPA, 16 of the expected ships would sail in with containers, while four others would arrive with general cargo. It said food products, including frozen fish, bulk salt, buckwheat, bulk sugar and crude palm oil would be brought in seven ships. Petroleum products, including petrol and bulk gas, are expected to be brought in four ships, the NPA added.

CBN says foreign reserves rises to N29.6bn

he Central Bank of Nigeria (CBN) says the nation’s foreign exchange reserves stood at to 29.61 billion dollars as at May 27. This is contained in a post on the bank’s website on Thursday. The CBN said the figure was an increase of 0.3 per cent from 29.52 billion dollars recorded on April 27. It said the 29.61 billion represented the ‘gross’ amount while 28.74 billion was ‘liquid’ while 875 million as ‘blocked’. CBN had in 2014 relied heavily on external reserves to support the Naira which came under pressure following a fall in the price of crude oil. According to the CBN, the continuous pressure on the foreign exchange market is due to the rise in the internal demand for the dollar. The price of crude at the international market now hovers between 62.39 and 65 dollar per barrel C M Y K

AfDB expresses concern over Africa’s energy shortage A

frican Development Bank (AfDB) has expressed concern that the continent’s energy deficit remains large in spite of remarkable achievements in continental development. The view is contained in the fifth edition of the bank’s Annual Development Effectiveness Review (ADER) issued at its 50th Anniversary and Annual General Meeting in Abidjan on Wednesday.

The publication, posted on the bank’s website, is part of

a series produced by the bank’s Quality Assurance and Result’s Department. It states that 70 per cent of the bank’s indicators are on track. It provides an overview of Africa’s development achievements and trends, reviews the bank’s contribution to development results and looks at how well it manages its operations and own organisation. “While acknowledging that

UNVEILING - From left, Hafeez Oyetoro (Saka); Chidinma Ekilem, MTN Ambassadors; Mr Richard Iweanoge, General Manager, Consumer Marketing, MTN and Olanrewaju Fasasi (Sound Sultan) at the unveiling of MTN 2015 brand ambassadors in Lagos. Photo Lamidi Bamidele.

Attract more FDI into the country, NBCC urges Buhari By NAOMI UZOR

igerian British Chamber of Commerce, NBCC, has urged the incoming government to improve the business environment in Nigeria in order to attract more foreign direct investments into the country and ensure economic and sustainable development. The President of NBCC, Prince Adeyemi Adefulu, made this call in a congratulatory letter to President Muhammadu Buhari, as the grand patron of NBCC, saying that, the Policy Framework for Investment (PFI) outlines ten policy areas which affect the business climate, including: tax, corporate governance, anti-corruption, infrastructure, competition and investment. “To develop a sound business environment, there is a need for formalised process to evaluate these business conditions. Such evaluations require input from bilateral member organisations such as the NBCC to provide industry and investor feedback to allow the continuous adaptation to changing economic conditions” he said. Adefulu noted that expectation in the country is high and active management of this wave of optimism together with the strategic and systematic planning of long, medium and short-term sustainable solutions to kick start the economy alongside

an effective implementation and delivery model will be paramount. “The important role that industry and private sector stakeholders will play in this development is one I am sure is high on your agenda” he stated He said rebuilding Nigeria’s deteriorating infrastructure such as Power, Roads, Water and ICT must be a critical pre-occupation of this government, as this has been discussed severally. “Without the necessary infrastructure to propel Nigeria into a medium-income economy, its ability to compete on the global front and create jobs is compromised. We note with dismay that successive governments over the years have spent enormous amounts of money trying to fix power and roads in Nigeria, with relatively insignificant impact. “ As the revolution in the Nigerian telecommunication industry has shown, Nigeria cannot provide all infrastructure but must encourage private sector investment by appropriate policies. We must muster the same political will in critical areas to which the private sector will respond enthusiastically. “The NBCC would gladly work with government in whatever capacity and encourage foreign investment in the country in the development of much needed infrastructure” he stated.

Africa is making gradual progress, the report notes that the continent’s energy deficit remains very large. The overall electrification rate increased from 38 per cent in 2005 to 42 per cent in 2013, even as populations grew at a faster rate. “Average electricity consumption also edged up from 666 to 690 KWh/year. “However, Africa is still far behind other developing regions, ” the publication states. The review indicates that AfDB is contributing to the energy sector in Africa. “The bank’s approach to supporting the energy sector has evolved over the years. The 1994 Energy Sector Policy concentrated primarily on institutional reforms and capacity development in the energy sector, with the goal of helping to unlock private investment. “We helped to improve pricing policies, management practices and maintenance regimes,” it further states. The report states that after a few years, “it became clear that p1rivate investment was not forthcoming, and therefore the bank decided to support its regional member countries by scaling up its investments in major infrastructure development. “For the past two decades, some 12 per cent of AfDB investments have gone into the energy sector. Most went towards building national generation capacity and distribution networks, with an emphasis on rural electrification to promote inclusive growth.” Since 2009, the bank has contributed to financing more than 1,900mw of new generation capacity and over 15,000 km of transmission lines, according to the review. “Through these efforts, we have provided 567,000 people with new electricity connections and over 14 million people with improved access to electricity,” the review states. Pursuant to the bank’s twoprong objectives of inclusive growth and transition to green growth, the review notes that AfDB has provided 32 billion dollars in lending, knowledge and advisory services. It adds that the bank plans to set up centres of excellence in biomedical science and engineering to build human capital for the continent.

Vanguard, MONDAY, JUNE 1, 2015 — 25

Banking & Finance By BABAJIDE KOMOLAFE

nalysts at the Financial Derivatives Company Limited have expressed support for the removal of fuel subsidy saying it would reduce the pressure of the exchange rate of the naira and lead to long term appreciation of the national currency. “More importantly, because there is an inflated import bill due to the subsidy scam, subsidy removal will reduce the pressure on the currency and the naira will appreciate in the medium term”, they said in the FDC Economic Bulletin issued last week. They noted that removal of fuel subsidy will produce short term gain but long term gain. “Subsidies are reverse taxes and if removed will reduce the disposable income of consumers in the short term. However, it will result in an efficient redistribution in income, spur a rehabilitation of the refineries and an efficient oil industry in the long run; short term pain but long term gain”, they said. Titled, “Petroleum Subsidy Scam: The Raping of Nigeria”, the bulletin stated, “The benefits associated with a subsidy removal are usually long term which will be solely determined by how the appropriated subsidy funds will be utilized to support optimal productivity within the economy. “If the subsidy were removed today, the pump price would jump to approximately N130, which is the total open market price when one considers both the landing cost of petrol at N115.77 and the margin for

Iran holds first trade exhibition in Nigeria

COMMISSIONING — From left: Branch Leader, VGC Branch, Fidelity Bank Plc. Isaac Usanga, Executive Director, Lagos & South-West Bank, Fidelity Bank Plc., Ikemuefuna Mbagwu and the representative of the Education Secretary, Eti-Osa LGA, T.O. Lawal at the commissioning of Classroom Block of Home Economics, Arts and Crafts Centre of Ikota Primary School, Ikota Lagos donated by Fidelity Bank Plc.

Subsidy removal'll reduce pressure on Naira — FDC transporters and exporters of N15.49 as of May 10, 2015.1 However, the pump price would be guided solely by

Subsidies are reverse taxes and if removed will reduce the disposable income of consumers in the short term

global oil prices and would not be at the mercy of oil marketers. Cur rently, scarcity initiated by the oil marketers due to delayed payments increased the pump price of petrol. The scarcity created an avenue for arbitrage, with the fuel being sold for as high as N600/ liter in the black market. The impact of the strike and fuel scarcity was severe, and almost crippled economic activities, as banks and even telecom operators had to reduce their operating hours due to the scarcity of

petroleum products. This situation could be averted if the issue of subsidy is addressed and put to rest. But addressing fuel subsidy is just one part of the hydralegged problem in the oil and gas sector. The passage of the PIB and a deregulation of the sector are required to fully enjoy an efficient oil and gas industry. In the long run, subsidy removal will assist the government financially and create a path to addressing the problems in the oil sector.”

Heritage Bank CEO to speak on innovation at CBN’s expo

anaging Director/Chief Executive, Heritage Bank Limited, Mr. Ifie Sekibo will speak on ‘Innovation in Financial Services Delivery’ at the annual Cashless Card Expo of Central Bank of Nigeria (CBN). This year ’s edition of the Expo is scheduled to hold from 23rd to 25th June 2015 at Eko Hotel & Suites in Lagos. Among other things, the expo features various awards for outstanding payment cards and services, in a bid to recognise and reward banks and financial services efforts at promoting the cashless policy. In addition to the presentation by Sekibo, Heritage Bank has been nominated for two of the Cashless Expo Award categories namely, “Best Co-branded Card of the year ” and “Best Industry innovation of the year”. Since it commenced operations in 2013, Heritage Bank has distinguished itself through innovative banking services which offer unique

customer satisfaction and unparalleled comfort and convenience to existing and new customers of the bank. This is reflected in the zero COT, with no hidden charges, offered to its numerous customers two months after it commenced operations. The nomination of the Bank for “Best Co-branded Card of the year ” and “Best Industry innovation of the year” awards at this year’s CBN’s Cashless Expo is in recognition of the various industry setting innovative epayment cards and channels introduced by the bank since it commenced operations in 2013. These include: ePiggy Card, for collecting change at merchants; 7411 Smart Travel Tourist Card, which enables visiting tourists in Nigeria to carry out card transactions easily; Mainasara Women and Youth Card, a scheme card to support women and youth development; Vineland Microfinance Bank Card, for customers of Vineland MFB to carry out transactions. Others are: Royal

