Financial vanguard 02032015

MARCH 2, 2015

Why local investors shun e-commerce sector— REPORT •Nigeria loses 40% of stake to foreign investors, say operators is second only to the US, but this is not expected to last much longer.

Beginning in 2016, China will overtake igerian operators in the ethe US in spending. Massive gains in commerce ecosystem have China, as well as in India and attributed the apathy of local Indonesia, will push Asia-Pacific’s investors to the lucrative and booming growth ahead. These countries, along e-commerce sector to high failure rates with Argentina, Mexico, Brazil, Russia, of tech start-ups as well as fear and Italy and Canada, will drive edoubts about the viability and commerce sales growth worldwide. Einvestment value of the sector. commerce markets in other countries According to e-Marketer’s 2014 included in eMarketer’s forecast are forecasts, worldwide business-tonearing maturity. The strength of sales consumer e-commerce sales will in emerging markets is largely due to increase by 20.1 per cent to reach their large populations coming online $1.500 trillion. Growth will come and buying there for the first time. primarily from the Asia-Pacific will claim According to erapidly expanding more than 46% of digital online and mobile user buyers worldwide in Marketer’s bases in emerging 2014, though these users 2014 forecasts, markets, increases in will only account for 16.9 m-commerce sales, worldwide per cent of the region’s advancing shipping population. Penetration business-toand payment options, will also be low in Central consumer eand the push into new and Eastern Europe, international markets commerce sales Latin America, and the by major brands.

East and Africa. will increase by Middle Last year, for the first For now, North America 20.1 per cent to time, consumers in and Western Europe are Asia-Pacific spent more the only regions where a reach $1.500 on e-commerce majority of residents will trillion purchases than those in make purchases via North America, making digital channels. it the largest regional e-commerce In Nigeria although, the market is market in the world. This year alone, gradually picking up, local investors B2C e-commerce sales are expected have about 20 percent investment in to reach $525.2 billion in the region, the internet business against the 60 per compared with $482.6 billion in North cent which should be the ideal had America. they decided to invest earlier in the China will take in more than six of sector to grow the e-commerce every 10 dollars spent on e-commerce platform. in Asia-Pacific this year and nearly Operators, who spoke to Financial three-quarters of regional spending by Vanguard, said that at the moment, 2017. The country’s ecommerce market Continues on page 22

By JONAH NWOKPOKU

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Cover Story

Vocation & technical education – A key to improving Nigeria’s development

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VISIT - From left: Mr Rotimi Fadipe, Executive Director, Supply Chain, Honeywell Flour Mills Plc; Mr Folaranmi Odunayo, Chairman, Manufacturers Association of Nigeria, Apapa branch; Dr. Frank Jacobs, President, Manufacturers Association of Nigeria; Mr Olanrewaju Jaiyeola, Managing Director, Honeywell Flour Mills Plc and Mrs. Eyanuba Dafinone, Chief Executive Officer, Afriq Products during MAN courtesy visit to Honeywell Flour Mills Plc in Apapa, Lagos.

Why local investors shun e-commerce sector — REPORT Continues from page 21 there is still lack of understanding and sheer pessimism among Nigerian investors about the local internet business. They argue that although the sector requires relatively high investment capital, the growth of the e-commerce platform could be quicker and tremendous compared to other areas like property and oil and gas.

“It is a daunting task securing investment from Nigerian investors. We secured seed funding from friends and family who believed in the idea. I would say Nigerian investors do not understand internet business and the economics of it. This makes it difficult to secure investments from them. It will take a wave of investments from foreign investors to open their eyes to the opportunities that abound in the Nigerian technology space,” said Femi Taiwo who is the Co-Founder and Chief Executive Officer of Nigeria’s property website, www.private property.com.ng.

He told Financial Vanguard that he was able to eventually secure $100,000 investments

from a South African investor, Justin Clarke who is now Chairman of One Africa Media.

“From 2011 when the investment was finalised,” he said, “ we have been growing by triple digits Year on Year since then.”

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aiwo noted that “the fears of Nigerian investors are more around return on investments since these companies have high failure rates and it usually takes a while for many of them to turn a profit.” He however noted that in spite of this, Nigerian investors should understand that every business involves some levels of risks, and that it has become imperative for Nigerians to invest in the tech space “because Nigeria is leapfrogging the development learning curves most developed countries went through due to worldwide rapid technological advancements.”

“There are still numerous issues and problems faced by Nigerians in various sectors of the economy that can be easily solved by technology,” he added

Over the last three years, the e-commerce sector has recorded unprecedented growth. Pioneered by the Rocket Internet backed retailer, jumia.com, the sector has driven online shopping in Nigeria to about 35 percent valued at over N100 billion, according to recent statistics.

Despite this, local investment has remained relatively low. According to Financial Vanguard investigation, there are over 120 e-commerce sites in the country, majority of them have not even the least capital investment of between $5, 000 to $20, 000 (N1 million to 3 million) which experts say is what is needed to break successfully into the ecommerce business. As a result, most of them will not survive their first year and those who do, will manage for much longer period before breaking even.

Investigation has also revealed that most of the big names in e-commerce in Nigeria today are completely foreign owned or have some foreign equity stakes. For instance, online ventures like, Kaymu.com, a marketplace, Jumia.com, retail, Lamudi, real estate, Easy Taxi, Transport,Carmudi, auto marketplace, Jovago, hotel booking and hellofood.com are all under the stable of German owned Rocket Internet’s Africa Internet Group.

On the other hand, other ventures like Konga.com which is being hailed as Nigeria’s indigenous internet success story has at least 50 percent of its stake owned by Continues on page 23

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echnical education is a training, military officers are planned programme of known to beat up the citizens courses and learning who challenge their powers and experiences that begins with go scot free for their inhumane exploration of career options, actions. The danger posed by supports basic academic and life environmental pollution and skills, and enables achievement fake drugs is alarming. The less of high academic standards, educated in the society lack the leadership, preparation for skill to manage AIDS, cancer industry-defined work, and and diabetes among other advanced and continuing serious health problems. One education. Vocational education wonders what the nation’s and training prepares learners health minister and the 36 state for careers that are based in health commissioners are doing manual or practical activities, to tackle these issues. Every traditionally non-academic and good citizen is aware that the totally related to a specific trade, neglect of technical and occupation or vocation. In other vocational education is socially words, it is an “education and economically injurious, designed to develop because it is robbing the nation occupational skills.” Vocational of the contributions the and technical education gives graduates would make on individuals the skills to “live, national development. For that learn and work as a productive Nigeria is today wearing the citizen in a global society.” toga of a poor state.

Technical and vocational Although technical and education has been an integral vocational education seem part of national development deficient in ‘citizenship or strategies in many societies leadership training’ (Friedman because of its impact on 1982). It provides students with productivity and economic “life skills to become productive development. Despite its entrepreneurs as it engenders contributions the leaders of creative and innovative ideas, Nigeria have not given this enlarge the economic pie, and aspect of education the attention increase personal freedom. it deserves, and this is one of Most of the so-called the reasons for the nation’s “expatriate engineers” who are underdevelopment. This article being paid millions of dollars focuses on the dearth of skilled to build Nigeria’s roads and technical and vocational bridges are graduates of manpower in Nigeria and technical and vocational argues that technical and colleges. Yet the leaders do not vocational education holds the take technical institutions key to national development. seriously. Nigeria’s current Every facet of the economy preoccupation with university has been affected by lack of education reduces economic skilled technicians. The opportunities of those who are financial sector lacks more oriented toward work than technicians to regulate the academic. Not everyone needs banks and to develop financial a university education. software to properly tackle the Awarding licenses to greedy rising fraudulent activities in organizations and individuals the banking sector. Without to establish private universities s e c u r i t y, that are not even as development is equipped as some impossible in a of the technical and society; no nation vocational schools can sustain its in the United States democracy if the and other advanced citizens lack nations cannot Many confidence in the develop the society. police. The police graduates lack Because of the sorry violate the 'employability' state of the nation’s citizens’ human tertiary institutions skills, which and civil rights many of the and lack forensic would easily graduates lack laboratory and be acquired “employability ” fingerprint skills, which would technicians to from technical easily be acquired conduct criminal and vocational from technical and investigations. colleges vocational colleges.

And due to poor

Vanguard, MONDAY, MARCH 2, 2015 — 23

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igeria has made several futile attempts to use Public Private Partnership to build infrastructure that it so badly needs. But each of the attempts has failed to achieve the desired goal. The Lagos-Ibadan Expressway, the Local Wing of the Murtala Mohammed Airport and Lagos-Epe Expressway are a few of such attempts.

These projects failed to deliver on their mandate because parties to the partnership did not understand the full implication of what they were going into. Around the world today, public-private partnership is being used to build first class infrastructure that governments have no resources to finance. For a long while now, the international community has come to realise that the world’s huge infrastructure demand cannot be met by the public sector alone; private two sectors jointly. For regulations and the noninvestors and operators are instance, investors and renewal of licences. In needed, but they worry about operators could seek political addition, some broader risks political and regulatory risk. risk insurance and companies apply throughout the life Today, political and regulatory could deter government cycle, changes to taxation risk takes many form, from intervention by carefully laws, for instance, and community protests to crafting ownership and endemic corruption.

The framework developed for tightened regulations and commercial structures. On the corruption, and is relevant in public sector side, the national risk mitigation puts in both developing and government such as Nigerian evidence the main levers that government could provide can be adjusted while eliciting industrialised countries”.

Last week, the World investors with protection by the white spaces where constitutional multilateral development Economic Forum spelt out 25 offering guarantees by ensuring fair banks, commercial banks and international best practices insurers can create muchand fast dispute-resolution from different infrastructure needed risk-mitigation mechanisms, and by enforcing sectors that could help Nigeria anti-corruption instruments. and other developing robust countries attract private sector policies.

