Why Nigeria remains poor

JUNE 29, 2015

NEGLECT OF SOLID MINERALS:

Why Nigeria remains poor

By OMOH GABRIEL, Business Editor

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conomists, geologists and surveyors have long agreed that under the Nigerian soil are wealth and riches untold. But majority of Nigerians are wallowing in poverty. The Nigerian Extractive Industries and Transparency Initiative, NEITI report suggests that there are about 40 different kinds of solid minerals and precious metals buried in Nigerian soil waiting to be exploited. The commercial value of Nigeria’s solid minerals has been estimated to run into hundreds of trillions of dollars, with 70 per cent of these buried in the bowels of Northern Nigeria.

President of Miners’ Empowerment Association of Nigeria, Mr. Sunny Ekosin, reveals that Nigeria loses a whopping N8trillion annually in unexploited gold alone. He also says that Ajaokuta remains the key to Nigeria’s industrialisation and that getting it back to work is a matter of patriotism for President Buhari and his team.

Ekosin in an interview with Vanguard said: “If Nigerians were taking data seriously, we would have built a database, where we have authentic information. In 2012, the Permanent Secretary of the Ministry of Mines and Steel, came before the nation and said, that from our precious metals alone, specifically from gold exploitation alone, Nigeria is losing N8 trillion ($50 billion) annually."

The failure of Nigeria, since independence in 1960, to put in place a structure that will make the benefits of the exploitation of solid minerals available to all Nigerians has been the bane of the nation. At the moment mining of minerals in Nigeria accounts for only 0.3 per cent of its GDP, due to the influence of oil resources. The domestic mining industry is underdeveloped, leading to Nigeria

having to import commodities it could produce domestically, such as salt or iron sheets and billets.

According to NEITI’s audit findings, solid mineral deposits are scattered all over Nigeria, with more deposits in certain areas than others. Over 40 million tonnes of talc deposits have been identified in Niger, Osun, Kogi, Ogun and Kaduna states. There are huge deposits of coal ranging from bituminous to lignite in the Anambra Basin of South-Eastern Nigeria. There are lead-zinc ores within the Asaba Area of Niger Delta, while tin,

niobium, and lead, are to be found around Oyo and Igbeti, with as much as over a billion tonnes of gypsum spread around Sokoto, Niger, Ondo and Ekiti states.

Nigeria’s potentially most beneficial solid minerals are spread around the nation but most of them are in the North. Limestone deposits occur in Cross River, Ogun, Benue, Gombe, Ebonyi, Sokoto, Edo and Kogi states; magnesite in Adamawa and Kebbi states; coal in Enugu, Imo, Kogi, Delta, Plateau, Anambra, Abia, Benue, Edo, Ondo, Bauchi, Adamawa and

Kwara states; wolframite in Kano, Kaduna, Bauchi and Niger states; silver is found only in Kano, with kyanite in Kaduna and Niger states; manganese only in the Northern states of Kebbi, Katsina and Zamfara with diatomite found only in Yobe State, while ilmenite-rutile is only in Bauchi, Plateau and Kaduna states; fluorite only in Taraba State with gold in Niger, Kebbi, Kaduna, Kogi, Kwara and Zamfara and a little in Osun.

Nasarawa State in the North has been appropriately tagged as Nigeria’s home of Solid Minerals. The state is one of the most naturally endowed states in Nigeria in terms of the availability of economically and commercially viable natural resources. These include clay, columbite, ilmenite, mica, barytes, pyrite, galena, limestone, sodium chloride, ephalerite, silica sand, granites, tantalite, mica, sphalerite, talc, gemstone (tourmaline, aquamarine and sapphire), halcopyrite, topaz, cassiterite, columbite, tantalite, emerald, heliodor, amethyst, quartz, coking coal, marble, and iron ore. Bauchi is another richly endowed state in the North with metal ores, non-metallic ores and gemstones. Other untapped mineral resources in Bauchi include kaolin,talc,tin,quartz,iron ore, gypsum, zircon, calcite, tantalite, chalcoprite, mica, copper ore, limestone, tourmaline, beryl, garnet, columbite, muscovite, aquamarine, topaz, marble, bismuth, wolfromite and others.

Yet with these potential money spinning resources, states in the country are starved of funds and are currently facing a cash crunch. Nigeria as a nation is passing through economic hardship as a result of fall in oil prices. The low activity in the solid mineral sector is not yielding the desired financial benefit as there are no records of payment of taxes and

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22 — Vanguard, MONDAY, JUNE 29, 2015

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Neglect of solid minerals: Why Nigeria remains poor Continued from page 21 royalty to the government.

Nigeria is losing lots of resources from untapped mineral deposit as well as from the little that is being mined mostly by illegal miners who smuggle the products out of the country.

According to NEITI audit report on solid mineral operation in Nigeria, there are six buying center, nine dredging companies, eleven exporters of solid minerals, fourteen medium scale mining companies, thirty-five commercial quarry, fifty-four construction quarry, eight quarry for manufacturing giving a total of one hundred and thirty-seven activities in the solid mineral sector of the Nigerian economy.