Life Microfinance Bank Card, For customers of Royal Life MFB to carry out transactions, Miliki Living Patrons Card: for patrons of Miliki lounge to pay their bills within the Miliki premises only; and PMAN Card, For PMAN members to receive royalties and carry out transactions. Last year, Heritage Bank introduced the first transparent MasterCard in Nigeria. The beautiful MasterCard is designed to be physically transparent and to exhibit transparency in its service delivery. The Bank also introduced Nigeria’s pioneer portable POS solution christened “PortaPOS” to ride on the mPOS revolution, which is fast gaining acceptance worldwide. The PortaPOS, which is aimed at providing a seamless payment channel for merchants, was designed to address payment challenges within the retail payments space and also in support of the Cash-less Nigeria project of the CBN.

n furtherance of the Memorandum of Understanding (MoU) signed during the Nigeria Iran Joint Commission, the Islamic Republic of Iran will hold its first trade exhibition in Lagos Nigeria this month. Tagged First Iran Solo Exhibition in Nigeria, the exhibition will hold at the Landmark Center, Lekki, Lagos State, from Tuesday June 9th to Thursday June 11th. The First Iran Solo Exhibition will be declared open by the President of Iran Trade Promotion Organization and Deputy Minister of Industry, Mr.Valollah Afkhami Raivd, supported by the Iran Ambassador in Nigeria, Mr. Saheed Koozechi, while the Lagos State Governor, Mr. Akinwunmi Ambode, is the Special Guest of Honour. Among other things, the exhibition will feature over 40 Iranian companies in manufacturing, oil and gas, building and construction, infrastructure, health, furniture, interior decoration, and food industry. Sponsored by the Embassy of the Islamic Republic of Iran, The Trade Promotion Organisation of Iran and Landmark Center, the exhibition is organised by Pars Rastak International Conferences, Exhibition Research Services, in partnership with the Nigeria Iran Business Council (NIBC), Nigeria Association of Chambers of Commerce, Mines, Industry and Agriculture (NACCIMA), Nigeria Investment Promotion Council (NIPC) and the Nigeria Export Promotion Council (NEPC). Speaking on the exhibition, the Iran Ambassador in Nigeria, Mr. Saheed Koozechi, said that the exhibition is designed to expand trade relations with Nigeria. He said, “This exhibition will open doors of opportunities for both Iranian and Nigerian companies and businesses. It will help to identify each other’s capacity in order to deepen trade relations between the two countries. Right now, Iranian companies do not know the opportunities available in Nigeria. , and Nigeria is a very big market, especially with its big population and resources.

26 — Vanguard, MONDAY, JUNE 1, 2015

Economy

Investors cautious on new government Stories By EMEKA ANAETO, Economy Editor

rivate sector industry leaders have taken cautious positions in reaction to the change of government particularly at the national level in Nigeria, thus throwing the markets into limbo which may linger until definite statements on the direction of economic policies are made by President Mohammadu Buhari. Last Friday ex-president Goodluck Jonathan handed over Nigeria’s economy in perhaps its most trying moment since the advent of the current democratic dispensation. Economy analysts have highlighted the public sector and macro-economic challenges faced by the Jonathan administration in its last one year as a major source of concern in the private sector. Key amongst the challenges is the massive and sustained decline in government revenue due to lower crude oil prices. Inflation is also tiptoeing northwards while external reserves continue to dwindle as monetary policy tightening is almost reaching its elastic limit. Rising government debt, fuel scarcity crisis and epileptic power supply are also some of the challenges that the new government will have to grapple with to impact positively on the private sector. Against the backdrop of the foregoing, economy analysts at Afrinvest, a leading investment banking group in Nigeria, last weekend reiterated its outlook for key macro-economic indicators post transition. On its bear case it sees oil price trading below US$60.00 in the near to medium term while government revenue base will remain low. The analysts also forecast lower level of reserves which may inform further pressure on exchange rate even as they expect inflationary pressure to continue retaining its

average inflation rate of 9.5% for 2015. The analysts stated ‘’amidst these headwinds, we forecast a tempered growth in domestic economic activities as we retain our 5.0% GDP growth rate forecast for 2015”. Meanwhile contrary to what was observed in the foreign exchange (forex) market in recent weeks, rates at the BDC segment stayed calm at N220.00/US$1.00

While optimism for the new administration was high, market observers expect the forex rates across market segments to be broadly driven by reactions to policy signals emanating from the hand over to the new government coupled with any other policy direction that follows

on all trading days of the week. Forex market dealers believe the calmness observed in currency market may be linked to lower level of demand for the Naira as investors adopt a cautious approach to trading given short-term instability in the system as event leading to transfer of power from the J o n a t h a n administration to •Buhari Buhari-led government took government coupled with any place. other policy direction that While optimism for the new follows. administration was high, market As currency traders await the observers expect the forex rates forex policy direction under the across market segments to be new economy regime of broadly driven by reactions to Muhammadu Buhari, top of policy signals emanating from their wish list for the new the hand over to the new

administration is an overhaul of the nation’s foreign-exchange rules. “The market would love to see some restoration of foreignexchange flexibility,” said Dapo Olagunju, Access Bank’s treasurer in Lagos. “The question is, when will there be a meeting of minds?” “The market doesn’t move,” Mickael Avou Ahonzo, the Parisbased head of currency trading at Ecobank Transnational Inc., which operates across Africa told Bloomberg last week. “It’s frustrating. We’ve seen the same rate for the last one or two months. We don’t have many opportunities” to make money. Central Bank of Nigeria (CBN) is believed to have started talks with dealers about how to loosen the trading restrictions at the beginning of May, 2015 but no decision was taken in that direction by the Monetary Policy Committee (MPC) meeting held two weeks ago due to the ‘waitand-see’ position the committee took in respect of the advent of the new government. “There’s no change” yet to the currency regime, CBN spokesman Ibrahim Mu’azu told Bloomberg last week. “We have to see the direction of the incoming government.”

New governments at centre and states lament over economy, treasury A

s the political leaders who took over reigns of power at the national and state levels settle into offices today they have clearly given thumps down to their predecessors in the area of economic management First is the President Mohammadu Buhari who took over from Goodluck Jonathan last weekend and declared that Nigeria’s economy is in “deep trouble and needs careful management to overcome the impact of low oil prices, slowing growth, high unemployment and the security threat from Islamist group Boko Haram” Beyond the electioneering campaign and party leaders’ commentaries after the elections, this was the first time Buhari

would be commenting on the economy he is inheriting. At the states level it was all complain galore over the state of affairs in the treasuries as the new governor in Bauchi State Barrister Mohammed Abdullahi Abubakar said “I met empty treasury”. The new governor said this shortly after taking oath of office administered by the State Acting Chief Judge, Justice Rabi Talatu Umar at Abubakar Tafawa Balewa Stadium Bauchi adding that he is ready to make public figures of the state treasury to the people of the state that the state treasury is completely empty. He said: “The people will have to give us time to correct all wrongs perpetrated by the PDP

administration. The people have to understand and be Patients with us because it’s not going to be an easy task. “I want to assure the people of Bauchi state that we are equal to the task of bringing out the state out of the woods. The Bauchi report may have been tainted with political sentiment as the transition was from one political party leadership to another. But in Kano State where the hand over was between leaders of same political party (All Progressives Congress, APC) the Transition Committee set up by Kano State new Governor, Abdullahi Umar Ganduje, last week said that the outgoing governor, Rabi’u Kwankwaso, has not only left an

empty treasury but additional liability of N379 billion, second highest State indebtedness after Lagos State, also an APC state. Chairman of the 93-member (largest transition committee membership across the country including federal level) committee and Deputy Governor, Professor Hafiz Abubakar, who read the abridged copy of its final report stated that ‘’hard times await Kano and it might take patience to get along.” Abubakar, a professor of Food Nutrition gave the breakdown of liability by the Kwankwaso’s administration adding that the total capital receipt to the state between May 2011 and May 2015 stood at N 419.75 billion out of which N430.6 billion was spent. He further said total capital receipt by the 44 local government areas of the state within the same period stood at N346.591 billion which was expended on joint projects between the state government and the local governments. Abubakar who served Kwankwaso as Commissioner for Finance between 1999-2003 explained that the previous administration initiated over 4,000 projects, for which over N140 billion was paid to contractors with N4.5billion still outstanding

Vanguard, MONDAY, JUNE 1, 2015 — 27

Corporate Finance Stories by PETER EGWUATU

r. Rahul Colaco is the Managing Director of FrieslandCampina WAMCO Plc. In an interview with select journalists before the th company’s 60 anniversary in Nigeria which was held penultimate weekend in Lagos, he spoke about the challenging operating environment in the country and how Friesland Campina WAMCO has weathered the storm over the years. Other issues discussed was the local content policy of the Federal Government , some of the company’s Corporate Social Responsibility, CSR and the future prospect of the company amongst others. Excerpts: What is Friesland doing with regard to the Federal Government’s local content initiative? We support the Federal Government’s initiative on local content. About 90 per cent of our raw materials are sourced locally. We want to further increase our local content and support the Federal Government’s initiative to grow the agricultural sector. FrieslandCampina WAMCO pioneered the Dairy Development Programme (DDP) in August 2010. This is gradually developing into a full national programme as the company is dedicated to making the initiative a success by ensuring the transfer of technology know-how on milk production to Nigerian farmers. The company plans to further train and consult with farmers, with the support of the government. What has been the challenges facing your company and the manufacturing industry in general? There are many challenges facing the company and the manufacturing industry. We have infrastructure challenges like power, bad roads, security, competition, smuggling, exchange rate, etc. But we have been trying as a company to surmount some of these challenges. FrieslandCampina WAMCO Nigeria Plc will maintain its No. 1 position as the nation’s leading milk manufacturing company by investing in its people, capacity expansion projects and by being an excellent corporate citizen. How is FrieslandCapina impacting on the community? We are good corporate citizen. We have impacted positively on the community where we operate. We embark on structured programs that improve nutrition and enhance the lives of many Nigerians. FrieslandCampina WAMCO has over the years proven itself

We're committed to FG's local content initiative — Colaco, MD, Friesland Campina WAMCO