Thus new report in the World investment in infrastructure Economic Forum’s development. The report which was launched in New Infrastructure Knowledge York last Wednesday by the Series outlines actionable riskforum was prepared in mitigation measures to be collaboration with The Boston taken by the public and private Consulting Group. It presents sectors. According to the report a risk-mitigation framework “Political and regulatory risk consisting of actionable is one of the major constraints measures to be taken by the on infrastructure investment various parties to a public- decisions. It takes different private partnership; some of forms over an infrastructure the actions highlighted in the project’s life cycle, from report could be taken by the delayed construction permits private sector, some by the and community protests to public sector and some by the breach of contract, tightened

World Economic Forum recipe for infrastructure development will help Nigeria

To increase investment in infrastructure, a coordinated, global, long-term and multistakeholder approach is required

The report summarises the impact that the different political and regulatory risk factors have on projects, and cites a wide range of examples that help explain and underpin the need for riskmitigation tools. Importantly, the report confirms that these types of risks are encountered across a wide range of geographies; this is not a developed versus emerging economies issue.”

In order for investors to confidently increase their investments in infrastructure, they need to see transparent and comparable data and processes, as well as predictable legal and regulatory frameworks that can withstand political risk,” said Douglas L. Peterson, President and Chief Executive Officer of McGraw Hill Financial, and Co-Chair of the Strategic Infrastructure Initiative.

Reducing these risks can help unlock the private capital needed to bridge the infrastructure financing gap

The report emphasised that the world has more to lose than ever before from massive failure of critical infrastructure. To improve efficiency and lower cost, various systems have been allowed to become hyperdependent on one another. The failure of one weak link, whether from natural disaster, human error or terrorism ; can create ripple effects across multiple systems and over wide geographical areas.

The challenge is financial, and incentives are misaligned.

In the United States, over 80 per cent of infrastructure is owned or managed by private sector firms, which are not responsible for the negative externalities that failure of their part of the infrastructure could have elsewhere.

To increase investment in infrastructure, a coordinated, global,long-termand multistakeholder approach is required. There is no doubt ing the fact that upgrading infrastructure is essential in recognition that resilient infrastructure has become the backbone of a competitive economy”.

Nigeria policymakers have a lot to learn from the lessons exposed in the report. Nigeria certainly need private investors' capital to finance the huge infrastructural deficit in the country.

Cover Continues from page 22 South African Venture Capital firm, Naspers. And with additional $60 million and $40 million new venture fund raised in January and October, 2014 respectively, it remains to be seen how much indigenous stake the online retailer still retains.

Investigation has also revealed that Naspers also supports a whole range of other profitable online ventures in the country including the online classified, OLX, price comparison site, Pricecheck, a news portal, News24, and the recently launched online job marketplace, Careers24. Even other ventures like the car marketplace, Chekki, and online job market, Jobberman are also being backed by One Africa Media from South Africa.

“Nigeria has already lost out on the internet money making business. We seem to have this habit of putting money in a

Why local investors shun e-commerce sector — REPORT business where we are sure the entrepreneur doesn’t need the money or have started making money. And even if they do put their money in it as it could happen sometimes, the deals you get in that regard are very unfavourable. They want to make little investment in it and then want to take at least 50 to 60 percent. So what is the point?” lamented Lanre Aknilagun who started drinks.ng last three years with $50, 000 investments from SPARK. Akinlagun told Financial Vanguard that, “the problem is that Nigerians have lots of money but they have little appetite for risks. They only allow themselves to be aware of what they know is guaranteed. That is why

stealing and corruption is a guaranteed source of revenue.

They wouldn’t put money into something until someone else has done it.”

“Most Nigerian investors look for a safe landing when investing. Most of them do not look at the bigger picture. They mostly look at the short-term gains. When Raphael Afaedor and Tunde Kehinde founded Kasuwa.com and Sabunta.com, how many Nigerian investors were willing to take the plunge?

Investment can come not only in the form of financial investment.

Intellectual investment from investors and mentoring are also forms of investment,” said Chiebuka Nworah, Founder/CEO of EtyresNigeria.com, an online automobile tyre retailer.

He told Financial Vanguard that he and his friends: Godric Echefu, Olaseni Odukoya and Eze Peters Dike pulled their savings up to the tune of N1 million in July, 2014 to start the business. He said although challenges remain, the investment has been worthwhile as growth has been exponential. “Sales revenue,” he maintained, “is over 200 percent from our projections, “as total units of tyres sold have grown by more than 300 percent since we took off.”

According to Nworah, “It is very, very difficult to secure investment from Nigerian investors because most of them are skeptical about investing in the Nigerian Tech Space. Take a look at Facebook for example.

I always argue that if Facebook

was the brain-child of a Nigerian, that vision would have died. It took Facebook over 5 years to become profitable.

How many Nigerian investors are willing to wait that long?”

He maintained that it is important that Nigerian investors begin to consider the tech space, “because Information Technology is the future.”

“We are living at a period where everything would be characterized by software, the Internet and Information Technology. Four of the most valuable companies in the world are IT companies. The business model of Information Technology is emerging as a mainstay in the world economy,” he added.

More so, he said, “The ecommerce sector in Nigeria is still untapped. We have barely scratched the surface. There are still lots of niches and services Continues on page 35 C M Y K

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Business & Economy

LeapFrog invests $25m in afb

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eapFrog Investments and AFB Mauritius Limited (“afb”) have announced that LeapFrog has invested $25m in afb. afb is a fast-growing financial technology (“fintech”) platform that offers life-changing financial services to financiallyexcluded consumers and small businesses. Partnering with major mobile operators and over 400 retailers including Woolworths and Naivas, afb has extended its reach to over a million people in subSaharan Africa. afb currently has operations in four countries, including Kenya, Zambia and Ghana with rapid expansion into adjacent geographies planned. afb also offers branded store cards for the English Premier League giants Manchester United and Chelsea.

Across Sub-Saharan Africa, consumer finance from formal banking channels is almost non-existent: Insurance is massively underpenetrated, and can be as low as 1% of the adult population in many African markets. Savings products also remain chronically underdeveloped, and only 5% of adults source loans from formal institutions.

Resort Savings aims at housing for young people

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igerians within the ages of 25 and 40 years who so desire to have a roof over their head can now afford to do so even if they don’t have all the funds to prosecute such ambition.

Resort Savings and Loans Plc, a primary mortgage bank with a 21-year history in mortgage lending and administration is poised to help people in such age bracket with facilities that will enable them achieve such dream. The banks new product, tagged Early Home Owner is the product that has been so designed by the bank to attain such dream. Talking about the product, the Managing Director of the bank, Mr. Abimbola Olayinka stated that the product is provided to members of staff of the bank adding that “the result of the test gave birth to the product” He explained that, Early Home Owner requires every customer to make a minimum equity contribution equivalent to twenty percent(20%) of the value of the property to be purchased, subject to a maximum mortgage loan amounts of N6 million.

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PRESENTATION - From left, DCP Johnson Kokumo, DC Operations, Lagos State, Mr. Raymond Onomerike, Divisional Head, Corporate Services, Keystone Bank look on as Mr. Innocent Ike, Executive Director, Lagos and West Directorate, Keystone Bank presents keys of patrol vans donated by the bank to the Lagos State Police Command to CP Kayode Aderanti, Lagos State Police Commissioner, last week.

NAC, WesBank meet over national vehicle finance scheme T

he officials of the National Automotive Council (NAC) and WesBank of South Africa have met in Abuja on the proposed roll-out of madein-Nigeria vehicle finance scheme later in the year. A statement by the NAC said its Director-General, Mr Aminu Jalal, led the Director, Policy and Planning, Mr Luqman Mamudu and Director, Industrial Infrastructure, Mr Waheed Odetoro to discuss the scheme.

Nigerian government approved the NAIDP to attract investments from global vehicle manufacturers and to grow the supply of locallymanufactured vehicles

The WesBank delegation comprised of Mr Eugene Ochse, Head, Africa Operations and Mr Simon Ingersent, CEO-designate for Nigeria Operations. It said the WesBank officials

also interacted with potential partners, including selected vehicle dealers to obtain first hand information and get acquainted with dealership practices peculiar to Nigeria.

The statement said that NAC

Scheme was designed around a network of vehicle dealers and distributors for the pilot project.

NAC signed a memorandum of Understanding (MoU) with FirstRand Bank in Johannesburg, South Africa in October 2014. The MoU mandates WesBank to manage consumer vehicle financing for Nigerian assembled vehicles. It also quoted Jalal as saying that the Nigerian government approved the Nigerian Automotive Industry Development Plan (NAIDP) to attract investments from global vehicle manufacturers and to grow the supply of locallymanufactured vehicles.

According to the statement, the MoU will allow WesBank to work closely with NAC to develop vehicle financing solutions.

The aim, it said, is for vehicles built in Nigeria to be readily affordable for the average Nigerian. It recalled that Jalal had said that the Vehicle Financing Scheme would make Nigerianassembled vehicles affordable on convenient payment terms spread over a period of about four years at affordable interest rate.

The statement said the scheme was also intended to assist vehicle assembly plants in Nigeria to gain high volume within a short time so as to facilitate local components development.

Indigenous metre manufacturers laud NERC over power sector local content law

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he Electricity Meter Manufacturers Association of Nigeria (EMMAN) has commended the Nigerian Electricity Regulatory Commission (NERC) for enacting a law that would encourage local players in the power sector. The commendation is contained in a statement in Lagos by the Executive Secretary of the association, Mr Muyideen Ibrahim.

The statement said the local content law would not only protect the indigenous players in the evolving Nigerian power sector but also impact positively on the economy by raising the Gross Domestic Product (GDP). It said that it would also provide employment and business opportunities for Nigerians.

It added that the local meter manufacturers had the production capacity to bridge the wide electricity metering gap in the sector. They can also supply world class meters to neighbouring West African countries and Africa at large, it said.