Report on the Physical and Process Flows in Nigeria Solid Minerals Industry 2011 prepared by Haruna Yahaya & CO (Chartered Accountants) indicated that there are no adequate records of operations in the sector.

The report said “A review of Central Bank of Nigeria and Nigeria Customs Service records on exported minerals showed that there were discrepancies in the value of exported minerals as well as the associated company.

From available records of Central Bank of Nigeria, 15 companies exported 9,068.70 metric tonnes of minerals valued at N577, 768,456 while Nigeria Customs Service records showed that 30 companies exported 7,107,099.80 metric tonnes of minerals valued at N11,496,070,691.

“Despite the fact that Gold and Barites were being mined across the nation, there is no record to show that these minerals are among the mined or exported minerals.

Further finding shows that barites are mined in Benue and Nasarawa states, they are also purchased by multinational oil companies as drill fluids, despite high activities of miners there are no record of royalty payments.

“From the available records of the Ministry of Mines and Steel Development, there were no evidence of royalty payment on these exported minerals. The Nigeria Minerals and Mining Act 2007 requires that any exporter of solid minerals must request for permit to export minerals. But in defiance to the Act, there was no available evidence of request for permit or approval C M Y K

Entrepreneurial Education Revolution: An Imperative for Sustainable Development in Nigeria: Part 2

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to export minerals by the companies,” the report stated.

The report further said “The informal players are mostly artisan miners, medium scale operators and illegal miners who hardly keep any record.

Some of the minerals mined in Nigeria are exported out of the country by both formal and informal players. There are no official records from ministry of Mines and Steel Development on the actual volume of minerals exported out of Nigeria within the period under review.

However, the few records available relates to transactions that were done by the formal players as they passed through the Central Bank of Nigeria, Nigeria Customs Service and Nigeria Export Promotion Council”.

NEITI 2012 report conducted by Moore

Despite the fact that Gold and Barites were being mined across the nation, there is no record to show that these minerals are among the mined or exported minerals

Stephens of LLP 150 Aldersgate Street London signed by Tim Woodward on 31 December 2014 on Nigeria solid mineral said “Artisanal and Small-Scale Mining Department failed to report revenues collected from mining cooperatives and from the Minerals buying Centre.

These revenues were selected by the NSWG in the EITI scope through unilateral disclosure of the Government Agency.

“This situation led to a significant amount of the discrepancies. Total revenue from the Solid Minerals Sector amounted to N31.449 billion in 2012. The revenue stream from the Solid Minerals Sector is composed of 84.18 per cent of taxes received by FIRS. Mining taxes received by MID and MCO represent 3.48 per cent and 2.24 per cent respectively.

“According to the data collected from extractive companies and Government Entities, after reconciliation work, revenues generated from the Solid Minerals Sector amounted to N31.449 billion.

These revenues include, in excess of the reconciled revenue amounting to N28.736 billion, unilateral disclosures of companies amounting to NGN 2,003 million and unilateral disclosures of Government Entities amounting to NGN 710 million: Government Revenues from Continues on page 23

igeria faces a number of attitudes, skills and culture, it challenges that can is vital that entrepreneurial only be met if it has innovative, education is addressed from well-educated, and an early age, besides, age is entrepreneurial citizens who, no barrier to entrepreneurship whatever their walk of life, have as Tony Hsieh of Zappos the spirit and inquisitiveness started selling worms from raw to think in new ways, and the mud when he was 9 years old, courage to meet and adapt to Steve Job, Richard Branson the challenges facing them. and Mark Zuckerberg of the Moreover, a dynamic economy, Facebook fame all started off as which is innovative and able young entrepreneurs. to create the jobs that are The time is ripe for us as a needed, will require a greater country to stop celebrating number of young people who mere certificates and are willing and able to become dormancy, while primacy and entrepreneurs, young people recognition should be given to who will launch and creativity, skills and successfully develop their own enterprising spirit. The present commercial or social ventures, times have shown over time or who will become innovators that the global arena is blind in the wider organisations in to your credentials but is a which they work. Because wealth creating slave to your education is the key to shaping skills and abilities. Anyway, it young people’s attitudes, skills is not your credentials that and culture, it is guarantees vital that success in the entrepreneurship g l o b a l / The time is ripe education is information age addressed from an for us as a but rather your early age. country to stop problem solving Entrepreneurship celebrating abilities, critical education is thinking ability essential not only mere that can discern to shape the certificates and ‘fact from fiction’, mindsets of young dormancy, and your ability to people but also to adapt (un-learn & give provide the skills re-learn), your and knowledge recognition to creative and that are central to creativity, innovative developing an skills and abilities and your entrepreneurial life-long love of enterprising culture. learning. If your It is important we spirit ‘piece of paper ’ embrace this failed to deliver ‘global age’ these then whilst paradigm in our education it may have successfully system as it has been done in prepared you for the China, India, Australia, industrialized 20th century Europe, U.S.A and of lately the economy but it has certainly Asian tigers (Malaysia, failed you in the globalized Singapore, Taiwan and the 21st. As Alvin Toffler puts it, Koreas).The most advanced ‘The illiterates of the 21st form of this new model is what century will not be those who is referred to as cannot read and write, but ‘TEACHERPRENEUR’, those who cannot learn Which Bill Gates was unlearn and re-learn’. It is the referring to in 2010 when he acceptance of this open secret said ‘five years from now on that should make policy makers the web, you will be able to find and the general populace to the best lectures in the world shift attention from the and it will be better than any conventional way of thinking single university’. that you must be a graduate This involves embedding before achieving success. Some entrepreneurial education into of the inventors such as Bill education and training right Gates, and Mark Zuckerberg from the primary school to dropped out of school to make secondary school and tertiary it in life because of their institution. The essence of this innovative, creative and is because education is key to enterprising spirit and not shaping young people’s