•Rahul Colaco to be a socially responsible company and is perceived as an excellent Corporate Citizen by stakeholders. At WAMCO, we believe CSR is an efficient strategy for a successful human and society development, especially for developing countries, like Nigeria. Our CSR programme is not only structured to address the developmental needs of communities but also to promote corporate governance, which is translated in our annual accounts, employee relations, business relations, etc. We have embarked on structured

We have embarked on structured programmes that improve nutrition and enhance the lives of many Nigerians

programmes that improve nutrition and enhance the lives of many Nigerians. Some projects we have carried out include: School Adoption: Donation of educational materials to facilitate learning in public schools. Support to 18 adopted schools during events such as inter-house sports, Prize Giving Day, etc; Provision of sustainable solar powered potable water to needy communities- 41 solar powered bore wells as of 2013; Funding research in Food Science in Higher Institutions. 6 Tertiary Institutions enjoy this benefit; Financial Award to Best Graduating Student in Food Science in the 6 selected Tertiary Institutions; Donation of products to charity homes and orphanages nationwide – 30 Homes What is the current financial performance of the company like? The company’s commercial and financial performance remained satisfactory in spite of the harsh business environment. Turnover increased by 5.14 per cent from N120.26 billion in 2013 to N126.44 billion in 2014. Profit

Before Tax (PBT) however decreased by 14.55 per cent from N19.31 billion to N16.50 billion as a result of significant increase in the cost of dairy raw materials, which was not fully passed on to consumers; increased operating expenses; and the write-off of Export Expansion Grant already taken into profit in the previous year. Can you tell us more about Friesland Campina WAMCO? FrieslandCampina WAMCO Nigeria Plc has been a necessary part of most Nigerian homes since 1954 through its iconic brand Peak Milk. It is a multinational, dairy manufacturing company and an affiliate of Royal FrieslandCampina of The Netherlands, one of the largest dairy cooperatives in the world. “We are the makers of Peak, Three Crowns and Friso brands of milk in Nigeria. Over the years, we have maintained leadership of the Evaporated milk market with the Peak brand. Guided by an inspiring mission, nourishing Nigeria with quality dairy nutrition, we are unwavering in the provision of quality, nutritious milk products for Nigerians” said Ore Famurewa, Corporate Affairs Director, FrieslandCampina WAMCO. Why are you marking the 60th anniversary of the company in a special way? 60 years in the life of a man is not a joke, so doing business in Nigeria for 60 years is not easy. FrieslandCampina WAMCO Nigeria Plc makers of Peak and other milk brands, celebrates 60 years of delivering consistent quality dairy nutrition to its teeming loyal consumers residing in East, West, North and South of Nigeria. Over the last 60 years, Peak has continued to be strong throughout the several changes in the market. We attribute our success to two things. First, our focus is to consistently nourish Nigerians with quality dairy nutrition in order to reach their Peak. Second, we continually explore ways of standing out of the crowded shelf and touching every part of the consumers’ lives. Peak has won industry recognition as an innovative and trendsetting brand that delivers superior dairy nutrition across life-stages. The brand succeeds because it always connects with its consumers, supports its key business partners and helps the general public to pursue their aspirations and reach for their Peak. To surprise loyal consumers, based on research and their expectation, Peak Evaporated Milk now comes in new packaging as well as a lid that opens and closes easily. It is called ‘Peak Easy Open’.

United Capital CEO gets international recogntion

nited Capital Plc, a financial and investment services firm has been awarded the 2015 Banking & Finance Firm of the Year (Nigeria) by the UK based Corporate LiveWire. The Corporate LiveWire Global Award focuses on recognizing global excellence in the financial services sector. While presenting the awards, Jake Powers, Publisher of Corporate LiveWire, said, “This is our biggest and most in-depth awards winner to date and we have honoured some of the most well-known advisory firms in the world including PwC, Clifford Chance and Morgan Stanley.” He noted that the firm was recognized as a result of its sustained leadership in capital market issues in both corporate and public sector as well as its efforts towards securing significant new mandate in Asset Management and Trusteeship.

Dentsu Aegis Network acquires stake in Media Fuse Nigeria

entsu Aegis Network, a global player operating in 110 countries, has bought into Media Fuse, a full-service media independent agency in Nigeria. The relationship between the two marketing communication firms now gives birth to a new firm Media Fuse Dentsu Aegis Network. Dawn Rowlands, CEO of Dentsu Aegis Network, subSaharan Africa, said in Lagos that the company which is made up of eight global network brands - Carat, Dentsu, Dentsu Media, iProspect, Isobar, mcgarrybowen, Posterscope and Vizeum-was making investment in Media Fuse based on the Network’s strong belief in Nigeria and the ability of Media Fuse team to bring Dentsu’s unique operating model to life in Nigeria. “Our partnership with Media Fuse enables us to launch our unique and proprietary tools like CCS and Convergence Planning, which will help local and our global clients grow their value they derive from media significantly,” she said.

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Corporate Finance

Portland Paints targets rights issue to raise additional capital By NKIRU NNOROM

ortland Paints and Products Nigeria Plc (PPPNP) has said it will be embarking on rights issue to raise additional capital in pursuit of its plan to improve returns and address the high leverage position of the company and other business expansion plans. The company further noted it will focus on innovation and seek opportunities to introduce new products into its array of brands as it pursues increased profitability for its stakeholders. The Chairman, Mr. Larry Ettah, who spoke at the company’s Annual General Meeting, AGM, in Lagos, said the management will consequently realign its portfolio and make strategic shifts where necessary, as well as concentrate on capacity building for its people. Laying the company’s result for the year ended December 31, 2014 before the shareholders, Ettah noted that Portland Paints recorded another year of impressive business performance as bottomline growth hit 159 percent, from a profit after tax of N57.3 million in 2013 to N148.6 million in 2014. During the period under review, operational profit also grew from N174.3 million to N304.5 million, he said. He, however, explained that “for strategic reasons, the board is not recommending the payment of dividend for the year, but hoped that with the company’s improved performance, this may not be a challenge any more. Ettah noted that the outlook for the Nigerian economy in 2015 is expected to be significantly affected by low crude oil prices, increase in exchange rates of Naira against major currencies, national security issues and the political risk associated with the elections. According to him, the International Monetary Funds (IMF) has projected 4.8 percent GDP growth for Nigeria, while both the Nigerian government and the World Bank assume a 5.5 percent growth rate; a decline from the range of 6.5 percent-7.0 percent that the Nigerian economy had been growing at for some years now. He stated further: “Oil prices that closed below $60 in December 2014 fell as low as $46.00 in January 2015, leading to the review of the Federal Government’s 2015 Budget benchmark from an initial $65 to $53 per barrel.

LAUNCH — From left: Tunde Akinluwa, Head, Sales O3 Capital; Oremeyi Akah, Country Manager, Verve; Abimbola Pinheiro, MD/CEO, O3 Capital; Yvonne Onyejiaka, Business Development, Game Stores; Sylvester John, West Africa Executive, Game Stores; Uduak Nsa, Store Manager-Designate, Game Stores during Game Stores' credit launch.

May&Baker back to profitability as shareholders okay 5k dividend By PETER EGWUATU

hareholders of May & Baker Nigeria Plc have unanimously approved the five kobo per share dividend proposed by its Board of Directors for the financial year ended December 31, 2014, just as the company returned to profitability. The shareholders at the 64 t h A n n u a l General Meeting of the company held in Lagos commended the company’s performance for the year under review, in view of the harsh operating environment it operated upon and for returning back to paying

dividend. In his remarks at the meeting, Chairman, May & Baker Nigeria Plc, Lt. General Theophilus Danjuma (Rtd) said “Despite the harsh operating environment, our company posted an impressive result for the year 2014. The challenges associated with the building and depreciation of the Pharmacentre are gradually being taken care of and our company has bounced back to profitability.” According to him “Result for the year 2014 shows that the company recorded a 990 per cent growth in profit. From a pre tax loss position

of N11.4 million in 2013, the group recorded a pre tax profit of N101.1 million in 2014. Similarly, after tax

The future outlook of our company remains bright and the signs are already manifesting woth retuen to profitability

profit rose by 161 per cent from a negative of N103 million in 2013 to a positive of N63 million in 2014. This was achieved on a group turnover of N7 billion, against N6.3 billion in 2013, a revenue growth of 10.2 per cent.” The May & Baker Chairman explained to shareholders that the company was unable to raise additional capital last year when approval was given by them due to unfavourable market and economic conditions. In his words: "It is my utmost hope that we will be able to bring in equity within the next one year as it is evident that recapitalizing the company has become an urgent imperative. Our financing cost has remained above N600 million for the second year running. This would have flowed into profits for shareholders had we operated more on own equity than borrowed funds. On future outlook, he said “The future outlook of our company remains bright and the signs are already manifesting with return to profitability and dividend payment. I am optimistic that as soon as we are able to recapitalise the business we shall take down the high financing cost which is currently taking substantial earnings off the company. This will put us in a strong position to fully leverage o u r i n s t a l l e d c a p a c i t y, aggressively promote our existing brands, launch new products in our pipeline and deliver better profits.”