“On behalf of the Electricity Meters Manufacturers Association of Nigeria (EMMAN), I will like to commend the

Dr Sam Amadi-led Nigerian Electricity Regulatory Commission (NERC) for the bold step in the right direction,” it noted.

The statement also said that Ibrahim used the medium to pledge the association’s unalloyed support and commitment to the Nigerian power sector reform. It said that the reform would encourage foreign companies who import electricity meter into Nigeria to come and set up manufacturing plants which would boost the economy and improve capacity of Nigerians.

“We are particularly proud of Amadi for having the political will to make the commitment which will go down in the history of this country. “It will re-position the power sector which is very critical to the country’s economy,” it said. The statement urged electricity distribution companies (Discos) to embrace the local content law in the power sector by patronising the local meter manufacturers. It assured Nigerians that member companies were capable of delivering world class metering solutions and allied products that could compete favourably with any product in the world.

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Banking & Finance

Ecobank CEO counsels investors on managing risks

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cobank Group Chief Executive Officer (CEO), Albert Essien has advised international investors on strategies for managing risks in Africa.

He gave this advice in a keynote address delivered in Munich on Thursday at the 4th Conference on Managing Risk in Africa. Mr Essien offered strategies for managing risk in Africa’s growth markets. Against the backdrop of what he outlined as a generally positive outlook for Africa, he advised investors against viewing Africa as one, but rather 54 countries with different growth prospects, different infrastructure, trade agreements, tax regulations, culture and levels of technological development.

Mr Essien urged investors to be prepared to engage with African countries on a longterm basis and avoid abrupt changes in investment focus because of perceived instability in certain markets.

He encouraged managing risks associated with doing business in Africa, including fiscal and monetary policy issues such as foreign exchange restrictions, transparency and compliance, political instability and corruption and resource and infrastructure challenges.

The Ecobank Group CEO offered executives overseeing market entry strategy in Africa six key considerations that they would have to contend with. These, he said, were: understanding the local business culture; assessing which markets represent the best balance of risk and reward; finding and vetting appropriate local partners; understanding local market regulations; local environmental factors; and levels of technological development.

Mr Essien highlighted several market entry risks, which he enumerated as: political risk, reputational risk, operational risk and physical risk to staff and assets. He encouraged scenario planning as a good way to anticipate what future trends might emerge and what their impact and probability might be.

“Whatever risks are identified, they are best viewed holistically rather than in isolation.

AfDB backs Nexim Bank’s Sealink project with $.3m grant STORIES BY BABAJIDE KOMOLAFE

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he efforts of the Nigerian ExportImport Bank (NEXIM) to facilitate the establishment of a regional maritime company, The Sealink Project, has received a fresh boost with the signing of a financial grant with the African Development Bank (AfDB) for $302,000 under the aegis of the Nigerian Technical Cooperation Fund (NTCF).

Speaking at the event, the Resident Representative for AfDB Group in Nigeria, Mr. Ousmane Dore, reiterated AfDB’s commitment to promoting infrastructure development in Africa as being in line with the bank’s overarching objective to spur sustainable economic development, social progress and poverty reduction in the regional member countries (RMCs). He indicated that an innovative maritime initiative such as the Sealink Project would greatly assist in bridging the artificial boundaries that have hitherto prevented trade, economic integration and seamless logistic services within the region. He was particularly impressed that NEXIM deemed it strategic enough to enlarge the scope of the project to include the Economic Community of Central African States (ECCAS) region (for which feasibility study part of the

grant shall be applied), and expressed the hope that eventually, the project would cover the entire region and enhance trade, free movement of persons, goods and services.

In his remarks, Mr. Roberts Orya, the Managing Director/Chief Executive of NEXIM Bank thanked the Directorate of Technical Cooperation in Africa (DTCA) AfDB for the Nigerian Technical Cooperation Fund (NTCF) grant to NEXIM.

He said: “The release of this financial grant of US$302,000 to NEXIM Bank under the Nigerian Technical Cooperation Fund (which is) managed by African Development Bank is an attestation of the confidence the Federal Government of Nigeria as well as other key stakeholders in our commitment,have in us, especially through the SEALINK Project, to facilitate the free movement of persons, goods and services within the West and Central African subregions.…”

The $302, 000 grant would be used to conduct further

feasibility studies on the project to extend it to the Economic Community of Central African States (ECCAS), as well as enhance the Sealink promotional activities and assist in the development of human capital and corporate governance structure of the the Sealink Promotional Company Limited (SPV) which was incorporated to facilitate the project implementation. The SPV is being promoted by the Federation of West African Chambers of Commerce and Industry (FEWACCI), Nigerian Export-Import Bank (NEXIM) and Transimex, S. A, Cameroun.

SIGNING - From left: Mr. Suleiman Shuaibu, Acting D-G of the Directorate of Technical Cooperation in Africa (DTCA); Mr. Ousmane Dore, Resident Representative, African Development Bank Group, Nigeria country office; and Mr. Roberts Orya, MD/CEO Nigerian Export-Import at the signing of Nigerian Technical Cooperation Fund (NTCF) financial grant to NEXIM Bank for the Sealink project at the AfDB offices in Abuja

FCMB funds acquisition of 100 tractors to boost agriculture

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irst City Monument Bank Limited is set to provide funding to the Tractor Owners & Hiring Facilities Association of Nigeria (TOHFAN) for the acquisition of 100 tractors to boost agricultural production this year.

This is part of the bank’s efforts to increase loans to the agricultural sector from six percent to 10 percent of its total loan portfolio Managing Director/Chief Executive, FCMB Limited, Mr. Ladi Balogun disclosed this at a press conference organised by the Bank tagged, “FCMB Agric Business: Diversifying the Nigerian Economy.”

Balogun said that the Bank will intensify its support to the agricultural sector and its value chain in order to fasttrack the growth of the

Nigerian economy.

Speaking at the press conference, Chairman of TOHFAN, Alhaji Danladi Garba, commended FCMB for its support to the agric sector and farmers.

He said, FCMB in 2014 supported the group with N120 million for the acquisition of tractors which have been distributed to farmers in Kaduna state.

He said for the 2015 farming season, TOHFAN have applied to FCMB for credit facility to acquire 100 tractors. “And by the time these tractors are released, 52,510 farmers will have access to tractor services and the expected net revenue to be generated to these beneficiaries is N188 million,” he said.

Speaking further, Balogun reiterated FCMB’s

commitment to supporting the agricultural sector. He said: “The bank is focused on being a strategic partner to the government and other stakeholders in the agric sector to ensure food sufficiency, employment and revenue generation, in line with its value as a helpful financial institution. We have been providing various lines of credit to the sector and its value chain, including small and medium scale businesses. This funding has been on the rise and we are determined to grow it to 21 percent within the next three years as against nine percent in 2014”.

Highlighting FCMB’s contributions to agriculture, he disclosed that in 2014 the bank provided lines of credit valued at almost N30billion to the sector, adding that six

per cent of FCMB’s total loan book or 200,000 loans per year go to the agriculture sector, compared to an average of 3 percent in the banking industry. "We realise that there are millions of farmers across the country that need credit at affordable rates, considering the level of attraction the agric sector has garnered. That is why we are increasing our level of support.”

He said in addition to the support to NOHFAN, FCMB has also collaborated with Doreo Partners to launch a support programme for farmers, known as Baban Gona (or ‘’great farm”). This is an agricultural franchise model, where farmers are trained and offered loans to carry out their farming activities.

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Corporate Finance

MasterCard, Grooming Centre to extend electronic payments to SMEs

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asterCard and Grooming Centre have signed a Memorandum of Understanding (MoU) that will see electronic payment solutions extended to 500,000 Small and Medium Enterprises (SMEs) in suburbs and rural parts of Nigeria.

Grooming Centre is a Nigerian micro-finance organisation that seeks to address the gaps in financial services by providing affordable loans to womenowned MSMEs. Up until now, Grooming Centre disbursed these payments by cash or cheques, which are less efficient than electronic means.

Under the MoU, the Grooming Centre will pre-load the funds onto MasterCard prepaid cards. Business owners can use their cards to withdraw funds at millions of ATMs or pay for goods and services at merchants that accept MasterCard payments in Nigeria and in over 210 countries globally.

“There are a huge number of MSMEs that do not have access to any form of formal financial tools or services.

Through the provision of electronic payments, these business owners will enjoy more convenient access to capital, be able to better manage and track their spending, save for future needs and protect themselves against unforeseen risks,” says Godwin Nwabunke, Chief Executive Officer of Grooming Centre.

MasterCard and Grooming Centre will also work with various financial institutions to rollout payment devices including Mobile Point of Sale terminals, enabling these MSMEs to accept debit, prepaid and credit cards for the first time.

“Through this partnership, we will enable financial inclusion in communities where consumers have largely been unable to use formal payment products and have had to rely on cash,” says Omokehinde Ojomuyide, Vice President and Area Business Head for West Africa, MasterCard.”These payment solutions will help these MSMEs reduce the amount of cash they currently handle, increase sales, and improve cashflow while making it easier and safer for their customers to pay.”

Pension funds hit N4.5trn with 6 million contributors Stories by PETER EGWUATU

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rusader Pension Limited, a pension fund administrator has lamented the low number of people in the pension scheme in the country, as pension funds hit N4.5 trillion.

The Managing Director, Crusader Pension Limited, Mr. Adeniyi Falade, who disclosed this at the NASD OTC Private Equity Conference held in Lagos said “ N4.5 trillion of Pension Fund is available at the moment and this money needs to be invested.

Imagine, it is only six million workers that are in the pension funds scheme at the moment and we have N4.5 trillion just in eight years that the new contributory pension scheme took off. What will happen when we have all the workers in Nigeria in the pension scheme? It will be much more money. It is very painful that we have only six million workers contributing to the fund in a country with over N160 million population” To this extent, he called on Private Equity operators to be active in terms of having well structured products that will require funds. “In fact, very few people understand the pension scheme. It is highly regulated. So for this kind of funds to be invested in any firm, the firm must have proper documentation and good management in place, and well structured to guarantee returns. As you know, everybody that is employed ought to be contributors to the pension funds, but this is not the case with Nigeria.