Vanguard, MONDAY, JUNE 29, 2015 — 23

Re-Governors: No bailout coming from anywhere T

here were several response from Nigerians on the above subject matter discussed in this column last week . Here are some.

Kabir Bello Dandago The rich also cry. Its time for Nigerians to see the change as promised. Blames and counter blames can not help matters.

As said, a change only starts with a change of heart. APC, Nigerians are watching closely Maduka Osoka All we are saying and expecting is change from our present situations, not stories.

Umoh Atanang This is a shame if the federal, states and local governments cannot be trusted with public funds. No wonder those who aspire to hold public offices always make it a do or die affair. How can they be stealing our monies and show off as if they are gods? All I am waiting to see is the socalled change that APC government intends to bring but if not, it will then be a moral burden on them as so many APC members and those decamping from PDP and other parties to APC in order to protect their ill gotten wealth.

Gold E. Boyd Some people are not being reasonable. The question is, was it GEJ administration that mismanaged their state funds, and make them to be bankrupt?

Initially, they claimed that GEJ administration didn’t share the excess crude account monies but the former Finance minister refuted them. The Governors are the major problem of Nigerians because it is the same governors crying wolf now that starved the LGAs of their funds. They fought against financial autonomy of LGAs. They should go back home and straighten up their records.

Netanyahu Buhari MUST ignore them and concentrate on making the federal government work. The way and manner they convert state funds to personal use insults all sensibilities. How can a governor be moving about in private jet, someone who may never have afforded a local flight before becoming a governor? They move in a convoy of over 30 SUV’s in addition to cars, buses, pick up trucks, dispatch riders etc. Not one saved a kobo for a period like this. Buhari should leave them alone. I wish our democratic system allows for midterm elections, all of them would have gone in one fell swoop. I am enjoying their cry of frustration to find money to

continue to live their wasteful lifestyles. The governor of Imo state built an ‘International conference centre’. You ask yourself which international conference is holding in Owerri?

Oromilla Watch out, the bailout thing is just a scheme by Buhari and his APC co-travelers to refund some of the campaign funds used for their presidential election. How do you imagine a state using up to N30 billion or N50 billion on a federal project when that same state has it’s own projects abandoned? This is the same reason Umaru Musa

How can a governor be moving about in private jet, someone who may never have afforded a local flight before becoming a governor?

Yar ’Ardua’s government banned this same governors never to execute federal project’s in their domain but should request or draw FG’s attention to it.

In actual fact, the FG should not bail out any state. Let them think out of the box to rescue themselves or face their people.

I tell you, they will either wake up or their government or will be swept away by riot. And then the FG should enact a law that will make early election possible if there is a major protest against a governor or local government chairman in their domain.

long-term economic development. In which case, reversion to regional autonomy may be preferable. If we had, as in per-indendence days, Eastern Region, Western Region and Northern Region, this will reduce the cost of governance and add to the viability of the regions.

Osanebi Osakuni Where are the people that supported these politicians to shout for change? They must be ashamed of themselves. They queued behind them to chase out someone else. Now the person has been chased out and the story have become different.

Yes, federal government owes some states. How do we believe the financial figures being submitted by the same governors? This is actually where the so called Buhari’s probe should start from. How much does FGN owe states like Osun and Benue? We are waiting for this ‘hange’

Prince T FG will fail if it does not help the states. However, Buhari can learn from Obama by applying stringent rules to the bail out funds. The fund will be specific to certain projects and paid periodically on completion of each stage of the projects.

Abiamone A situation where half of the states are insolvent calls for urgent review. Either the number of states is too many or state creation is detrimental to

Michael It is not their fault since every month they get their free Hallelujah Niger Delta money and spend all the money as they wished forgetting they must pay their workers.

Rio Itsene How can irresponsible and reckless spending by states be considered “financial crisis”?

One-sided crisis?

“Every state must publish its account as well as every local government. This is the kind of change the APC government and legislature should bring about in the country”.

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Neglect of solid minerals: Why Nigeria remains poor Continued from page 22 the Solid Minerals Sector increased from NGN 26,925 million in 2011 to N31.449 billion in 2012. Large sector mining was higher in 2012 due to an increase of granite and limestone production respectively to 12 million tons and 18 million tons compared to 8 million tons and 15 million tons in 2011. This was a result of the increase of the consumption of granite and production of cement in Nigeria during 2012.