O3 Capital, Game Stores boost cashless policy to unveil credit card By PETER EGWUATU

s part of their support for the Central Bank of Nigeria, CBN’s Cashless initiative, O3 Capital Nigeria Limited and Game Stores have partnered to introduce the first consumer credit card in Nigeria. Mr. Abimbola Pinheiro, CEO, O3 Capital Nigeria Limited sated this during the launch of Game Credit that the card is the first white label credit card in Nigeria that can be used only in Game Stores all across Nigeria. According to him “The card will give customers the freedom to buy now and pay later for any items purchased in Game Stores. The Game Stores in Nigeria are located in Lagos, Enugu, and Kano. This credit facility works on revolving credit bases with a 15 day interest free period and low minimum

monthly repayments of 10 per cent in a month. The O3 Game card will offer customers a generous revolving credit limit of up to N1.5million based on the qualification criteria of the individual applicants. Pinheiro, noted that the objective of the O3 Game card correlates to that of the CBN’s Financial System Strategy 2020, which includes the cashless policy. “The objective is to promote economic activity by ultilising innovative payment systems with ease of accessibility to the general populace. This is in line with 03 Capital’s mission to take the CBN cashless policy to a whole new level” he added. He further noted that the Game card is another avenue to provide the average Nigerian with access to credit that will enable them meet their needs. In his remark at the launch, Mr. Sylvester John, West Africa Executive, Game Discount World Nigeria Limited said “Game Stores,

Africa’s largest discount retailer of general merchandise is guided by four basic core beliefs, one of which is exceeding the expectations of our customers. The credit card being launched today is the first of its kind in Nigeria to be used without an issuance fee, additionally, the card is also issued free of commitment and advisory fees.” To qualify for the Game’s credit card facility, he said “ All applicants must be permanently employed and over the age of 21. Applicants must be in possession of an official identity document Also applicants must have a valid bank account and a good financial track record. Speaking as well, Yvonne Onyejiaka, Business Development Manager, Game Discount World Nigeria Limited, said “Game Store is ultimate gifting destination and offer registry of the items that customers need in an occasion, be it for wedding, birthday etc.”

Vanguard, MONDAY, JUNE 1, 2015 — 29

Homes & Housing

UK mortgage approvals rise by 7%

•Modern housing estate

Nigeria’s real estate outgrows GDP at 8.7% —PwC Investment to hit $13.65bn in 2016 By YINKA KOLAWOLE

he Nigerian real estate sector is growing at a rate of 8.7 percent, which is faster than the average GDP growth rate of 7.4 percent, according to a new report by accounting and auditing firm PricewaterhouseCoopers (PwC). In the report titled, “Real Estate: Building the future of Africa”, PwC also projected the country’s real estate investment to rise by about 49 percent, from $9.16 billion currently to $13.65 billion in 2016. It attributed the expected increase to a number of factors. “This is driven by a growing middleclass driving demand for residential property development and, indirectly, retail, industrial and commercial real estate development. High networth individuals (HNWIs) invest 25 percent of their assets in real estate compared to 18 percent or less in equities and other instruments. Continued government reforms have created an enabling environment for property development and financing. Increased allocations of funding to the asset class by local and foreign investors are also key drivers of projected growth in this sector,” it stated. PwC also noted that residential real estate market is driven by the growing population in Nigeria, as well as the increasing rural-urban migration, strong economic growth and a growing middle

class. It added that commercial real estate market is driven by an influx of institutional, foreign and private business into the country as well as the growth of locally established businesses and multi-national oil companies across the cities of Lagos, Abuja and Port Harcourt. “The availability of office space is improving and several A-grade projects are

huge housing deficit in the country. “It is estimated that Nigeria has a housing deficit of 17 million houses estimated at $363 billion. This number is expected to increase by two million houses per year at the current population growth of 2.8 percent per year.” It noted that if the growth pattern is sustained and improved on, numerous jobs will be created

There is considerable room for profitable investments in the real estate sector in the country underway. Rental figures in Lagos remain among the highest in the world, with achievable rents at more than $85 per square metre per month.” The report also indicated that there is considerable room for profitable investments in the real estate sector due to the

in the process and the housing deficit will be bridged sooner than later. The PwC report however highlighted the problems facing the real estate industry. The report cautioned that in spite of the substantial opportunities existing in the Nigerian real estate market,

there a number of specific risks for property investors. “There are existing problems with access to finance; with a lack of long-term debt financing and an underdeveloped mortgage market, with mortgage loans representing less than 1 percent of the nation’s GDP. Cumbersome and time-consuming processes for land acquisition and ownership documentation can make acquiring land difficult, while land in urban areas is expensive. Building materials and construction costs are also high and there is a reliance on expatriate workers resulting from a shortage of expertise in the local construction industry. Security considerations as a result of local unrest should also be factored into investment decisions. A dearth of infrastructure presents difficulties for potential developers, as non-availability of basic services such as water and energy has forced developers to provide these amenities, adding up to 30 percent to total development costs,” it stated.

‘FG owes construction firms N500bn’ C

onstruction companies in the country claimed that the federal government is owing them N500 billion. President, Federation of Construction Industry (FOCI), Mr Solomon Ogunbusola, said that the nation’s construction sector of the economy was comatose due to the failure of the federal government and some state governments to pay construction firms for projects they have completed. He noted that as a result of the debts, some of them may soon close business and disengage their employees. “The Federal Ministry of Works alone is owing our members N500 billion and one company is owed over N70 billion. The records are there. We are now retrenching our workers. We are merely opening the offices because we want to remain in office, hoping that the incoming administration will

be a better one for us. We cannot keep quiet or hide any longer. All construction companies in Nigeria are being owed huge sums of money amounting to over N500 billion. We all being owed and to further stoke our grievances the Central Bank of Nigeria (CBN) is urging banks to publish the names of our members who took loans from the banks and are being owed for projects that they had long completed as chronic debtors. The name of the government that owed the construction companies should also be published. Let the banks publish the names of our members along with that of the Federal Ministry of Works, Federal Capital Territory (FCT) and area councils owing us as chronic debtors. It is because they could not pay our members that they, in turn, could not pay the banks,” he stated.

ortgage approvals in Britain rose in April to their highest level since June last year and they look set to keep growing, according to data from the British Bankers’ Association. The number of approvals rose by 7 percent to 42,116, from 39,203 in March, the highest figure since June last year. BBA said one reason may have been the abolition of Stamp Duty on house purchases in Scotland. It was replaced by the Land and Buildings Transaction Tax on 1 April. Some reports had suggested the housing market slowed down before the election, as richer buyers worried about Labour’s proposed Mansion Tax on homes worth more than £2m. But BBA figures indicate that was not the case. “There was a significant pre-election jump in mortgage approvals which we would expect to continue in the coming months,” said Richard Woolhouse, chief economist at the BBA.

US mortgage rates hit 2015 high

ortgage rates in the US rose to a 2015 high last week as bond investors reacted to reports showing the housing market is heating up. The average rate for a 30year fixed mortgage was 3.87 percent, up from 3.84 percent the previous week and matching the level at the end of 2014, Freddie Mac said in a statement. The average 15year rate increased to 3.11 percent from 3.05 percent, according to the mortgage financier. Home-loan costs climbed as investors speculated that positive economic data will encourage the Federal Reserve to increase the amount it charges banks to borrow funds. In her first public comments on monetary policy since late March, Fed Chair Janet Yellen said that if the economy continues to improve as she expects, “it will be appropriate at some point this year” to start raising rates. Signed contracts to buy previously owned homes rose to a nine-year high in April, according to the National Association of Realtors. C M Y K

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C M Y K

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C M Y K

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C M Y K

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C M Y K

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How Federal Government robbed the states “Subsidy: FG withdraws N395bn from Excess Crude Account.” Everest Amaefule, PUNCH, May 24, 2015, p 6.

omebody should hang for this if it occurred in China or Yew’ Singapore. But, since this is Nigeria, somebody should at least change their boutique designer outfits for “prison designer collections”. The report revealed as follows: “The Federal Government withdrew the sum of N395bn in 2013 to fund subsidy on petroleum products, the Fiscal Responsibility Commission has said. Furthermore the Commission said: “Funds have been deployed towards payment for petroleum products subsidy and PEF (Petroleum Equalisation Fund). It is difficult to find justification for this in the Fiscal Responsibility Act 2007.” That the Federal Government of Nigeria, under President Jonathan and Dr Ngozi

Okonjo-Iweala, had been robbing the states of funds had been suspected for some time. What was lacking was the proof beyond reasonable doubt – or what crime writers will call “the smoking gun”. The search has come to an end with the release, last week, of the 2013 Annual Report and Audited Accounts of the Fiscal Responsibility Commission, FRC. Governor Amaechi of Rivers State had been the most vocal among governors with accusations of robbery against the Federal Government. The allegations have always been dismissed by the Minister of Finance as “baseless”. With the revelation by the FRC, regarding these illegal transactions, Mrs OkonjoIweala now stands revealed as an individual who is also engaged in illegal activities. Amaechi has been vindicated. In fact, right now, the question is no longer whether the Federal government had been robbing and impoverishing the states; it is “how much had been

stolen under Jonathan and the Minister”? Could it have been more than N395bn? There are reasons to think so – as we shall demonstrate later. The Excess Crude Account, ECA, created by President Obasanjo and the Minister in 2004, was an illegal account from the start. But, acting with impunity and the delusion of superior knowledge, and, without consulting the National

The Excess Crude Account, ECA, created by President Obasanjo and the Minisre in 2004, was an illegal account from the start

Assembly, NASS, the two opened the account. At the time, when the PDP regarded itself as invincible (we will rule for 60 years), neither the PDPdominated NASS, nor the governors, majority of whom were PDP raised any objections. Even ACN, Labour and APGA governors ignored this affront to their states’ interests. With sufficient funds coming in to run their states nobody foresaw the downturn in revenue which had occurred since 2014. So, what we now have is a situation where an illegal account, established by the Minister, ostensibly for the benefit of the three tiers of government is being raided by the same Minister to the detriment of the states. If ever there is an argument for true federalism, this example had provided it. Obasanjo, with his “Father-knows best attitude” had agreed to establish that account because he felt that state governors could not be trusted to save for the rainy day. So, the Federal Government forcefully seized the funds and saved on their behalf. Apart from the self-righteousness underlying that thinking, Obasanjo forgot that he would not rule for ever. A crooked

Federal Government, with the states’ funds in its grip would do more damage than individual governors acting irresponsibly. We apparently had such a government for five years from 2010 to 2015. N o w, the FRC audited account, apart from being a little late had confirmed the fears of those of us who were against the ECA from the start. Actually, we need not have waited for the FRC report to suspect that the operation of the ECA by the Federal Government was fraudulent. Last year, when the announced balance in the account ran low, and Governor Amaechi, the lone complainant, started asking questions, $1bn additional funds suddenly showed up in the account without explanation from the Federal Government. But, the Finance Commissioners attending the monthly allocation meeting were too intimidated to press the issue. With the FRC report, it would appear that the Federal Ministry of Finance maintains two sets of ECA books – one for the states (the false one) and another for itself (the true one). And the FG only reveals to the states what it wants to disclose.