The contribution of pension funds to the Gross Domestic Product, GDP is seven per cent. It is still very low. How is the fund going to be deployed? So the Private Equity, PE stands very

General Partners, GPs cannot be held liable for performance, yet investors have no say

favourable to get this fund once they are well structured” he emphasized.

Falade, further noted the key concerns in Private Equity investments, saying lack of investor rights is a problem. According to him “General Partners, GPs cannot be held liable for performance, yet investors have no say. Also, there is non alignment of goals between managers and investors. Other problem is that Private Equity charge excessive management fees perceived as locust and cats and there are substantial

restrictions on sale or transfer of interest. There is no secondary private equity market in Nigeria to transfer limited partnership interest.

All these are what NASD OTC should consider and see how to tackle these issues.”

In his presentation at the conference, Mr. Bisi Sanya, a Senior Partner, Ernst & Young, said “Over the last several years, say one to two decades, emerging market have evolved into major Private Equity Investments. Key findings for Africa show that PE in 2013 , which stood at US 3.2 billion was invested in 98 Private

Equity investments. Also, $3.3bilion was raised through PE funds closed, while US $13.18 billion invested by PE from 2009 to 2015.

In this regard, he stated that private equity was entrenched in Africa and encouraged operators to work hard to invest in companies.

According to him “Capacity for Nigerians to manage Private Equity fund is an issue as PE has become a major force in capital formation and participation of investment activity.”

SIGNING - Ezediashi Ofili, VP, Prepaid Product Management MasterCard, (centre, left) and Godwin Nwabunke, CEO, Grooming Centre (centre, right) shake hands following the signing of an MoU to extend electronic payments to MSMEs in Nigeria. Looking on are Adesoji Tayo, Executive Director, Grooming Centre (left) and Uwagbae Uzebu, Director, Acceptance Development, Non-Traditional Channels MasterCard (right).

Standard Chartered Bank makes board changes

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s part of an orderly succession plan balancing stability with fresh perspective, the Board of Standard Chartered Plc has announced a comprehensive package of changes to its Board. Current Group Chief Executive Peter Sands is to stand down from the Board, giving way to William Thomas Winters (“Bill”) as the new Group Chief Executive with his appointment to the Board taking effect in June 2015.

The comprehensive changes to the board also extends to the topmost levels as current Chairman, Sir John Peace has indicated an intention to step down from the Board during the course of 2016, allowing time for Bill

Winters to transition into his new role and to ensure Board level continuity. Speaking about the ongoing transitions, Sir John Peace stated that “Bill Winters is a globally respected banker and has the right experience and skills to drive the Group’s new phase of growth. He brings substantial financial experience from leading a successful global business and has an exceptional understanding of the global regulatory and conduct environment. He’s also a proven leader with a strong track record in nurturing and developing talent.”

He continued in praising the efforts of the Current Group Chief Executive stressing that “Peter Sands

has made an immense contribution to the success of the Group and has had a transformative impact during his 13 year tenure as both Group Chief Executive and previously as Group Finance Director.

Since becoming Group Chief Executive in 2006, the Group has more than doubled in size, has been consistently profitable and has returned over USD12 billion of dividends to shareholders.

His leadership and insight, over a period of huge change and challenge for the entire industry, ensures he leaves the Group well placed to achieve its full potential.

Vanguard, MONDAY, MARCH 2, 2015 — 29

Corporate Finance

Foreign in or invvest estor orss par ticipation dr ops on NSE participation drops

By NKIRUKA NNOROM

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ata from the Nigerian Stock Exchange, NSE, showed a significant drop in foreign investors’ participation as at December 2014, while a significant increase was recorded on domestic side. During the period ended December 31, 2014, foreign investors’ participation on the NSE dropped to 48.24 percent, as against 80.92 participation rate achieved in November 2014.

On the other hand, domestic investors’ participation within the same period in December 2014 stood at 51.76 percent, as against 19.08 percent rate of participation recorded in November 2014.

However, on a year-to-year basis, foreign investors’ participation rose to 57.52 percent in 2014, as against 50.80 percent participation recorded in 2013, while domestic investors ‘participation stood at 42.48 percent between January to December 2014, compared to 49.20 percent recorded in the same period in 2013.

Also, in 2013, total foreign inflows into the Exchange exceeded outflows by about four percent, while in 2014, foreign outflows exceeded inflows by 22 percent. However, in December 2014, there were more foreign inflows than outflows.

Also the outflows in December were significantly smaller than the outflows in the previous months.

In its 2014 review and outlook for 2015, the firm said: “The local bourse performed negatively in the review period, the worst in three years. This was as a result of strong investors’ apathy towards the equities market, particularly from local investors.

“This was further exacerbated by sell offs by foreign portfolio investors in the face of local exchange rate risks and improvements in their respective economies.”

It, however stated that the negative market momentum currently being experienced would taper off towards mid 2015, adding that this would be made possible by sound policy framework from fiscal and monetary authorities.

“Given the current attractive valuation of equities, we expect a flurry of activities in the second half of 2015. An upbeat in the international crude prices and by extension, an improvement in the Nigeria’s economic environment will provide a strong support for the equities market,” analysts at Cowry Asset said.

“After two years of consecutive growth–35.45 percent and 47.19 percent in the year ended December 31, 2012 and 2013 respectively, the NSE All Share Index (NSE ASI) shed 16.79 percent of its former value on a year-to-date basis,” the report added.

Nestle shareholders suffer 27% dividend decline

By NKIRUKA NNOROM

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hareholders of Nestle Nigeria Plc will have their final dividend for the year ended December 31, 2014 slashed by 27 percent, if the amount being proposed by the Board of Directors is approved at the next Annual General Meeting, AGM, in three months' time.

The Board of Directors of the company is proposing N13.87 billion as dividend for the period, which is 27 percent decrease over N19.023 billion paid in the corresponding period in 2013.

However, the final dividend dividend along with the interim dividend of N7.926 billion paid earlier in the year amounted to a total dividend of N21.798 billion.

This represented eight percent increase over N20.212 billion paid in the previous year.

According to a filing with the Nigerian Stock Exchange, NSE, only shareholders whose names appear on the register of members as at close of business on Friday, 24 April 2015, will benefit from the dividend payment.

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30 — Vanguard, MONDAY, MARCH 2, 2015

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Vanguard, MONDAY, MARCH 2, 2015 — 31

Homes & Housing

•A modern mass housing development

FG restructures FHA due to under-performance —Minister Stories by YINKA KOLAWOLE

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he Federal Government approved the restructuring and commercialisation of the Federal Housing Authority (FHA) due to the underwhelming performance of the agency over the past 40 years.

Minister of Lands, Housing and Urban Development, Mrs. Akon Eyakenyi, disclosed this at a one-day management retreat on ‘Strategizing for Effective Restructuring and Commercialisation of the FHA’ in Abuja. She noted that government was worried by the consistent underperformance of FHA over the years and the organization’s inability to meet the legitimate aspirations of Nigerians for decent housing.

“FHA is government’s foremost agency for housing delivery.

Housing is one of the basic needs of man. You will all understand then why the government is genuinely worried by the consistent under-performance of the FHA over the years. The organization has not been able to meet the legitimate aspirations of the people of Nigeria,” she said.

The minister said the federal government has taken steps aimed at creating a conducive environment for private sector operators to improve their participation in housing delivery, but lamented that government’s efforts are being hindered by the under-performing FHA.

“Government has created the Nigerian Mortgage Refinancing Corporation (NMRC) to simplify the process of creating mortgages for Nigerians. It has also approved the new National Housing and Urban Development policies. All these actions are aimed at removing all the encumbrances that hinder access to decent and affordable houses for all Nigerians. However, a parlous FHA creates a disconnect in the country’s delicate housing equation.

“The government is genuinely worried by the consistent underperformance of FHA over the years”

While NMRC is aimed at strengthening the consumer in his demand for housing, the FHA is expected to firm up the supply side of the equation. That was why the President graciously approved the restructuring and commercialization of FHA

as a step towards empowering it to deliver on its mandate. Following that approval, I had the privilege to inaugurate both the Interim Management Team and the Technical Board of the Authority on December 12 last year. The two bodies are to be in place for a period of 18 months beginning from November when the Presidential approval was obtained,” she stated.

Eyakenyi urged the new FHA management to give

the authority a new lease of life, noting that the retreat is an opportunity for staff of FHA to gain more insight into the reform document. She added that the document, with specific deliverables and timelines, is supposed to serve as a compass to guide the Interim Management Team in implementing the restructuring and commercialization of Federal Housing Authority.

In his comment, the newly appointed Managing Director of FHA, Prof. Mohammed AlAmin, attributed the underperformance of the authority to poor operational structure, ill motivated staff and paucity of funds to meet its housing delivery target.

He said the new management met an organization filled with poorly motivated staff that have stagnated on the same level for upwards of 10 years, creating doubts among the staff about their future and that of the authority. “Rather than work in synergy to promote the interest of the authority, staff and management were in perennial state of mutual suspicion which put a dagger at the heart of the authority.

In addition, we found that FHA’s major projects designed to add to the nation’s housing stock and reinflate the organisation’s dwindling resources had been grounded by paucity of funds,” Al-Amin stated.

… Partners firm on N300bn affordable housing

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n the quest to bridge the nation’s huge housing deficit, the Federal Government has signed a Memorandum of Understanding with an international firm for the construction of 15,000 affordable houses across the country within 12 months, at a cost of $1.5 billion (about N300 billion).

Minister of Lands, Housing and Urban Development, Mrs. Akon Eyakenyi, who signed the MoU, said the decision was taken in fulfillment of President Goodluck Jonathan’s promise to transform the country in all aspects of life, especially through mass production of affordable houses.