“The Solid Minerals Sector accounted for an average of 0.02 per cent of total export earnings for the year 2012.

Zinc and Lead ores account for more than 48 per cent of the Solid Minerals Sector exports. All companies operating under a mining or quarrying license and which

make payments to MID in excess of NGN 2 million ($ $12,500) were required to report their payments in accordance with EITI Requirements. As a result, cash flows reconciled for Solid Minerals Sector represent 89.43 per cent of royalties received by MID from the Solid Minerals Sector. MID also collected over 3.41 per cent of the entire Nigerian flows from the Solid Minerals Sector. The selection resulted in 65 extractive companies listed with the Nigerian authorities. For extractive companies operating in the Solid Minerals Sector and which have made royalty payments below the N2 million threshold, cash flows are included in this report through unilateral disclosure by Government Entities.

The report said “At the

beginning of the reconciliation, the total amount reported by the Government Entities of Nigeria from the Solid Minerals Sector amounted to N49.759 billion.

We note, however, that the total net difference between the amounts declared by reporting companies’ and those of the

Solid Minerals Sector accounted for an average of 0.02 per cent of total export earnings in 2012

Government Entities amounted to NGN 6,535,199,305 (13%), At the end of the reconciliation, a total amount of N27.560 billion was reported to have been received by the Government of Nigeria between 1st of January and 31st of December 2012. A net difference of N (2.004 billion) (7.3%) remained unreconciled. According to the data collected from Solid Minerals Companies, we have calculated the royalties that should be paid to the MID based on quantum reported during the reconciliation work.

The difference between amounts really paid and those calculated amounting to N (12,089,562) and represents (1.4%) of the total royalties as declared by MID”.

The inability of states to exploit the resources in their domain is partly traceable to

the 2007 Mineral Act which has vested the ownership of solid mineral on the federal government.

Organized mining began in 1903 when the Mineral Survey of the Northern Protectorates was created by the British colonial government. A year later, the Mineral Survey of the Southern Protectorates was founded. By the 1940s, Nigeria was a major producer of tin, columbite, and coal. The discovery of oil in 1956 hurt the mineral extraction industries, as government and industry both began to focus on this new resource. The Nigerian Civil War in the late 1960s led many expatriate mining experts to leave the country.

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he exploitation and exploration of solid minerals are governed by The Nigerian Minerals and

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24 — Vanguard, MONDAY, JUNE 29, 2015

Cover Continued from page 23 Mining Act 2007 (“the Act”) which was passed into law on March 16, 2007 to repeal the Minerals and Mining Act, No. 34 of 1999. The Act vests control of all properties and minerals in Nigeria in the states and prohibits unauthorised exploration or exploitation of minerals.

According to the Act, all lands in which minerals have been found in commercial quantities shall from the commencement of the Act be acquired by the Federal Government in accordance with the Land Use Act. Property in mineral resources shall pass from the government to the person by whom the mineral resources are lawfully won upon their recovery in accordance with provisions of the Act. The Minister, amongst other things, is charged with the responsibility of ensuring the orderly and sustainable development of Nigeria’s mineral resources, creating an enabling environment for private investors, both foreign and domestic, by providing adequate infrastructure for mining activities and also identifying areas where government intervention is desirable in achieving policy goals in mineral resources development.

The Act also provides for the establishment of the Mining Cadastre Office, MCO, which shall be responsible for the administration of mineral titles and the maintenance of the cadastral registers, and empowers the Minister, by regulation, to determine areas eligible for the grant of an exploration or mining lease based on a competitive bidding process. The MCO shall collect a fee for processing of applications for mineral titles and an annual service fee established at a fixed rate per square cadastral unit for administrative and management services. In other words, the FG owns, controls, monitors the exploitation and exploration of natural solid mineral resources.

In economic development mineral resources are the foundation upon which an industrialised economy is built, and industrialisation is essential if Nigeria is to reduce over-dependence on the oil industry – an industry which, despite the revenue it generates, provides employment for just 6 per cent of the Nigerian labour force.

The schist belt that covers the western half of Nigeria has proven reserves of gold.

Although gold production in this region dates from 1913, colonial mining companies abandoned their activities following the onset of the C M Y K

CONFERENCE - From left: Syed Khurrum Zaeem, Head, Transaction Banking; Remi Oni, Executive Director, Corporate & Institutional Clients; David Adepoju; Head, Global Markets, all of Standard Chartered Bank Nigeria and Bassam Issa, Treasury Manager, Nigerdock Nigeria PLC-FZE at the 5th EuroFinance Conference on Treasury, Risk & Cash Management in West Africa held in Lagos, Nigeria.

Neglect of solid minerals: Why Nigeria remains poor Second World War. The gold mines have since remained dormant, aside from an abortive attempt at extraction by the Nigerian Mining Corporation in the 1980s, which floundered due to a lack of funds. Artisan miners now account for most gold extraction, but primary deposits that could support mechanised mining have been identified in the north west and south west parts of Nigeria. These deposits are of a relatively high grade, and it is estimated that extraction costs could be as low as $50 per ounce, due to the shallow depth at which they are found.