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Insurance

Insurance sector offers hope of significant potential — REPORT By ROSEMARY ONUOHA The Nigerian insurance sector is considered to offer significant potential with foreign investors attempting to build a profile in the market despite being confronted by a difficult operating environment as fluctuating oil prices threaten the country’s economic expansion. According to a report by A.M Best, a sense of optimism is prevailing as the prospect of a new political era is instilling a greater degree of confidence in Nigeria’s future. The report titled, ‘Nigeria’s Insurance Sector Faces Economic Challenges, but New Government Improves Prospects’ stated that in spite of such challenges, there appears to be some signs of renewed confidence in the economy following the accession of the new government led by Muhammadu Buhari. “Buhari faces numerous economic, fiscal and political challenges, including the decline in oil prices and a continued insurgency from the militant group Boko Haram. It is anticipated that Buhari will bring much needed changes by reducing corruption (over USD 20 billion in oil revenue is unaccounted for in government accounts he will be inheriting), implementing economic reforms by reducing the country’s reliance on oil and by increasing foreign investor interest in Nigeria through the promise of greater transparency. Should these expectations transpire, greater confidence in Nigeria will likely attract further interests into its largely untapped insurance industry,” the report stated. According to the report, in line with growth in the broader economic environment, Nigeria’s insurance sector has expanded significantly, although largely driven by inflation, which is reported to have fluctuated between 8% and 14% over the past five years. Market participants have reported double-digit rates of expansion in nominal terms, supported by the rise in infrastructure projects and an increasingly wealthier population, which in turn has more valuable goods to insure and residual earnings to save. Growth to some extent has also been supported by the introduction of compulsory insurance, although enforceability of these mandatory lines of business

remains a problem for the industry as a whole. Nonetheless, despite these positive drivers of growth, total insurance penetration rates remain low at just 0.3% in 2013. The report noted that although Nigeria’s population is growing, high levels of poverty and unemployment remain the reality for the majority of the country, as the benefits of economic growth have not sufficiently reached swathes of the poorer segments of society. Furthermore, a distrust in financial institutions, perceived weak oversight of regulators, or even a low-level of awareness regarding the benefits of insurance, are

factors continuing to dampen the attractiveness of the sector to the majority of the population. Without addressing these issues or introducing innovative products and appropriate

Buhari faces numerous economic, fiscal and political challenges, including the decline in oil prices and a continued insurgency from the militant group Boko Haram

distribution methods to attract the various segments of Nigeria’s demographics, insurance will continue to be viewed as a luxury product only available and necessary to the well-off. A.M Best stated that Nigeria’s insurance regulator, the National Insurance Commission (NAICOM), continues to be proactive in its attempts to advance the Nigerian insurance market. Over the years, the regulator has implemented numerous reforms to improve the perception of the sector and expand the contribution of the industry to the country ’s economic output, to varying degrees of success.

PRESENTATION — From left: Ambassadors Kevin Ebhohimen, Aishat Sani, Tunde Adegbeso and Dr Raphael Oko during the Award of Peace Ambassador at the United Nation’s Family Day in Abuja.

KBL debuts online third party insurance

BL Insurance has opened an online portal for the sale of third party insurance. The company said that the move is in line with the need to achieve financial inclusion and to further enable consumers’ access to compulsory insurance products. In a statement, the company said that the portal enables consumers anywhere in the world to start and finish the process of purchasing a third party insurance policy. This way, members of the public are able to buy insurance in the comfort of their homes, offices and on the go using the internet. Meanwhile, the company has settled N198,827,794.42 worth of claims in the first quarter (January-March) of 2015. This amount represents claims settled in motor insurance, fire, marine, energy and other classes of insurance. The company restates its resolve to settle claims within 48 hours once documentation is complete and urged customers to continually ensure prompt reporting of losses in line with the benefits of the insurance cover they have. Apart from the third party online portal which can be accessed through KBL Insurance’s website, the organisation plans to further leverage on digital and online technology for transactions in expanding its retail insurance base. These alternatives are designed to ensure that the online community is able to access insurance easily.

Expert urges employees to prepare for retirement

anaging Director of Premium Pension Limited, Mr. Wilson Ideva has stated that retirement that is not preceded by proper planning and preparedness could spell disaster for both the retiree and the society. Ideva made this assertion in Asaba while delivering a paper at the 2nd edition of the Delta State Bureau of State Pensions Annual Lecture Series. Ideva said, “Enjoying a hitchfree retirement goes beyond receiving a lump-sum and regular programmed withdrawal from one’s Retirement Savings Account (RSA). It requires in-depth planning and profound mental and psychological conditioning of the retiring worker to equip him to seamlessly adjust to a different kind of life after

decades of service to society. Delivering a paper titled, “Towards Sustaining Stronger Relations Between State and Local Government Bureaux of Pensions and Pension Fund Administration: The Delta State Experience,” Ideva dwelt extensively on the consequences of lack of understanding of the basic requirements for a happy life in retirement and associated illpreparedness for it. He said, “A retirement illprepared for could spell disaster both for the retiree and the society and consequently give the Contributory Pension Scheme (CPS) a bad name and erode the initial gains. The onus falls on the Bureaux of Pensions and the pension operators to run preparatory programmes for workers, especially those on the

verge of retirement.” He further asserted that economically, socially and psychologically stable retirees are the most effective advertisement for the CPS. Ideva called for synergy of all stakeholders in the CPS to ensure that the gains of the industry in the past decade are sustained. “Partnership of relevant government institutions, especially the Bureaux of Pension and the pension operators in the country is the sine qua non for sustaining the current gains of the Contributory Pension Scheme and even expanding its scope and proliferating its inherent opportunities” he said while calling for the prioritization of awareness creation on the importance and workings of the CPS. To ensure that many more

workers are covered by the pension scheme, Ideva advised that every government plan to expand and/or redefine its programmes even as it relates to the private sector must incorporate in-built strategies to accommodate the pension requirements of participants, beneficiaries and key actors as the case may be. He also noted that expanding the CPS to the informal sector of the economy as permitted by the Pension Reform Act 2014 requires some measure of creativity and professionalism on the part of key actors to actualize. “The CPS is one of the most successful government initiatives that still harbours even greater potential. It requires ingenious and concerted approaches to lift it to the next level,” Ideva stated.

38 — Vanguard, MONDAY,JUNE 1, 2015

E-Commerce

TNS, Kantar sign strategic mobile research deal with GeoPoll By Princewill Ekwujuru

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research consultancy firm, TNS and sister company, Kantar Media have announced an exclusive and wide-reaching strategic partnership with GeoPoll, to deploy a new range of research products and services intended to deepen and improve market research in Africa and Nigeria. Kim MacIlwaine, CEO, TNS Africa, Mediterranean & Middle East in a statement addressed to the media, intimating them of the new product said, “mobile is becoming an increasingly important mode of communication for market researchers, and we are excited to collaborate with GeoPoll to expand our data product offerings in key African markets.” According to him, “ we believe GeoPoll’s robust mobile surveying technology combined with TNS and Kantar Media’s expertise in market and media research will be beneficial to all of our clients working in Africa.”

Google to add ‘buy button’ to search results

oogle has confirmed that it is to introduce a “buy button” to its search results imminently. The button would give Google Search users the option to purchase without needing to visit a separate website. The company ’s chief business officer, Omid Kordestani, said he wanted to reduce “friction” for users so they buy more things online. Google faces significant competition from Amazon, where many people now begin their search to buy products. “There’s going to be a buy button. It’s going to be imminent,” said Mr Kordestani on stage at the Code Conference in California last week. The change would make it easier for shoppers to buy products featured in its shopping ads that appear alongside search results. Mr Kordestani also noted that about nine out of 10 purchases are still made offline.

E-commerce start-up funding: Hotels.ng breaks jinx, secures N240m investment STORIES BY JONAH NWOKPOKU

igeria’s online hotel booking agency, Hotels.ng has secured $1.2 million, about N240 million investments from international investors. The investment came from international investors including seed-stage technology fund, EchoVC PanAfrican Fund and Omidyar Network, the investment vehicle of eBay founder, Pierre Omidyar. In a sector plagued by dearth and apathy of indigenous investors, Hotels.ng has become the only e-commerce company in Nigeria with the most indigenous investment of up to 90 percent, having also received seed investment of $225, 000, about N36 million in 2013 from Lagos-based venture capital firm, Spark.ng. Started in 2013 on the heels of e-commerce revolution in Nigeria, Hotels.ng has spearheaded online hotel booking in the country with over 7,000 hotels listed from across the country. The company said with the closure on this investment round, the company is now strategically positioned to invest further in its technology capacity and further expansion across Africa. Speaking on the investment, Founder/ CEO of Hotels.ng, Mark Essien said: “We’re forging ahead into relatively uncharted ter ritory. Ecommerce in Africa is a massive market to conquer, but there are no hard and fast prototypes from which to follow. We cannot simply replicate western models here. We have to build our own blueprints from scratch, which takes significant investment, both in terms of time and money. This additional capital will allow us to realize the next stage in our ambitious growth plans, which will see us consolidate our position as Nigeria’s market leader in online hotel bookings, with a view to expanding our service into other African markets.” Also speaking, Managing Partner of Spark.ng, Jason Njoku said: “Mark and his team are the future of Africa’s digital economy. They are hungry for success, innovative in their approach to building their market and rigorous in their business execution. Closing on this funding round is a big win, not only for Hotels.ng, but for all African internet start-ups. It is proof, if any more were needed, that

the Internet market in Africa is extremely appealing for VCs, more of whom are now looking to create value and build big on the continent.” For Ory Okolloh, investments director at Omidyar Network: “Omidyar Network knows firsthand the power of e-commerce to drive social and economic development. Hotels.ng hits all the marks of an investment with positive impact by leveraging online technology to connect buyers and sellers, supporting local small and medium businesses, and boosting consumers’ confidence in digital

channels.” On his part, the Managing Partner, EchoVC Pan-African Fund, Eghosa Omoigui said: “We were attracted to the Hotels.ng opportunity in part due to the vision, leadership and integrity of its founder, Mark Essien, and the relentless execution the team displayed in building a profitable and robust ecommerce business in a challenging, but ultimately exciting market. Mark represents the type of highquality and high-conviction African techpreneur that our fund is tasked with investing

in. Hotels.ng is now in the very best position to continue on its upward trajectory of being West Africa’s foremost online travel and hospitality platform. Following a competitive selection process, we’re delighted to be an integral part of helping to fuel their next stage of meteoric growth.” Internet access in Nigeria is predicted to grow from 16 percent of the population to 50 percent by 2025, propelling the country’s digital economy forward and driving more people online to facilitate offline activities.