She said the move underscores government’s resolve to partner with different operators in the housing sector, particularly between real estate developers, building materials producers, investors in real estate business and the different tiers of government, to maximize housing delivery. “I wish to emphasize that the Federal Ministry of Lands, Housing and Urban Development will continue to collaborate with key actors and operators in the housing sector to reposition the sector for improved and efficient housing delivery to the majority of Nigerians, especially the low income earners,” she stated.

The minister urged other investors and developers across the country to partner with the government in providing adequate shelter to the citizenry. “We have also stepped up our efforts in partnering with the private sector, investors and other stakeholders in the housing and urban development sector in order to ensure that we all work together to achieve the desired goal,” she said.

FMBN to lift embargo on estate loan

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ederal Mortgage Bank of Nigeria (FMBN) has disclosed readiness to lift embargo on Estate Development Loan (EDL) subject to commitment on timeliness by developers.

Managing Director/Chief Executive, FMBN, Mr. Gimba Ya’u Kumo, stated this when the new executive members of Real Estate Development Association of Nigeria (REDAN) paid a courtesy visit to the bank in Abuja. He said this was part of the bank’s efforts to facilitate delivery of quality houses to Nigerians and thus reduce the housing deficit.

Kumo explained that the bank would review the estate development loan window to remove observed lacuna. He added that the National Housing Scheme would be reviewed to ensure better collection of contributions from the primary mortgage banks (PMBs), noting that FMBN was reforming its operations to enforce discipline and transparency.

FBN Mortgages appoints new board

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BN Mortgages Limited, a subsidiary of First Bank of Nigeria Limited, has announced the constitution of a new Board of Directors.

The mortgage company was established to provide integrated mortgage solutions to individuals and property investors, fund the development of quality residential and commercial accommodation choices as well as facilitate acquisition via a wide range of financial products.

The new board is led by its Chairman, Mr. Tunde Odunayo with Mr. Adenrele Oni as MD/CEO. Other members are Abdullahi Ibrahim, Otunba Bosede Osibogun, Olatubosun Ashiru, Titilayo Ahmadu and Dr. Umaru Kwairangfa.

In a statement, the MD/ CEO said the new board will continue to build on the excellent records of its predecessors whilst remaining committed to building and developing FBN Mortgages to make it the preferred Mortgage Solutions provider.

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32 — Vanguard, MONDAY, MARCH 2, 2015

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Vanguard, MONDAY, MARCH 2, 2015 — 33

34 —Vanguard, MONDAY, MARCH 2, 2015

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Vanguard, MONDAY, MARCH 2, 2015 — 35

“Injustice anywhere is a threat to justice everywhere”.

Rev Martin Luther King, Jr, 1929-1968. (VANGUARD BOOK OF QUOTATIONS p 104). eldom does a commentator find himself in a position of the defender of a big and strong multi-national organisation. Organisations, especially a global bank, in its legal battle with an individual, are generally assumed to be the aggressors.

When Justice Oliver Wendell Holmes, Snr, 1809-1894, in exasperation, exclaimed that, “An organisation has no pants to kick and no soul to damn.

And, by God, it should have both”, he was only echoing the seeming helplessness of individuals when fighting against big organisations.

However, like most axioms, there are exceptions to the conventional wisdom. Truth is, sometimes, the giant organisation becomes a victim of the individual – under certain circumstances.

Banks, particularly, are prone to becoming victims to customers refusing to repay the loans granted them; and who still go to court to prevent the bank from obtaining justice. The courts globally are inundated with such law suits.

Perhaps, one example of a large global organisation being a prey to questionable court judgment occurred

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Ecobank, victim of injustice… 1 recently in the West African nation of Togo. A court in Togo awarded Mr Thierry Tanoh, the former Group Chief Executive Officer, GCEO, $11.6 million on February 3, 2015, for alleged wrongful dismissal, by ECOBANK TRANSNATIONAL INCORPORATED, ETI. Ordinarily, that should not have attracted any notice, apart from the size of the settlement – which is probably far more than Mr Tanoh would

jurisdiction over Mr Tanoh’s employment contract”. And, indeed, there is a contract, clauses 26 and 28 of which read as follows: 26. Arbitration.

“Any and all disputes, controversies or claims arising under or in connection with this Agreement, including without limitation, fraud in inducement of this Agreement, or the general validity or enforceability of

Truth is, sometimes, the giant organisation becomes a victim of the individual – under certain circumstances have earned as his legitimate remuneration package from the bank if he had completed his tenure twice.

ECOBANK, predictably, had given notice of appeal of the court ruling. The bank has announced as follows: “ETI does not accept the legitimacy of the Togolese court’s ruling because the court does not have legal

this Agreement shall be submitted to binding arbitration before one arbitrator to be selected by mutual agreement of the parties, or failing mutual agreement, to be appointed by the President of the International Chamber of Commerce in Paris, France.

The arbitration shall be conducted in London,

England under the UNCITRAL Rules, and the award of the arbitrator is to be final and enforceable in the courts of England.

Irrespective of the outcome of the arbitration, it is hereby agreed that parties shall each bear their own costs.

28. Governing Law and Jurisdiction.

“This Agreement shall be governed by the laws of England, and, subject to clause 26 above, the parties hereby submit to the exclusive jurisdiction of the English Courts”.

Even those not trained in law should be able to understand those two statements, whose authors must have gone to great pains to render them simple, straight forward and elegant in draft.

The reader might now be wondering what is our business with the ECOBANK judgment. The first reason for this intervention has already been stated in the statement

by Dr Martin Luther King, Jr. The quest for justice is universal and it should be allinclusive. Nobody, individual or corporate citizen, should be discriminated against, on account of nationality or size.

ECOBANK operates in 36 countries, but ECOBANK NIGERIA LIMITED is the

biggest unit. Millions of Nigerians, as well as foreigners in many countries, are also shareholders, and, therefore, stakeholders. It is their $11.6 million which had been awarded to Mr Tanoh, an Ivorian, in Togo. Global stakeholders have a stake in seeing to it that justice is done. And that means to ECOBANK as well as to Mr Tanoh. Given the two clauses quoted above, it is not clear that judgment had been obtained in the right place.

Jurisdiction remains an important component of any litigation anywhere in the world.

As a corollary to that, it needs to be pointed out that several “Nigerian” firms – First Bank, UBA, Zenith, ACCESS, DANGOTE etc – have also become transnational. Any of them could fall prey to judgments obtained from local courts lacking jurisdiction to entertain the cases. Once, the Togo judgment is allowed to stand it could create an avoidable bad precedent for employees of multi-national organisations in Africa to seek legal redress in any complaisant country – even when the terms of their agreements have ousted the jurisdiction of domestic courts. No African nation must give the impression that we have added legalised “jungle justice” to our long list of vices.

Cover Continues from page 23 to be filled and made available to Nigerians via the ecommerce sector. The percentage of investment is very low but the signs are encouraging. There are still numerous opportunities to invest in only if the investors could be discerning enough and look at the bigger picture instead of the short-term gains.” He said: “Investors should support small businesses in their own little way. For instance, Strive Masiyiwa supports businesses all over Africa by blogging about business principles on his Facebook page. He is investing his intellect and business expertise on small businesses all over Africa.

Nigerian investors should also learn to do same by investing finance or their business expertise/intellect on startups.

It would greatly enhance the Nigerian start-up ecosystem.”

On his part, Odebode Ademola, the Co-Founder of NerdBervy said: “Tech space will always evolve. And the thing I love about Technology is that there are a lot of problems we see around us that solutions can be created for. At

Why local investors shun e-commerce sector — REPORT NerdBevy, for instance, we have different ideas that would make a lot of changes and affect many lives positively. These solutions stem from the problems we see around us. So really, investing in Tech space gives you a pool of viable ideas to choose from. Every Tech idea that brings about a solution to a particular common problem if well planned out would definitely be a success.”

NerdBevy, an IT firm that specialises in supply and maintenance of IT equipments including development of web applications and solutions, launched RepairAm.com, an online gadget repair service in February, 2014. Unfazed by lack of investment, he and his partners raised N500, 000 from their friends and families to start NerdBervy and have within one year achieved over 60 percent growth.

In this situation operators and industry watchers alike believe that the role of Venture capital firms and private equity cannot be underestimated.

Some even argue that there

should be legislations including an enlightenment process to encourage them to also invest in the space.

“What we need is increased political stability in Nigeria.

This is because no one is going to invest in a country where they are not certain of its political future. There also needs to be a platform to educate high net worth individual in the country of the immense opportunities in the sector and its potential for growth. There should also be some sort of legislation encouraging indigenous Venture Capital firms to

What we need is increased political stability in Nigeria, because no one is going to invest in a country where they are not certain of its political future

actually invest in online services,” said Suleiman Balogun who is the CoFounder of Nigeria’s letting agency, www.tolet.com.

He said: “What we have realised is that most Venture Capital firms in this country invest mostly in oil and gas.

That needs to change. Even in real estate development, what we have found out is that the money that is being used for the biggest projects in the country is coming from overseas. Yet we have individuals in this country who have the capacity and the wherewithal to shoulder all these costs and make significant returns on their investments. It is not exactly encouraging.”

With such steps taken especially by authorities, things will definitely improve for this sector that has so much to offer but with little support. At the moment, however, some indigenous Venture Capital firms are also stepping in to fill the vacuum and are already beginning to create completely independent and viable

indigenous online companies.

For instance, in 2013, iRoko TV entrepreneurs, Jason Njoku and Bastian Gotter, introduced SPARK, a $1 million backed company created to support and develop aspiring Nigerian tech and internet entrepreneurs. Based in Lagos, SPARK is a company that has set out to build companies and to fill the vacuum that currently exists in the country’s angel investment ecosystem.

Over the past two years, the company has lived up to its dreams by building and supporting some of the most profitable online businesses in Nigeria especially hotels.ng, foto, tolet.com.ng, drinks.ng and a host of others.