An estimated 10 million tonnes of lead and zinc veins straddle eight of Nigeria’s states, with the 700,000 tonnes in Abakiliki in Ebyoni State representing the most favourable prospect. In the non-metallic minerals category, riches also abound: the building industry is supplied by crushed rock, gravel and sand; glassmaking grade sand has been established in many parts of the country; and Niger, Osun, Kogi, Ogun and Kaduna states collectively boast up to 100 million tonnes of talc, a mere fraction of which is used in several medium-sized talc processing plants.

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emstone mining is one area that has seen something of a boom, though again the level of exploitation is running well below potential. Gemstones present include sapphire, ruby, aquamarine, emerald, tourmaline, topaz, garnet, amethyst, zircon, and

fluorspar. Bentonite and barite – both of which are constituents in the mud used when drilling oil wells – are also in abundance, with 7.5 million tonnes of barite in Taraba and Bauchi states and 700 million tonnes of bentonite across the country.

Reserves of bitumen represent another under utilised resource, with estimated reserves of 42 billion tonnes or twice the country’s existing reserves of crude oil.

Paradoxically, most bitumen used in road construction in Nigeria is currently imported.

Coal and tin were among the natural resources mined on a massive scale, with the former being used to generate electricity, power the railway network and meet the demands of regional and international markets. Lead and zinc were a significant source of export revenue, and Nigeria was the world’s largest exporter of columbite. Stagnation in the

If the government’s plan to revitalise the solid minerals sector is to succeed, it must first boost confidence in mining titles among potential private investors

solid minerals sector cannot simply be attributed to the meteoric rise of oil: poor management by state-owned enterprises – compounded by corruption and an incoherent exploitation of resources – has also played its part.

Precious metals are also present in quantities that make them commercially viable. But for all this mineral wealth, Nigeria’s mining industry remains in the shadow of the oil industry. Arc. Musa Mohammed Sada former Honourable Minister of Mines and Steel Development said in an interview while in office that the World Bank project institutional frameworks such as Nigeria’s Minerals and Mining Act of 2007 was put in place to bring mining industries in the country to be in line with global best practices. He said Nigeria’s Steel industry has to be resuscitated for Nigeria to realise its vision of becoming one of the first top 20 industrialised nations in the world by year 2020 The solid minerals sector in Nigeria has long been treated as the poor relation of the oil and gas sector. Compared to the level of investment and development in oil and gas extraction – which has grown exponentially since Nigeria joined the Organisation of Petroleum Exporting Companies (OPEC) in 1971 – mining activity has suffered stagnation, and even decline.

While petrol dollars dominate the economy, the National Bureau of Statistics lists solid minerals as contributing less than 1 per cent of GDP, despite significant coal and iron ore

reserves, and known deposits of gold, uranium, tin and tantalum. But the vast potential of Nigeria’s mineral wealth has not always been so ignored. Before the oil boom of the 1970s, the economy was largely sustained by the exploitation of solid minerals.

International blue-chip mining companies have long since given the sector a wide berth due to its reputation for inefficiency.

President Mohammadu Buhari has acknowledged its potential as an alternative to the petroleum industry for foreign exchange earnings, and said he would revitalise its fortunes. The rationale for Nigeria’s renewed interest in exploiting its natural resources is simple.

The government recognises that over dependance on oil also leaves the economy vulnerable to international oil politics and fluctuations in oil prices.

A simplification of the procedures for attaining mining licenses is key to future development of the solid mineral sector. In the past, efforts to generate growth in the industry have been thwarted by bureaucracy and the absence of a focused federal policy. The emphasis is on providing transparent procedures that will help develop an industry led by the private sector. Tax concessions, deferred royalty payments and 100 per cent foreign ownership of mining enterprises are among the incentives it is hoped will encourage investment.

In September 2009 the national president of the Miners Association of Nigeria, Mr Sunday Ekosin, announced that illegal mining had declined by 30 per cent com-pared to previous years, thanks to a renewed commitment by the association and the Ministry of Mines and Steel Development to integrate illegal miners into the mainstream.

If the government’s plan to revitalise the solid minerals sector is to succeed, it must first boost confidence in mining titles among potential private investors.

In September 2009, Mines Minister Diezani AlisonMadueke told a conference at the London Stock Exchange that Nigeria will soon start addressing a backlog of new mining licenses and will complete a review of existing licenses aimed at weeding out speculators by the end of October 2009. The review aims to open up new areas for qualified mining companies, which will build on new legislation that makes the sector more accessible to investors. But so far this has not Continues on page 25

Vanguard, MONDAY, JUNE 29, 2015 — 25

Business & Economy

Innoson’s outstanding debt at GTBank reconfirmed zGTbank action injured our credibility

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TBank PLC is insisting that Innoson Group of companies owes the bank. Contrary to a law suit filed by the company claiming N30 billion in damages, findings traced the origin of the case and confirmed that GTBank granted various credit facilities totaling N2,400,000,000.00 (two billion, four hundred million Naira only) to Innoson, to finance the importation of motorcycles and spare parts.