CONFERENCE - From left: Dr. Olumuyiwa Oludayo, Registrar, Covenant University; Brovo Kim, Managing Director, Samsung West Africa; Uzoma Dozie, Chief Executive Officer, Diamond Bank Plc and Yomi Adedeji, Managing Patner, Softcom at the Future Ready University Conference Press briefing organised by Diamond Bank in Lagos.

Nigeria leads online auto inquiries in emerging markets with 89% growth

igeria secured the highest year on year growth when it came to motor vehicle related online search inquiries in emerging markets, with 89 per cent growth rate, according to a white paper released by Nigeria’s online car marketplace, Carmudi.com. Titled ‘The booming automotive industry in emerging markets’ the white paper highlighted among other things, the purchasing behaviours in Nigeria, the internet’s role in car sales and trends between GDP per capita and car ownership in Nigeria and other emerging markets. According to the study, Nigeria beat 20 other Middle East and African markets, as

far as the internet is concerned as a driver of car sales, with 89 per cent followed by Tanzania and Bangladesh with 71 and 69 per cent respectively. The report noted that “There is no reason to doubt that emerging markets will rapidly catch up to these figures. Evidence of this phenomenon can be seen when looking at automotive Google search queries as the year over year search growth has been astonishing particularly in Africa.” Nigeria’s e-commerce space has witnessed significant growth in the last three years, driven by 58.3 percent internet growth and about 32.7 mobile penetration. On the purchasing behaviour in Nigeria, the

report noted that “50 percent of car dealers in Nigeria surveyed during the preparation of the report, saw a decrease in sales as a result of slowing sales and naira devaluation before and during the general elections in the country. However, 30 per cent said they saw an increase in sales due to the changing economic climate and infrastructure in Nigeria.” Speaking during the presentation of the white paper before journalists in Lagos, Carmudi’s Managing Director in Nigeria, Christian Keller said the report was inspired by dearth of reliable data in the auto markets in Nigeria, especially for dealers and investors, who need to make informed decisions.

Vanguard, MONDAY, JUNE 1, 2015 — 39

Aviation

Why Nigeria does not have national carrier — CHIDOKA By LAWANI MIKAIRU

he out-going Minister of Aviation, Chief Osita Chidoka has revealed why he could not midwife a national carrier for Nigeria before the expiration of his tenure, just as he identified and explained some of the problems bedeviling the Aviation ministry and its parastatals. Chidoka, while presenting his aviation score card to stakeholders in Lagos, said that none of the domestic airlines currently operating domestic flights in the country can become a national carrier because they are privately owned, adding that a national carrier must have a diverse ownership structure . The minister said attempts to make Aero Contractors a national carrier in 2011 failed because the minority shareholders refused to agree to restructure the ownership. He added that Aero was chosen because of its indebtedness to the Federal Government through AMCON, its safety records, the size of its fleet, operational coverage and availability of electronic ticketing. He also said because the Aero Contractors experiment failed, the ministry’s panel set up to look at the viability of a national carrier advised that Nigeria should

explore the multiple carrier option instead of the single national carrier option. Chidoka revealed that for any airline to transform into a national carrier “it must have International Air Transport Association (IATA) and International Operational Safety Audit (IOSA) certification, it must have evidence of technical partnership and must meet minimum fleet size, equipment and diverse ownership.” According to him, "for you to be a national carrier, the ownership structure should be diversified. The airline should not be a family business operated by one man and his children. Private investors should have equity in the business, the books must be open for scrutiny and auditing and there must be transparent financial dealings and agreeing to restructure the ownership through the sale of shares on a 60/40 basis. “The airline must have a strong and reliable technical partnership that will constantly guide the airline on the path of safety and profitability. This must be accompanied by International Air Transport Association (IATA) International Operational Safety Audit(IOSA) certification which is done periodically. The airline must have the right fleet size in order not to put unnecessary pressure on few air planes which will lead to quick wear and tear.”

The minister also explained why the Ministry of Aviation has not been very effective in discharging its function of overseeing the parastatals under the ministry. Chidoka said “The Ministry of Aviation has eleven departments. Two of the eleven departments are focused on the provision of technical Aviation services. Current staff strength in the ministry stands at 560. “ “32.96% of the staff serve in the two technical departments while the remaining are split amongst the non-technical departments .The staff pooling system of the federal civil service limits the ministry ability to build and maintain a group of technical experts to manage the affairs of the civil Aviation industry.” “The pooling system should be modified to accommodate the technical expertise required in certain areas. The ministry staff strength is skewed towards service

For you to be a national carrier, the ownership structure should be diversified

Chief Osita Chidoka, former Minister of Aviation

areas as against technical aviation related areas. The staffing needs to be re-adjusted to enable the ministry beef up the staff numbers in the technical aviation areas which is the organisation’s core focus”. The Aviation Ministry boss further disclosed that the problem with the ministry is not the removal of the minister but the frequent posting and transfer of the permanent secretary. This, he said, had created room for politicians and contractors to take over the ministry. On the survival of airlines, the

Aviation Minister said that he would not subscribe to a situation where airlines are allowed to die before efforts are made to rescue them, adding that the regulator should be proactive to intervene in any airline the moment it notice any sign of problem. “There is the need to set up Aviation corporate governance and enterprise Risk framework to reduce the probability of aviation corporation failure due to moral hazard.” Chidoka said. The Minister further said that he had appealed to Pension Commission (PenCom) to set aside 3 per cent of pension fund to invest in aviation, adding that when this is done it would help to grow Nigerian airlines. Chidoka harped on the need to give Nigerians seeking participation in the aviation industry first right of refusal. Specifically, he said Nigerians should be allowed to operate In- flight catering services. He said he did not give approval and would advice incoming minister not to give approval to any foreign company seeking approval to operate in the country, adding that when Nigeria In-flight catering company; Airline Services Limited(ASL) tried to operate in Britain ,it was frustrated . He explained that the British authority asked ASL to seek the cooperation of customers first before coming to them, while the customers asked ASL to get approval from the British airport authority.

Micro-Finance We train for job creation — ITF Stories by PROVIDENCE OBUH

he Industrial Training Fund (ITF) has said it's training programme is for job creation across sectors of the economy. Director-General, ITF, Mrs. Juliet Chukkas-Onaeko, made the disclosure at the graduation ceremony of the inaugural set of Automobile Technicians trained by Truck Masters Nigeria Ltd, under the ITF-NECA Technical Skills Development Project (TSDP). She said, “We are training for job creation, we believe that when we match our training, it will meet the market need and guarantee that when these

people finish they will not be looking for jobs but meeting needs.” Meanwhile, she said that all those sponsored by the fund in collaboration with the Nigeria Employers Consultative

Association (NECA) and other organisations would soon get international certifications, adding that the organisation has been working with series of established players in various industries like agriculture, oil and gas and automobile maintenance in order to train more youths.

High corporate governance’ll attract investment — AFC

he Chief Executive Officer, Africa Finance Corporation (AFC) Mr. Andrew Alli, has urged Organisations both in Nigeria and the Continent to embrace high corporate governance in order to attract continued investment. Alli said this in a paper presentation titled: “Corporate Governance for Long Term

Business Success” at the Institute of Directors (IoD) Nigeria, Annual Fellow’s Luncheon, themed: “Corporate Governance: Overcoming the Influence of Power Control for Long Term Business.” He said, “If Africa is to continue to attract investments, organizations must be willing to show genuine implementation of high corporate governance

Bayer floats subsidiary to support investment in Nigeria

“We train to meet the requirements that are required by particular industry so that when they go out of the country they can meet expected standard. This training guarantees 80 percent practical experience which is what is required when it comes to technical skills development.

ayer AG has floated a subsidiary company in Nigeria to support its investment interests in Nigeria. Bayer is a global enterprise with core competencies in the areas of health care, agriculture and high-tech polymer materials. Speaking during the inauguration of Bayer Middle Africa Limited in Lagos, Member, Board of Management of Bayer, Mr. Michael König,

said that the aim of the subsidiary is to support and develop the businesses of the three subgroups of Bayer in the country, and to enable her serve her customers in Nigeria better. König disclosed that the company currently has more than 20 employees and is planning to grow to over 30 employees by the end of 2015 in the country with over 1000 employees across the African continent.

standards, which must be measured and constantly evaluated for optimal outcomes.” He described corporate governance as an internal control necessary to ensure equitable distribution of rights among various stakeholders and make every participant accountable for their actions, adding that it is also about putting in place the structure, processes and mechanism that enhances long term shareholder value through accountability of managers and enhancing organisational performance. He pointed out that failure in corporate governance is a real threat to the future of every corporation given its benefits, saying, “Strong corporate governance is even more important for today’s corporations.”