At the unveiling of SPARK, Jason had noted that the creativity, talent, and the spirit of entrepreneurship is in Nigeria but Nigeria’s business ecosystem isn’t set up to adequately support start-ups in their earliest days, adding that its intention with SPARK is to act as the catalyst to a period of aggressive and exciting growth in Africa’s Internet sector. Perhaps with more SPARKS, Nigeria may not completely lose out on the internet business.

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36 — Vanguard, MONDAY, MARCH 2, 2015

Interview

N200bn commercial papers to hit market in 2015 — FMDQ MD

By NKIRUKA NNOROM

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hat is the future of FGN Bonds in view of JPMorgan’s negative outlook?

In actual fact, we have sent a mail to the JP Morgan, James Marshall that only an entity in Nigeria today can tell you the liquidity of the market. Last year, we got the market, all the dealing members reporting their activities. So, JP Morgan, and I think another by Standard Chartered research said the liquidity in the market had gone very low and they were concerned and that was what led to that negative outlook. And how did they determine the liquidity in the market. You remember that central bank last year had taken off the one percent open position limit and they felt that the speed with which you could get out of your position is affected. They felt that liquidity is not so much as funding, but how quickly you can get of your position, so, if you want to buy $100 million dollars, how quickly can you get it out. Lets’ be honest, when foreign portfolio investors come in, they

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r. Bola Onadele Koko is the Managing Director/CEO, FMDQ OTC Plc, a self regulatory institution that organises transaction in fixed income securities in Nigeria. In less than two years of its operation, FMDQ has recorded a lot of milestones; key among them were the achievement of N1 trillion market turnovers in 2014, a more transparent and orderly financial market, which hitherto was non-existent before November 2013 when the securities exchange took off operation.

According to Onadele Koko, in this interview with Financial Vanguard, the FMDQ management was able to achieve these through certain policies which include the publication of daily quotation list which keeps the entire market abreast of daily trading at FMDQ among others.

He also argued that the forthcoming general elections will not have any negative impact on liquidity in the financial market.

EXCERPTS: don’t come all at once, but when they want to get out, they want to do that at the same time. The truth is the market was not deep enough to have everybody go out at the same time. So, immediately the crude oil price started heading south, they wanted to go out at once, the corporate treasurers started accelerating their own demand and when you have such a situation, you have a much higher level of demand over the natural supply of the market. So, JP Morgan quickly set negative outlook because of the level of liquidity. We think they will restore this because, quite frankly, the level of liquidity in the m a r k e t , interestingly, has come back and is actually much higher than where it was prior to when central bank issued that circular. You are also aware that the central bank after its attempt to reduce speculative tendencies took that open position to zero at first, later brought it at point one percent and has now taken it back to point five, so the standard

amount that the banks traded in foreign exchange was $500,000 dollars and that was back to where it was before the circular was issued. We have no doubt that the negative outlook will be reversed by JP Morgan. The liquidity in the bonds market remains strong, the liquidity in the foreign exchange market has been restored , and you know that the crude oil price itself is already beginning to bounce back gradually, so, I think there should be no problem going foward.

Do you envisage the return of foreign investors to the market?

Definitely, foreign investors that had indicated interest to take their money out have successfully taken their money out. That is the major strength and test for the policies of the central bank. Now that the exchange rate has gone to N180/190, after the election, with the sort of growth that Nigeria is being positioned to achieve, with the level of the exchange rate, which the central bank had said is appropriately priced, and with the sort of yields in the market at 14/15 percent, I think the country will witness, in actual fact, a higher level of foreign inflows more than it did before.

Immediately the elections are over and the transition, which is expected to be smooth, takes place, Nigeria will be set for another bull run in terms of development of the economy.

What about FGN bonds

•Mr Bola Onadele Koko

crowding out other bonds in the market?

I think the way to look at the capital market, is to look at the savings side, the investment side. It is no brainer that the federal government will likely

The liquidity in the bonds market remains strong, the liquidity in the foreign exchange market has been restored, and the crude oil price itself is already beginning to bounce back gradually

borrow this year to shore up its revenue against the expenditure. When it does that and it demands more money, you will expect the price to go up. So, yields may go up. The federal government may also decide not to borrow which it has started doing and issue Eurobonds, but the point is if we continue to grow our savings base in the country, there will be less of federal government crowding out the market. The truth is corporate entities will want to issue bonds. Whether they issue bonds at this level is a different discussion because if Treasury Bills are at 13 percent and bonds are nosing 14/15, then the corporate bonds will be much higher. Corporate treasurers usually avoid issuing long term when interest rates are high; they rather stay short term and look to borrowing long when interest rates are low. So, I think this year and probably next year, if the interest rate remains

Vanguard, MONDAY, MARCH 2, 2015 — 37

Interview

If anything is going to affect the market, it will be a forcemajeure caused by man, not God this time. But otherwise, we will see a very active market houses have approached us to make enquiries on this. We are also taking a market developmental approach towards this to support the market in ramping up very quickly. This year alone we have had visits from investment banking firms talking about the sort of commercial papers they will like to bring to the market and these are across industries, not only in the banking sector, but in the fast moving consumer goods and also in telecommunications sector. We expect about N200 billion commercial papers to be issued this year.

Were there penalties/ sanctions for market participants that probably flouted market rules last year?

high, corporate treasurers will go more to the short term where nobody is going to crowd them out. The truth is that banks will continue their intermediation role; the federal government will probably borrow more, but do not forget that the savings base is also increasing and everybody is desirous of finding a way to increase that saving.

What we have done is simply pension. Everyone is thinking through how the reforms will come in the insurance industry such that it can grow significant savings pool. When we grow that savings pool from pension and insurance sectors, we will talk less of federal government crowding out the private sector..

In actual fact, if the federal government does require any funds, we will still it to come to the market to establish the benchmark and that is how it works. So, I think the federal government will borrow more, I don’t think there is any crowding out, and it will push up the rate. Even without

borrowing more, we have seen where the rates are because if for any reason inflation trends up, the central bank will take rates up. So, at times interest rate may go up, not necessarily from federal government demanding to borrow more, but really from inflation strategy of the central bank. The truth is if the states come to the market to borrow, they will get the fund as long as the bonds are well structured, but they must be prepared to pay more. I think we have seen a corporate that is already borrowing at 16.45 percent. So, if a top corporate in Nigeria is looking at borrowing at 16.5, the states themselves are going to be under pressure to pay more if they decide to come to the capital market. That is what we will likely see in 2015.

What is the value of Commercial Papers (CPs) expected at FMDQ this year?

We issued the first one last year. A couple of issuing

We spent last year putting the platform together, getting the members on board. We have put together our penalties and our enhancement as self regulatory organiSation in place. We are going through the process of educating the market on those infractions. We spent last year educating them on trading practices, now we are letting them know what the sanctions will be when you don’t keep to the general trading practices and rules we have put in place. This week, we also spent time with some of the dealing members getting them familiarised with the infractions that are in place and the ones that are being monitored. We are set to go live this month; we have been tracking the infractions and attaching sanctions to them for them to know. What usually happens is that while you are putting new trading rules in place, you also want the market to get accustomed to the fact that once they don’t trade properly within those rules and guidelines you have set, the penalties will take place and they will be sanctioned. That framework is in place and market sensitisation is going on

to let people know that these are the infractions that are being monitored. Hopefully, by next month, you will start seeing what penalties and sanctions go to the members. So, the way you see the league table of turnover today is the same way we are going to give you the league table of infractions. People want to see on our website, the different institutions and the sort of infractions they have.

This year is about increasing investors’ confidence, so, we are going to do a lot of sensitisations and encourage clients/investors to speak to FMDQ in case there are issues.

The sanctions we are putting in place today are on relationship among dealing members, what you are supposed to do, are you doing it? We will like clients to report if there is any unfair treatment they have experienced or a disappointing level of service and we will attend to that. But, again, when you are developing, you take things in stages; you don’t bite too much at a time. We are also working now on a whistle blowing policy that we expect to be fully robust where you can report to us when you have issues in the market place between the members, between the clients and members so that there is a way to following up on issues that you see coming up in the market place and we will take that seriously as to how we resolve those issues to help build investors’ confidence.

How will the political climate affect FMDQ business in 2015?

We can’t see any negative impact for now. The fact is the market is still very active and liquid, nothing has changed, irrespective of whether there is electioneering or not and we expect that to continue into the year. What we will likely see is that rate may increase, but we don’t foresee l i q u i d i t y d r o p p i n g because the peple that are trading in this market have a lot of stake invested it . It is part of their job to trade and by the time we bring in the n o n - b a n k dealing members to also trade in this same market, we will see increased liquidity. So, for te political climate, I don’t think it will have much impact in terms of liquidity

of the market. And of course, as FMDQ continues to strive to provide more transparency, we believe this will influence the market more than what the political climate is dictating.

We are hoping that the elections will come and go very smoothly and there will be no war. If anything is going to affect the market, it will be a force-majeure caused by man not God this time, but otherwise, we will see a very active market. The only major changes we will see will be in pricing. But that the market will be illiquid or shut down, we don’t envisage that.

What is the impact of volatility in FX on the OTC Market?

I think we need to understand this market a bit and it is a bit different from equity market. If equity market is coming down, at times, people run away from the market, they don’t want to invest in it, but there is a natural flow of money to this market. If banks have liquidity, where will they put them, treasury bills or Federal Government Bonds, that is one. Two, the federal government has also put a sweetener, all their coupons and income made on these treasury bills or FGN bonds are tax exempt. So, when you go to your bank and say ‘am no longer into equity, I sell my equity and take money to my bank’, this market gets more liquidity because the bank has to invest that money. A Bank does not keep the money, it is either it takes it to central bank, buys treasury bills or FGN bonds.