The customer the bank said had the obligation of utilising the said funds for the agreed purpose and ensuring loan repayments as and when due as contained in the contract.

The facilities granted to Innoson, it was gathered, were secured by lien over shipping documents covering the imported goods financed by GTBank; Legal Mortgage over properties located in Calabar, Enugu and Nnewi and Personal Guarantee of Chairman/ Managing Director of Innoson, Chief Innocent Chukwuma.

According to confirmed sources from GTBank, Innoson and Chief Innocent Chukwuma however failed to meet repayment obligations due under the facilities. The bank alleged that it discovered that Innoson and Chief Innocent Chukwuma had cleared several consignments of goods financed by the bank without endorsed shipping documents, the originals of which are still in the bank’s custody. It said upon discovery some of the goods have been cleared, the bank filed a Petition before the Economic and Financial Crimes Commission (“EFCC”) on May 27, 2013, to investigate the matter.

Based on the petition, Chief Innocent Chukwuma was invited by operatives of the EFCC, following which he agreed to make monthly payments into Innoson’s account until the full liquidation the indebtedness to the bank. GTBank claimed that Innoson defaulted in making the agreed payments. The bank further alleged that in order to frustrate the recovery of the debt bid by the bank against him (Chief Chukwuma) and his company instituted suits at the Federal High Court, Abuja, as well as the Federal High Court, Awka in January 2014 against the Inspector General of Police, the Nigeria Police Force and Investigating Officer(s), seeking declaratory and injunctive reliefs, including orders restraining the Police from commencing

proceedings against Innoson and Chief Innocent Chukwuma. Furthermore, in a bid to stall the Bank’s recovery steps, Chief Innocent Chukwuma and his company Innoson, have continued to institute various suits before various courts, claiming huge sums against the Bank.

With no other alternative and to ensure the recovery of depositors' funds held by Innoson, the bank said it instituted a recovery action against Innoson at the Federal High Court, Lagos. This is in addition to a winding up action instituted against Innoson by the bank, which is still pending in court. Pursuant to the suit instituted by the bank at the Federal High Court, Lagos, it secured mareva orders against Innoson freezing its bank accounts in all banks in Nigeria

in September 2014.

The new N30 billion action filed by Innoson at the Federal High Court, Awka was instituted on the basis of purported damages which it suffered as a result of the

The recovery of the borrowed funds is to discourage deliberate loan default, uphold integrity and serve long term interest of depositors

mareva orders granted by the Federal High Court, Lagos in favour of the bank. According to some legal experts, this new suit is in continuation of Innoson’s attempts to distract the Bank from focusing on the criminal matter pending with the EFCC and the Police.

The legal experts also interpreted these Innoson’s moves as legal delay tactics antics, to avoid or delay paying its indebtedness and discharging its obligations to the Bank, which stands in excess of N2.4billion, while interest continues to accrue.

According to a source in the bank, the recovery of the borrowed funds is to discourage deliberate loan default, uphold integrity and serve the long term interest of depositors and the society at large.

ICC lauds CBN directive on foreign exchange

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he International Chamber of Commerce (ICC), Nigeria, said on Friday that compliance with the Central Bank of Nigeria (CBN) foreign exchange directive for importers would impact positively on the nation’s business climate.

ICC’s President, Mr Babatunde Savage said in Lagos that the directive would drive the growth of local industries and create employment opportunities. Savage said that compliance with the apex bank’s directive would also ensure competitiveness for Nigerian products. The CBN had on June 24, directed that importers of certain products will no longer access foreign exchange from CBN, Banks and Bureau de change for such importation. The CBN Governor, Mr Godwin Emefiele, said that the measure would prevent further depletion of the country’s foreign reserve on importation of goods that could be locally produced.

Dangote donates work tools to block moulders

By NAOMI UZOR

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SEMINAR: From left: Paul Uduk, MD/ CEO Vision and Talent; Olubukola Amoo, Training Executive, Vision and Talent; Tosin Benson, Customer Service Officer, Dangote Sugar Refinery PLC; Felix Ofungwu, ED ISN Medicals and Chinasa Oriaku, Legal Officer Vibrant Ventures Limited during the service excellence seminar organised by Vision and Talents Nigeria ltd in Lagos.

Neglect of solid minerals: Why Nigeria remains poor Continued from page 24 been realized.

Though the potential rewards for both investors and Nigeria are high, so too is the cost of regenerating the solid minerals sector. If the substantial known reserves of industrial minerals are to be exploited, significant finance and expertise must first be ploughed into the sector. It is estimated that the industry would require an investment of $10 billion a year if Nigeria is to achieve its aim of becoming one of the top 20 world

economies by 2020. The government must also take measures to ensure that the exploitation of Nigeria’s mineral wealth benefits a greater proportion of the population than the oil sector has. Further challenges include an inadequate infrastructure and the environmental impact of large-scale mineral extraction.