“ITF works with NECA to ensure equipments are made available for the training. We are sure of 100 percent employment for these one’s we have trained, this is how we can sped up job creation in the country and going forward we are training youths that would be acceptable anywhere in the world. We are standardizing our training centre and carrying out a centre audit to ensure the centre we have, have all it takes to produce internationally acceptable graduate. “The ITF has been working on certifications for our trainees so that they can work anywhere in the world, because our programmes seem not to be enough. The certification, when ready will have our trainees to take exams to qualify them for a diploma in the field of their training. “This is necessary because it has been difficult to attract young people to technical skills because of the poor remuneration and recognition that the sector of education has been suffering. “We have therefore been training our students not only on skilled manpower, but alongside good work ethics, good customer care, and also entrepreneurial skills,” she said.

40 — Vanguard, MONDAY, JUNE 1, 2015

C M Y K

Vanguard, MONDAY, JUNE 1, 2015 — 41

C M Y K

42 — Vanguard, MONDAY, JUNE 1, 2015

People in Business

hy he left paid employment: After his one year compulsory service to fatherland, Mr Olusina Ogunrinde worked in the banking industry for some years before voluntarily retiring in February 1998 to start his own business. “So many factors made me leave paid employment, one of which was the urge to be on my own in good time. I started Trustmark Communications properly on May 1, 1998 in a room and parlour apartment at Onipanu Lagos. Before this time, while still in the banking industry, I was already doing advertising; my friends were helping me. I am very creative so I did a lot of creative things which were approved. I believe that if God is with you, things will fall into place. That was what prompted me to leave the bank. I felt that since I could make some money from advertising, instead of tying myself down to salary, I could make more money on my own. What we do: We were into advertising mainly but in 2005, we had made some money so we decided to diversify into what we are doing today which include screen printing, computerized monogramming & embroidery, heat transfer prints, award plaque production, corporate gifts, corporate lapel pin production, branding of Tshirts, towels etc., and occasionally, we do paper printing. Diversifying: "As a matter of fact, diversifying has been our saving grace because if we did not diversify as at the time we lost the Chevron account, it would have been disastrous. In 2001, we moved to a three-bedroom flat in Ikeja. Of course, there have been ups and downs," he said. In their bid to expand the business, Ogunrinde said they added eight more machines in 2006 with the help of a loan from the defunct Intercontinental Bank. Saving grace: Unfortunately, life is not always a bed of roses so in 2010, “things went a bit down, we were faced with rental and other problems and that was when we were rescued by the Technology Incubation Centre (TIC), Lagos under the National Board for Technology Incubation of the Federal Ministry of Science and Technology. That was what brought us here. “Somebody directed me to this place saying it is a small scale industry condominium where my business could be saved because at that point, the business was actually going into extinction and we were about losing the Chevron account so C M Y K

•A staff of Trustmark at work

Desire to be on my own made me quit my job —OGUNRINDE

r Olusina Adedeji Ogunrinde is the Chief Executive Officer of Lagos-based Trustmark Communications Limited, a total communications outfit which started with advertising and marketing communications but later diversified. In this chat with Financial Vanguard, the University of Lagos Business Administration graduate tells the story of how he left the banking industry to become an entrepreneur, and the journey so far. By EBELE ORAKPO things were a bit difficult although we got it back and in the process, we were able to pay all our indebtedness to Intercontinental Bank. We lost it eventually in 2013 and we have been at this centre since then,” he said. "TIC has been our saving grace because when we moved in here, there was nothing like payment of rent, we only pay for electricity, water etc. This place has tenure and we are hoping that very soon, we will move. We render services so we cannot do that in the bush, otherwise we would have bought a piece of land somewhere and put up a structure. Also the economy has not been good. TIC is still accommodating us, but we hope that soon, we will get our own place because I wouldn’t want to go out now and start paying rent again, that will be suicidal." Challenges: "Power has been a huge challenge. A situation where the country is generating only 2,000 plus megawatts of electricity for about 170 million people, that is a precarious situation. The little money we make is spent on

fuel. In the last two weeks, we have been battling with fuel scarcity and you can imagine what we are going through. We had to buy fuel at N250 per litre. So how can a business survive in this kind of environment? But by and large, I thank God for where we are and we believe that God will take us to where we want to be." Number of employees: From day one, I employed two persons - a graphic artist and a receptionist. Now, I have nine plus myself, making 10. The beauty of small scale industry is that it employs many people but if I am into buying and selling, I may not need more than one staff but because I am producing, I have nine. Imagine if I have more

The beauty of small scale industry is that it employs may people

•Mr Olusina Ogunrinde...I am grateful to God for what I am doing now machines, I can have 15 employees. We have not been able to get financial assistance from government; we hear N200 billion for small scale industries but apart from those who got the National Economic Reconstruction Fund (NERFund) loan here many years back, since I moved in about four, five years ago, I have not had the opportunity of getting a loan to help my business so we are more or less stagnant." Investors: "If we see individuals who want to invest, we will accommodate them on our own terms because my fear with people investing in your business is that if things improve dramatically, they will want to kill you or drive you away from the business and that is why I am always afraid. Institutional investors are safer." Start-up capital: "We started with two machines which I brought in from the US. They cost thousands of dollars; I can’t remember the exact amount. I know that when we added more machines in 2006,

it cost us about N15 million, that was the loan we got from Intercontinental. We had some counterpart funding though because we were still doing advertising and money was coming in." Patronage: We thank God because no matter how bad the situation is, we have not stopped production. It may not be really the way we want it because when you are doing business, you want big money coming in. But in our case, big jobs come occasionally, the rest are small jobs and it is not helping cash flow. Although I thank God for this and this environment, but the type of business I want to do is the business that will bring me bulk money to do something tangible, money I will be able to invest, even if it is once in a while. "All the same, I am grateful to God for what I am doing now, may be this is where He wants me to be at the moment. In a nutshell, there is still a lot of room for improvement. Like some would say, it could be far, far, far better."

Vanguard, MONDAY, JUNE 1, 2015 — 43

Advertising & Promotions

*A record 486 people crocheting simultaneously for 20 minutes on April 24 at the American University of Nigeria's Commencement Hall. They were working to beat the Guinness World Record holders in the Most People Crocheting Simultaneously currently held by Americans.

Ikeja Electric: Changing perception, new realities STORIES BY PRINCEWILL EKWUJURU

he findings of recent survey of private equity backed companies indicates that the popular perception of private equity as an investor is only involved for short term gains as this couldn’t be far from the truth as propounded by Price Water Corporation, PwC. The reality is that private equity houses appear to be more willing to finance companies than traditional lenders are prepared to invest for growth. The survey of nearly 100 private equity backed companies showed that 74 percent of portfolio companies said their private equity backers were willing to invest more capital into their businesses, compared to 66 percent of respondents saying the same about their lenders – with more than a third of portfolio companies saying their lenders were not willing to extend further facilities. Overtime, private-equity performance has been misunderstood in some essential ways. It now seems that the private-equity industry decisively outperforms public equities with respect to risk-adjusted returns, which may prompt return-starved institutional investors to allocate even more capital to the asset class. Invariably this good news comes with a question mark: top private-equity firms now seem less able to produce consistently successful funds, this the Ikeja Electric, IE, a distribution company had succeed in, acquiring about $106 million (N21.2 billion)

under its Advanced Metering Infrastructure, AMI, would assist in curtailing energy theft and put an end to estimated billing system. Recently, IE, which emerged after the unbundling of the Power Holding Company of Nigeria, PHCN, in a press briefing showed a new way of changing the perception of its consumers in the face of challenges faced by electricity consumers in that zone, and the effort to

reposition the company. Vanguard sampled the opinion of consumers in that zone and got the following reaction from some consumers: In the face of IE, their lenders or personally sourced financier will be ready to invest more because the impact of right billing will be a major advantage for the distribution company, said Louis Eze, a consumer in Ikeja. A business owner in Ikeja,

Morgan Nwachukwu said: “We know electricity is deplete in Nigeria as a whole, but if the said meter is introduced it would be a relief for us business people, because we can only pay for energy consumed. Meter tempering will reduce as we learnt the meter is temper sensitive, may be also monthly service charge not carried out will stop.” “This attempt by IE will restore the confidence of electricity consumers in the zone, and Nigeria generally,” Kingsley Alle stated. “If this works, other Discos may be tempted to toe the line of IE,” Godwin Ifeajuna noted. Before now, the metering system in the electricity industry in Nigeria has been embarrassing and had depleted the pockets of consumers. To put an end to this, the Managing Director of Ikeja Electric, Mr. Abiodun Ajifowobaje, said in Ikeja, that the metering initiative known as smart metering, would address some challenges associated with billing system. Ajifowobaje said the pilot project started last month with test-run of 2,000 meters for consumers who had electricity challenges or non-functional meters in the six business districts in the zone.

Dance, story-telling, as Peak milk celebrates 60

ance and story-telling was what Friesland Campina WAMCO Nigeria Plc needed to celebrate Peak Milk at 60. The Managing Director of the company, Mr. Rahul Colaco, while speaking at the celebration ceremony, described Peak as “a truly Nigerian iconic brand,” while expressing happiness and appreciation of Nigerian’s loyalty to Peak milk and “particularly those who have come from far and near for the celebration of 60 years of nourishing Nigeria with quality dairy nutrition.” He said, “since the presence of Peak in the Nigerian market, the brand has continued to grow despite several changes in the market. Peak’s success is attributed to two things: First, a singular focus, which is to nourish Nigerians with quality dairy nutrition in order to reach their Peak. Second, continually exploring ways to stand out of the crowded shelf and touch our consumers through every stage of their lives. Peak has won industry recognition as an innovative and trendsetting brand that delivers superior

dairy nutrition across lifestages. The Brand’s positive results and success is about connecting with our Consumers, supporting our Business Partners and communities to pursuing their aspirations and reach for their Peak!

Every Nigerian grew up with Peak; Nigerians are still growing with Peak and without Nigerians, there won’t be 60 years of Peak milk, the iconic brand that has served the good people of Nigeria from generation to generation.”