38 — Vanguard, MONDAY, MARCH 2, 2015

Tax Matters

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ften times taxpayers have little or no knowledge of the basic requirements for filing their tax returns as well as the consequences for late filing on these returns. Below is a breakdown of the requirements for filing your tax returns, their due dates and penalties for late filing as it applies to various tax types.

1. Requirements for filing Company‘s Income Tax (CIT) In line with Section 55 of the Companies Income Tax Act (CITA) LFN 2004 (as amended), all taxpayers including those granted exemption from tax, are required to file their tax returns to the relevant tax authority every year. The tax returns shall consist of audited accounts (financial statement) of the business for the preceding accounting year and must be accompanied by: Income tax computations Capital allowance computations Schedules of fixed assets True and correct statement in writing containing amount of profit from each and every source A duly completed selfassessment form signed by a director or company secretary Evidence of payment (whole or part) of the tax due.

Tax returns under (International Financial Reporting Standards (IFRS) shall be in line with Section 55 of CITA and should include: In respect of first time adopters; Statement of financial position as at the beginning of the earliest comparative period when a taxpayer applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statement Statement comparing the tax effect of IFRS adoption with Nigerian Generally Accepted Accounting Principles (GAAP)

obtain prior approval before submission. This must be specifically approved in writing by the relevant tax authority.

Penalty for late filing of CIT Section 55 (3) a & b of CITA LFN 2004 (as amended) provides for penalty of N25,000.00 in first month of failure and N5,000.00 for each subsequent month.

2. Requirements for filing Education Tax (EDT) Section 2(a) of the TETFUND (Establishment, Etc.) Act 2011 provides that a company shall be assessed on EDT when being assessed on income tax under the CITA/ PPTA. EDT should be part of the tax computations when filing company income tax (CIT) or petroleum profit tax (PPT) returns.

Due Dates For old companies, six (6) months after the end of the company‘s accounting year.

For new companies, eighteen (18) months from the date of incorporation or six (6) months after the end of the company‘s first accounting period whichever is earlier.

Penalty for late filing of Education Tax (EDT) The same penalty applicable to late filing of CIT/PPT also covers NITDL. 3. Requirements for filing National Information and Technology Development Levy (NITDL) (for applicable companies only) Section 16 (2) of the NITDA Act, 2007 provides that FIRS while assessing a company for CIT/PPT in accounting period shall also assess such company for NITDL. It should be part of the tax computations when filing returns for CIT/PPT. Note: Companies with N100,000,000 turnover and are engaged in the following business lines are assessable to NITDL:

Statement of reconciliations from Nigerian GAAP to IFRS Deferred tax computation In respect of post-first time adoption: Deferred tax computation Due Dates For old companies, six (6) months after the end of the company‘s accounting year.

For new companies, eighteen (18) months from the date of incorporation or six (6) months after the end of the company‘s first accounting period whichever is earlier.

A company may request in writing for approval to submit accounts at a later date, in view of any peculiar circumstances, e.g. fire disaster or need to

Often times taxpayers have little or no knowledge of the basic requirements for filing their tax returns as well as the consequences for late filing on these returns

Penalties for late filers, ABC of tax returns (1)

WORKSHOP - From left: Mr Bolaga Oshiga, Director Project Management Tax Department, Mr. Achilis Amahwe, Director Internal Affairs Department, Representing Ag.Executive Chairman of FIRS, Alh. Kabir Mashi, Mr. Peter Olayemi, Director Medium Tax Department, Mr. John Obaro, MDSystemspecs Nigerian Limited and Mrs. Crystabel Onyejekwe, Executive Director, Buisiness Development NIBSS at One-day Sensitization Workshop for Tax Consultants, Taxpayers and Banks, held at Eko Hotels and suits in Lagos GSM service providers and all telecommunication companies; Cyber companies and internet providers; Pension managers and pension related companies; Banks and other financial institutions Insurance companies Due Dates For old companies, six (6) months after the end of the company‘s accounting year.

For new companies, eighteen (18) months from the date of incorporation or six (6) months after the end of the company‘s first accounting period whichever is earlier.

Penalty for late filing of National Information and Technology Development Levy (NITDL) returns The same penalty applicable to late filing of CIT/PPT also covers NITDL. 4. Requirements for filing estimated Petroleum Profit Tax (PPT) returns In line with Section 30 of the Petroleum Profit Tax Act (PPTA) Cap P13 LFN 2004, every company which or has been engaged in petroleum operations shall for each accounting period of the company, make up accounts of its profits or losses, arising from those operations, of that period and shall prepare the following particulars: Computation of estimates of adjusted profit/loss and assessable profits.

A schedule showing; The residence at the end of that period in respect of its assets All qualifying petroleum expenditure incurred by it in that period The values of any of its

assets disposed of in that period The allowances due to it for that period c) A computation of its estimated chargeable profits for that period d) A statement of other sums, deductible under Section 22 of the PPTA e) A statement of all amounts repaid, refunded, waived or released to the company, as referred to in Section 20 (5) of the PPTA f) A computation of its estimated tax for that period.

Due Dates Not later than two (2) months after the commencement of the accounting period of any company engaged in petroleum activities.

If at any time during such an accounting period, a company is aware that the estimated tax returns requires revision, it shall submit a further return containing the revised estimated tax for such period.

This is in line with Section 33 of PPTA. Penalty for late filing of Estimated Petroleum Profit Tax (PPT) returns Section 51(1) of the PPTA provides for a penalty of N10,000.00 and N2,000.00 for every day the failure continues.

5. Requirements for filing final PPT returns In line with Section 30 (2) of the PPTA, the same particulars as under Estimated Tax Returns should be filed (not being estimates).

Such copy of those accounts and each copy of those

particulars shall contain a declaration that they are true and complete and shall be signed by a duly authorized officer of the company or by its liquidator, receiver or agent of such liquidator or receiver.

Due Date Within five (5) months after the expiration of the accounting period of that company. This is in line with Section 30 (2) of PPTA. Penalty for late filing of Final PPT returns Section 51(1) of the PPTA provides for a penalty of N10,000.00 and N2,000.00 for every day the failure continues.

6. Requirements for filing Personal Income Tax (PIT) returns In line with Section 41 of Personal Income Tax Act (PITA) Cap. P8 LFN 2004 (as amended), a taxable person shall, for each year of assessment, file selfassessment return in the prescribed form (Form A in the case of filing with FIRS), with the tax authority of the state in which the taxable person is deemed to be resident. This is together with a true and correct statement in writing containing: The amount of income from every source for the preceding year, computed in accordance with the provisions of PITA Particulars that may be required under PITA with respect to any such income, allowance, relief, deduction or otherwise as may be material for that purpose i.e. particulars that will serve as proof.

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Business & Economy

SMEDAN signs 5yr partnership with Globacom to empower 17m SMEs

By FAVOUR NNABUGWU

S

mall and Medium E n t e r p r i s e s Development Agency of Nigeria (SMEDAN) and Globacom have signed a pact to empower 17 million Small and Medium Entrepreneurs (SMEs) in the country.

Officials of the two organisations signed a Memorandum of Understanding (MOU) on the partnership at Globacom office in Lagos.

The Director-General of SMEDAN, Mr. Bature Umar Masari explained that the partnership which will run for an initial period of five years with the opportunity for attractive call rates as Closed User Groups (CUGs) and a channel to advertise their products and services via Call Back Ring Tone Masari said, “SMEDAN is happy to partner with an indigenous company which has become a global brand.

Ever since Glo demystified the myth that per-second billing for calls was not possible, they have not stopped developing products and services that are beneficial to Nigerians, especially the masses”.

He explained that the project will also give 10 percent of the net revenue from the partnership to select Micro Small and Medium Enterprises (MSMEs) which subscribed to the package, adding that, “It is also laudable that this initiative was well thought through and has stakeholders input and buy-in,” While explaining the details of the agreement, Globacom’s Head, Corporate Sales, Kamaldeen Shonibare, said that the company would through the partnership empower small and medium enterprises that are members of SMEDAN in their businesses by providing them access to grants, soft loans and capacity training programmes.

The training opportunities, he explained, were designed to equip entrepreneurs with current value-adding global best practices that will help them reposition their businesses.

He said Globacom teamed up with SMEDAN on the initiative because Micro, Small and Medium Enterprises were the engine room for the rapid growth of the economy because of their

closeness and importance to the day-to-day existence of the people.

“As a proudly Nigerian company, Globacom is partnering with SMEDAN to catapult Nigeria to greatness through the empowerment of SMEDAN’s over 17 million members. We will support SMEDAN and its affiliates with funds, sensitisation workshops and business tools.

"We will also support the Industrial Development Centres being established in some states of the federation.

Our dream is to catapult numerous five thousand naira businesses to a half a million naira enterprises within one year,” Shonibare said. He added that Globacom’s “partnership with SMEDAN is in sync with our irrevocable commitment to

the promotion of the welfare of Nigerians through our various life-transforming empowerment programmes.

The training opportunities, he explained, were designed to equip entrepreneurs with current valueadding global best practices that will help them reposition their businesses

Over the years, we have invested heavily in such programmes.

Our empowerment schemes are multi-faceted and they cut across various demographics.”

Shonibare assured SMEDAN members that they would enjoy more telecoms benefit as Globacom had concluded arrangements to empower them with specialised lines for better and seamless communication.

He reiterated Globacom’s continuous support to all progressive areas of human endeavors including sports and entertainment. He also encouraged entrepreneurs to take full advantage of the window of opportunity that will lead to more business prospects in the future.

SESSION - From left: Aibee Abidoye, General Manager, Chocolate City; Sasha P, Recording Artiste; Mr Uzoma Dozie, MD/CEO, Diamond Bank PLC and Mr Gregg Afemikhe, Chartered Accountant, SS Afemikhe Consulting during the session on Financing the Entertainment Sector at the 2015 Edition of Social Media week held in Lagos on Wednesday. Photo Lamidi Bamidele.