However, offsetting these challenges are the immense rewards a successful revitalisation of the industry would bring: a huge boost to the national coffers; a means of halting the drift of labour from

poor rural areas to more affluent urban concentrations; and, most significantly, a viable alternative to the oil and gas revenue that has dominated the Nigerian economy for three decades. If foreign investors are willing to bear the start-up costs of largescale mining operations – and if the federal government can cement a favourable policy framework to make foreign investment both attractive and tenable – Nigeria’s solid minerals sector could finally shake off the status of oil’s ‘poor relation’ and provide a lucrative, sustainable drive that will set the economy on the road to industrialisation.

angote Cement has empowered block makers in Lagos and Ogun states with work tools as part of its efforts aimed at strengthening block makers across the country, to become more productive.

The items which ranged from wheel barrows, shovels, rainboots to hand gloves, were handed to the block moulders in Badagry and Ibeju in Lagos State and Agbara in Ogun State, The Regional Manager, Marketing Services of Dangote Cement, Johnson Olaniyi, said, at the weekend, while presenting the items to the block makers, that the gesture was one of the many incentives lined up by the foremost indigenous cement giant to help them boost their businesses.

According to him, the donated items are to enable the block makers attain the necessary standards which he said is necessary to ensure safety of buildings as well as curb the menace of sub-standard blocks which contribute to building collapse. He said contrary to what some quacks are saying, cement block contribute to the safety and strengthen of a building hence the need to take great care in terms of the components used in moulding them.

26 — Vanguard, MONDAY, JUNE 29, 2015

Banking & Finance

Naira: Between restriction and devaluation Sterling Bank to publish names of debtors

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terling Bank has concluded plans to publish the names of individuals and institutions with non-performing loans on national newspapers, including social media if they fail to repay loans obtained from the Bank.

This is in line with a directive from the Central Bank of Nigeria (CBN) mandating banks to publish said names in at least three national daily newspapers.

With non-performing loans in the industry totaling N390 billion in May 2015, the Apex Bank has given a deadline of July 31, 2015 for delinquent debtors to change the status of their accounts from non-performing to performing, failing which their names (including directors in the case of companies) will be made public.

Sterling Bank admitted that some of its delinquent debtors had approached it after receiving formal notice for amicable settlement to avoid embarrassment.

Part of the statement from the Bank read thus: “Some delinquent debtors are making frantic efforts to repay their loans and avoid their names being published, while others are hopeful that the CBN will extend the deadline and are asking for more time to pay.

FirstBank sponsors LBS Africa Business Conference 2015

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irst Bank of Nigeria Limited, Nigeria's most valuable bank brand has again demonstrated its support for sustainable growth of business enterprises by sponsoring the Africa Business Conference 2015 organised by MBA Students of the Lagos Business School (LBS), Pan-Atlantic University, Lagos.

The conference with the theme “Innovative Strategies for Sustainable Growth in an Evolving Market” promises to proffer solutions to issues peculiar to doing business in Africa and Nigeria in particular.

The LBS Africa Business Conference 2015, the third in the series of annual gathering of prominent business leaders, policy makers and owners of SMEs will provide a rare opportunity for participants to gain key insights from panelists who are actively involved in shaping various economies in Africa.

Slated for 10:00am on Friday, June 26, 2015, the conference will hold at the Lagos Business School, KM 22, Lekki -Epe Expressway, Ajah, Lagos.

By BABAJIDE KOMOLAFE

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n spite of economic realities, the Central Bank of Nigeria (CBN), for obvious reasons, is trying hard to avoid another devaluation of the naira.

Consequently, it imposed further restrictions on the foreign exchange market by excluding 41 products and services from purchase of dollars from the nation’s foreign exchange market.

“For the avoidance of doubt, please note that the importation of these items are not banned, thus importers desirous of importing these items shall do so using their own funds without recourse to the Nigerian foreign exchange markets”, the apex bank said in a circular issued on Tuesday.

Though the CBN said that the purpose of the restriction is to conserve the nation’s foreign reserves, which has fallen by $10.59 billion from $39.62 billion in September to $29.03 billion last week, and promote local production of the products, analysts at the Financial Derivative Company argue that the main reason might be because another devaluation will impose further hardship on Nigerians “The previous devaluation coupled with fuel scarcity has eroded disposable income.

Further devaluation of the currency will increase the burden on the Nigerian public, “they stated in the Bimonthly Economic Bulletin issued last week.

Devaluation after restrictions

The CBN has devalued the naira twice between November and February. On th Tuesday November 25 last year, the CBN announced an 8.4 percent devaluation of the Naira, moving the official exchange rate band from N155 to N168.

This was followed by an indirect devaluation on th February 17 , when the apex bank announced the abolition of the official foreign exchange market, directing all foreign exchange demand to the interbank foreign exchange market. But each of these devaluations has been preceded by a set of restrictions imposed on the foreign exchange market, in a bid to avoid devaluation.