Media Perspectives targets 61m MTN subscribers with GMN initiative

edia Perspectives, a media buying agency and seven other firms said they have combined strength to give the 61 million subscribers on the MTN network 30 minutes free airtime, if they make 3 three minutes call between 5am to 8am in the morning, in an initiative tagged; Good Morning Nigeria, GMN. The seven other firms are: MTN, ARM, Coca-Cola, Jumia, Leadway Assurance, Mansard and Samsung. GMN is a Corporate Social Responsibility, CSR, as well as advertising-funded initiative that will enable subscribers enjoy free talk time which kicked off on May 29, 2015, will require callers to subscribe to be eligible to enjoy the free calls. Speaking during a press conference to announce the GMN initiative the MD/CEO, Media Perspectives, Tayo Oyedeji stated that the campaign was a CSR initiative conceived to enable phone users to make extended phone calls. He added that for subscribers to enjoy this free call, they have to make a 3-minute straight call to an MTN number to get 30 minutes free to continue on the same call. To receive this benefit, customers will be required to text GMN to 131. The service which is only available on the MTN network is an innovation that will deploy mobile advertising while making phone calls free.

LASACO Properties finances N400m LED billboard

ASACO Properties and Investment Limited, says it has invested N400 million on an LED digital billboard owned by Mediaview Limited, erected at Oko-Cole, a suburb by the third mainland bridge. The billboard which is standing at 25sq meters by 740 sq meter display space is said to have six advertisement slots only, and was constructed by HighSun Group China. Group Managing Director of LASACO Group, Olusola Ajayi, in Lagos while speaking at the commissioning of the billboard which is powered by a plant, said for the company to finance the project was a proper investment, more so as at the last sitting of the board, the members visited the site. Answering our reporter, the GMD stated; “it is a normal transaction that went through the board, and it went through the security check of the company.”

Selfie contest drives traffic to Hollandia yoghurt —Chi Limited

ollandia yoghurt selfie contest embarked upon by the brand from the stable of Chi Limited has been driving traffic to the brand the company said. The company in a statement said the selfie contest which started may 1st, 2015 is o twitter, facebook and instagram. According to the company participants who emerge winners will go home with prizes from Iphone 6, Samsung Galaxy tab and cartons of Hollandia yoghurt. To participate in the contest, consumers are required to take creative pictures or selfies with two or more individuals while enjoying and posing with packs of Hollandia Yoghurt drinks. The individuals may be family, friends, colleagues, classmates or loved ones. The photographs will then be posted on Hollandia Yoghurt Social media pages, Facebook, Twitter, and Instagram using the hashtag #ShareUnlimitedGoodness. Winners would be selected based on originality, content and creativity. C M Y K

44 — Vanguard, MONDAY, JUNE 1, 2015 Email:lesleba@lesleba.com, lesleba@gmail.com Blog page:www.lesleba.com/blog2 Website: www.lesleba.com Tel:0805 220 1997

ore Nigerians will probably consider widespread insecurity, unstable power supply and our faltering economy as the three most critical challenges for which President Muhamadu Buhari would have to urgently find sustainable solutions. Nonetheless, some critics may trace the root of insecurity to increasing desperation from unemployment and ‘forced’ idleness on a rising proportion of our youth population. There is probably a consensus; however, that the prevailing suffocating unemployment rate would be minimized if the economy was ‘bubbling’ with industrial and commercial activities. There is, probably also a consensus, that steady power supply would trigger a burst of economic activities that would readily mop up idle youths from our streets to reduce the threat of insecurity. It is however, not so obvious that, despite the best intentions of government in the privatization of the sub-sector, power supply may never become stable if enabling regulatory monetary indices also elude our economy. For example, inaccessibility of cheap funds has been identified as a major constraint to the capacity of privatized PHCN subsidiaries to effectively provide stable power supply; evidently, only few businesses with medium to long term gestations can survive if they are funded at the prevailing interest rate of over 20%. Furthermore, weaker Naira exchange rates will continue to spur electricity tariff (just like petrol price) to make complete deregulation of the power sector also unpopular. We may deduce from the preceding that insecurity will diminish, and power supply will become steady, only when

much surplus funds exist in Nigeria’s economy, while the real sector remains severely deprived. In the manner of a futile trial and error exercise the regulator ’s mandatory cash reserves for banks were differentiated, with the ratio for government deposits rising within 18 months from 20 to 75% only to become harmonized again with private sector deposits, at a consolidated ratio of 31% at the MPCs May 2015 meeting. Sadly, however, systemic liquidity surplus remain unabated! Indeed, media reports suggest that with the harmonized 31% cash reserve ratio the MPC may have unwittingly released additional liquidity of over N470bn into an already cash saturated market (see story titled “CBN hides banks’ interest earnings on standing deposit facility” on pg. 28, Vanguard newspaper edition of 18/5/ 2015 ). In response to the ensuing liquidity surfeit, shortly after the MPC’s decision, the CBN compulsively embarked on another borrowing spree from the banks to reduce the debilitating cash surplus in their custody with the sale of over N200bn treasury bills at mouth watering rates which were ironically above 12% for risk free sovereign debts, which normally attract less than 2% interest in better managed economies. Furthermore, the CBN and MPC will not deny that systemic surplus cash is also responsible for the weaker Naira exchange rates which trigger rising fuel prices to make deregulation of the subsector impossible. Thus, if the MPC’s shenanigans escape further attention, President Buhari’s tenure in office will not be radically different from the locust years of the recent past.

Buhari vs a clueless MPC? an enabling economic environment is in place. Universally, the relative ratios of inflation and cost of funds usually signal the growth trajectory of every modern economy; for example, as best practice in more successful economies, inflation will generally remain below 2%, so that consumer demand will be sustained to power increasing industrial activity. Similarly, wherever the inflation rate is closer to 10% as in our case, poverty deepens, as incomes lose about 50% of purchasing power every 5 years with adverse consequences for consumer demand and ultimately for national productivity and employment. Clearly, the objective of management in successful economies would be sustainable lower cost of funds below 7% to encourage borrowing and spending in order to spur consumer demand and also make cheap funds available to the real sector, so that businesses can readily provide more goods and services and in the process increase employment opportunities which in turn support further consumer demand in a cycle of productive economic activity and inclusive growth. Clearly, the above scenario sharply contrasts with the management of our domestic economy, where the critical monetary indices which drive growth are in reverse gear. Thus, it would be mischief for anyone to suggest industrial regeneration or any serious expectation for reduction in unemployment rate when inflation is almost 10% while cost of funds exceeds 20%. Clearly, as witnessed from our national experience, abundant

natural resources will not automatically translate to sustainable economic growth without the universal drivers defined above to galvanize resources to produce increasing social wealth which will in turn engender enhanced security if distribution is more equitable. The question therefore, is who has the responsibility for initiating those strategies that will bring about the desired enabling environment? Well, in addition to its responsibility for banking regulation and supervision, the Central Bank has a constitutional mandate to establish minimal inflation and low cost of funds; the CBN also has the responsibility to manage the Naira exchange in the best interest of the economy. Indeed, in order to protect CBN in its performance of its crucial mandate; the autonomy of the Apex Bank was enshrined in the 2007 CBN Act. Furthermore, the CBN Governor also heads a Monetary Policy Committee (MPC) which comprises eminent professionals who receive allowances to convene

Eminent professionals in Nigeria’s Monetary Policy Committee seem impervious to the socially oppressive impact of their decisions

bi-monthly to dictate the direction of monetary strategy in line with perceived needs of the economy. Sadly, despite its 244 meetings since inception, the MPC has in recent years failed to create the enabling environment for economic rebirth, while the impact of several of the Committee’s decisions has become counterproductive. Clearly, the inexplicable systemic burden of surplus cash has become the albatross of the MPC and made it impossible for CBN to restrain inflation below 3% or keep cost of funds below 10%; consequently, Nigeria’s economy has remained grounded with disturbing social consequences for several years. Regrettably, the eminent professionals in Nigeria’s Monetary Policy Committee seem impervious to the socially oppressive impact of their decisions on millions of helpless Nigerians. For example, the MPC’s high monetary policy rate of 13% will guarantee banks a free income of over N600bn, in return for lending back, primarily government deposits, to both CBN and the three tiers of government in 2015! This bounty would be supplemented by over N30bn that banks would also earn for warehousing close to N100tn of their excess funds with the CBN; furthermore, the usually juicy returns from forex roundtripping will also embellish bank profits this year; conversely, however, in more successful economies, banks would normally pay a fee of up to 1% rather than earn interest for placing their surplus funds with their respective Central Banks. It is inexplicable that so

Business & Economy Cocoa harvest compounds Ghana’s woes in bitter month for bonds

he risk of the smallest cocoa harvest in five years is combining with power cuts and a weak oil price to cloud the prospects for Ghana’s debt. Output from the world’s second-biggest producer of the chocolate ingredient may drop 25 per cent from last year, according to Ecobank Transnational Inc. That’s curbing revenue from the commodity that was the biggest source of Ghana’s foreign exchange in the first quarter. According to Bloomberg Ghana’s Eurobonds lost 1.9 C M Y K

per cent in May, the fourthbiggest retreat after Venezuela, Costa Rica and Gabon among 58 emerging markets. A drop in cocoa production “adds to the negative backdrop of a depreciating currency, the impact of oil prices on the budget and slowing growth in Ghana,” Kevin Daly, a Londonbased money manager at Aberdeen Asset Management Plc, who oversees $13 billion in emerging-market debt, said by phone. “A much lower production number is negative for the currency and the

budget.” A fungus outbreak that caused the cocoa shortfall, the worst blackouts in at least eight years, inflation at a four-month high and a currency down 20 percent this year against the dollar are constraining growth in West Africa’s second-biggest economy. The government is forecasting the slowest expansion since 1994 at 3.9 percent this year, while trying to narrow a budget deficit through the help of an International Monetary Fund package signed in April.

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