Dangote invests N80bn in Kenyan cement sector

By FAVOUR NNABUGWU

A

frica’s richest man, Alhaji Aliko Dangote has invested N80billion ($400million) to set up a cement plant in Kenya through East Africa Portland Cement Company (EAPCC).

Dangote entered Kitui County ’s limestone mines through the Kenya’s local cement in order to open $400 million, representing Sh34.8 billion Kenyan currency in Kitui County, Kenya.

Dangote Cement which also constructing major cement plants in Ethiopia, Tanzania, and Zambia, already has a license to prospect for limestone in Kitui County while he revised the upcoming factory’s annual production capacity to three million tonnes from the previous 1.5 million tonnes.

According to him, “We are reviewing plans for Kenya with a view to increasing

the scale of our proposed factory from 1.5 million tonnes per annum (MTA) to 3MTA”.

Dangote’s upcoming plants in Kenya, Tanzania, and Ethiopia will give it a total capacity of 8.5MTA, putting it ahead of Kenya’s Bamburi and Uganda’s Tororo that currently have capacities of 3.1MTA each.

“We are confident there will be sufficient demand both in Kenya and neighbouring countries”. Besides being rich in limestone, Kitui is also attractive due to its proximity to the Mui basin which has large reserves of coal. The coal is tipped to replace the relatively expensive diesel fuel in firing energy-hungry cement factories.

The group plans to have around 60 million tonnes of production, grinding and import capacity in Sub-Saharan Africa by 2016".

Institute partners US university on youths and women empowerment

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ouths and Women empowerment efforts in the Niger Delta region has received a new fillip as Development and Leadership Institute (DLI), a nongovernmental organisation (NGO), recently sealed a major partnership agreement with University of Arkansas at Pine Bluff, (UAPB) United States.

The partnership agreement involves collaborative support to various programmes and interventions by DLI in the Niger Delta region. Speaking during the ceremony in Port Harcourt, Olaoshebikan Clement Executive Director, DLI, disclosed that the partnership represents a major breakthrough for the organisation that will have a resounding positive impact on its work in the region.

“It will enhance the quality of our organisation’s programmes in the areas of agriculture, Poverty alleviation, livelihood protection and environmental conservation”. We will receive technical assistance, tools and technology to multiply the impact of our rural development programs, especially support to vulnerable women and youths”.

He further disclosed that the University of Arkansas at Pine Bluff is operating and pioneering research into enhancing the productivity and performance of the lower Mississippi Delta, which compares with the Niger Delta and offers tremendous opportunity for transfer of knowledge and technology.”

We hope to see impact on vegetable farming, fish farming, youth entrepreneurship, small householder farmers, snail farming and general biodiversity in the Niger Delta”, he said.

Clement who also spoke on choice of the American University to partner with his organisation, opined that it is based on DLI’s track record and achievements. “We have collaborated with University of Arkansas at Pine Bluff on an ongoing project, which involves the Rivers State Government, Rivers State University of Science and Technology, Wetlands International Africa and Rivers State Sustainable Development Agency.

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44 — Vanguard, MONDAY, MARCH 2, 2015 Email:lesleba@lesleba.com, lesleba@gmail.com Blog page:www.lesleba.com/blog2 Website: www.lesleba.com Tel:0805 220 1997

Budget 2015: Planning to fail?

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ver the years, both the Legislative and the Executive arms of government have consistently demonstrated their faith in the popular axiom that “he who fails to plan, plans to fail”; consequently, they have, always ensured that an Income and Expenditure plan is passed into law annually; nonetheless, inspite of their apparent loyalty to the concept of planning, public expectation for improved infrastructure and enhanced social welfare has, ironically remained unfulfilled, such that some cynics may suggest that our economic and social welfare couldn’t be worse even if we ignored the need for a formal plan of action.

In reality, however, empirical evidence suggests that planning is intrinsic to success in every endeavour, including the business of government; so, why is our own case different; why do we fail, even when we apparently plan? We will hereafter take the 2015 budget as a paradigm, and identify the areas of deviation from best practice in successful economies where annual plans positively impact on the welfare of citizens.

It is noteworthy that in more successful economies, budget implementation religiously commences on the first day of each year. Regrettably, in contrast, as at the first week in March, Nigerian’s 2015 budget still remains inchoate.

Nonetheless, this is not unusual, infact since the return to civil rule; Nigerians may not recall any budget enactment before March. Clearly, the salaries and allowances of civil servants are nominally immune to any delayed passage of the budget for up to 6 months; in this event,

there is never any real pressure or anxiety for civil servants and political office holders to complete the budgeting process promptly. Lately, however, there are suggestions that the 6 months latitude for expenditures on operational expenses in the absence of a budget should be reduced to 3 months; however, some critics may wonder how we can hope to become a first world country, when we cannot embrace the required fiscal discipline that will ensure that budget implementation begins on the first day of January each year!

Ultimately, the more serious impact of delayed budget passage is primarily on the capital budget, which captures expenditure on those sectors and infrastructure that would reduce hardship in the lives of increasingly more citizens.

Unfortunately, delayed budget enactment, has consistently frustrated the comprehensive implementation of the most essential part of the budget for several years; indeed implementation rates above 50% for Capital Expenditure is often regarded as success, while the unspent funds are hazily accounted for with well tested civil service procedures.

In the light of the above process, the present decrepit state of public infrastructure should not come as a surprise; for example, despite over $20bn expended on power in the last fifteen years, power still remains epileptic with barely 4000MW generated from the national grid. Ironically, we have also had to selectively provide additional soft loans to those buyers to whom we sold our power infrastructure with a loss of over N400bn!

Curiously, despite the privatisation of power,

government’s sustained expenditure in the subsector still exceeds the consolidated funds brought into the subsector by the new owners of our power infrastructure.

Clearly, with the present 15% paltry allocation (including 5% from SureP) to capital expenditure, the 2015 budget cannot raise any hope of any serious remediation to our critical infrastructural deficit.

Indeed, with the legislators’ current demand for almost 80% reduction in the projected SureP allocation, the net capital budget may be less that 10% of total expenditure, despite the urgent requirement for at least 50% to gradually redress the general decay.

Sadly, about 90% of all federally budgeted revenue in 2015 will simply be consumed in running the civil service; surprisingly, inspite of the savings from the alleged thousands of ghost

In more successful economies, budget implementation religiously commences on the first day of each year. Regrettably, in contrast, as at the first week in March, Nigerian’s 2015 budget still remains inchoate

workers so far weeded out of government service, the recurrent budget still continues to increase while the capital budget contracts; surely, such an inverse strategy will never transform us into a first world country.

However, the other serious threats to the success of the 2015 budget relate to the adopted benchmark for crude oil price, the Naira exchange rate and uncaged inflation. It is not clear if the Minister of Finance and the Budget office will stick to the proposed benchmark of $65/barrel before the recent crash below $50/ barrel. Nonetheless, if the more cautious benchmark of $52/barrel proposed by the Legislators is ultimately adopted, then, the budget as it currently stands would become worthless, and the Minister of Finance would need to revisit the drawing board to produce fresh income and expenditure estimates for the year 2015’.

Expectedly, the protracted nature of such review may make budget enactment a challenge until after the elections in April, unless of course, unfolding opportunities for self enrichment induce the hurried passage of a clearly inchoate budget by the Legislators.

Either way, the net product, will be the attendant social misery nationwide.

Certainly, the massive over 20% devaluation of the Naira was certainly not factored into the 2015 budget. Indeed, even if, inspite of low crude prices, a paltry 10% capital vote below N500bn is realisable, the sizeable import component of infrastructure expenditure, may actually further shrink because of the 20% plus devaluation and constrain any

hope of infrastructural improvement.

Incidentally, if low crude prices persist through 2015, almost 50% of budget revenue will be wiped off to create severe challenges for the implementation of the already paltry recurrent and capital budgets. In this event, government would incur further debts at atrocious interest rates in order to fund the N1 trillion deficit in the Federal budget, which sadly, is predominantly consumption oriented. It is really a sad day, if inspite of our bountiful resources, we still have to borrow irresponsibly just to fund our appetite for consumption rather than make a serious commitment to social and infrastructural remediation.

Nonetheless, just because civil servants and political office holders still earn the nominal values of their incomes and allowances will not totally shield them from the austerity budget. This is because Naira devaluation will push up prices and fuel inflation beyond 10%, and this will also have serious consequences for the purchasing power of all income earners. In other words even if your salary or usual income does not change nominally, it will inevitably begin to buy less and less. Thus, unless, there is a commensurate annual increase in salaries and incomes in the face of inflation, the net result is that consumer demand will contract as people involuntarily cut down on their basic needs and endure poverty, with disastrous consequences for manufacturers and suppliers of consumer goods and services and ultimately for employment opportunities.

Business & Economy

FG directive on foreign airlines' operational standards takes off approves an alternative

By FAVOUR NNABUGWU

T

he Federal Government directives to the Nigerian Civil Aviation Authority ,NCAA, to remove and ground all foreign aircraft registered in the private category that are listed on the Operations Specifications (Ops Specs) Part G of some Air Operator Certificate holders takes effect this week.

Speaking during the presentation of the report by C M Y K

the Ministerial Committee on Foreign Registered, Privately Operated Aircraft Operations in Nigeria chaired by Capt Victor Iriobe in Abuja, Mr. Osita Chidoka, Minister of Aviation, said, “I have also accepted the March 1 date for all foreign registered private category of aircrafts that are listed on the Ops Specs Part G of some AOC holders, must be removed from that status by NCAA” .

He said, “Consequently, the aircrafts operations will remain grounded until NCAA

operational status for the aircrafts. So March 1, 2015 remains the date for this.”

Chidoka also directed the NCAA to immediately revoke the Flight Operations Clearance Certificate (FOCC) and Maintenance Clearance Certificate (MCC) or airlines operating commercial charters, instead of their NCAA authorisation for private and also impose civil penalties of N17billion, an equivalent of $100,000 on the aircrafts.

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