For example, prior to the November 2014 devaluation, the CBN imposed a two day restriction on utilisation of its

intervention dollars. It also limited the margin on sale of such dollars to 10 kobo, and banned banks from selling them to bureau de change operators. This was followed by the exclusion of importation of generators and some items, including invisible transactions from purchase of dollars from the official foreign exchange market. The implication is that importation of these items would not be funded with foreign exchange purchased from the bi-weekly Retail Dutch Auction System (RDAS) sessions conducted by the CBN but from foreign exchange purchased from banks.

Furthermore, prior to the February devaluation, the CBN on December 17 reduced banks’ foreign exchange trading position to zero from one percent of shareholders’ funds. This was followed by a 48 hour limit imposed on utilisation of foreign exchange purchased in the interbank market by banks’ customers.

These restrictions were however ineffective in saving the naira from the February devaluation, rather they increased uncertainty and undermined confidence in the future value of the naira as well as encouraged sharp practices

People will claim to purchase foreign exchange for items not excluded, but will use it to import the excluded items

in the foreign exchange market.

Impact of new restrictions

The restriction announced Tuesday last week is expected to have similar effect.

According to a retired top management staff of CBN, the exclusion of the importation of the 42 items from the nation’s foreign exchange market will only heighten uncertainty and flight of foreign investors from Nigeria. “Mark my word, the naira will crash. The policy will increase sharp practices.

People will claim to purchase foreign exchange for items not excluded, but will use it to import the excluded items.

Remember our ports are very porous, with prevalence of sharp practices. The CBN cannot monitor what people import or use the dollars to purchase. As a result, sharp practices will abound,” the retired staff told Vanguard on condition of anonymity.

A senior bank foreign exchange dealer also said that while the restriction might reduce demand for dollars in the interbank market, it would certainly increase demand for dollars in the black market, hence the black market exchange rate is expected to rise, and the gap between it and the interbank rate widen further.

The policy, according to Alhaji Aminu Gwadabe, Chief Executive Officer, Sabil BDC, has further created room for speculation and hoarding. He noted that already parallel market exchange rate has risen to N226 per dollar on Friday from N220 on Monday, thus increasing the gap between the parallel market and the interbank market to N28.59 from N21.35 within five days.

On their part, analysts at Afrinvest Plc said that the restrictions lack the ability to

stimulate domestic production of the products excluded, and will lead to further devaluation of the naira.

“We note that the capability of these restrictions to stimulate domestic production of the excluded items, as suggested by the CBN depends to a large extent on too many variables outside the CBN’s purview”, they stated in the Afrinvest Weekly Update issued on Friday.

“Structural weaknesses and infrastructural constraints which strains competitive local production and the rigorous discipline and tight border control needed to implement import substitute strategies are vulnerabilities yet to be addressed. In our view, these factors will continue to dissuade the long-term benefits of this restriction until conscious structural reforms by fiscal authorities and supportive monetary policies are directed towards addressing the weaknesses.

“Pressure at the interbank foreign exchange market is expected to ease while the transferred effect will become visible at the BDC and Street segments as importers redirect demand. Hence, we perceive this as yet another dodgy devaluation of the Naira as we expect the spread between FX rate at the interbank and BDC/Street market to widen markedly.

This may further pressure inflation rate and Banks’ trading income due to further reduction of interbank liquidity. In addition, revenue from custom duties may be limited even as higher spread between interbank and BDC/ Street market may further incentivize sharp practices.”

These predictions imply that the latest restrictions aimed at saving the naira may end up doing more harm to the economy than good. While the restrictions may help to conserve the nation’s foreign reserves, as posited by the CBN, it would definitely promote sharp practice in the foreign exchange market.

Further, in the short term, rather than stimulate local economy, it would lead to increase in the prices of the excluded items, and hence aggravate the deteriorating inflationary situation.

Consequently, the restrictions, for now, represent the most convenient policy choice from a regulatory perspective, but like previous restrictions, it might turn out to be another attempt to avoid the inevitable.

Vanguard, MONDAY, JUNE 29, 2015 — 27

International Business News

The economic slowdown is over, say consumers C

onsumer sentiment climbed to a fivemonth high in June, a sign that shoppers may be ready to ramp up spending, according to data released Friday.

A gauge of consumer sentiment rose to a final June reading of 96.1, rebounding from a drop in May, the University of Michigan reported. Economists polled by MarketWatch had expected the final June figure to match a preliminary result of 94.6. The consumer-sentiment gauge averaged 86.9 over the year leading up to the recession.

“Consumers voiced in the first half of 2015 the largest and most sustained increase in economic optimism since 2004,” according to the report, which noted an improvement for households throughout the income distribution. “The economic slowdown has ended according to consumers.”

Economists follow readings on confidence to look for clues about consumer spending, the backbone of the economy.

Earlier this week the government reported that May ’s consumer spending posted the largest growth since August 2009. A strengthening labor market, along with a pick up for wages, is supporting spending.

“After a soft start to the year, we expect the economy to find

its footing in the coming months with stronger consumer spending seen to be a key driver of accelerating [economic] growth,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics.

Also, rising home prices have helped Americans gain equity in their properties, shoring up their personal finances. Families with properties that have increased in value have been able to refinance or sell their homes without taking a loss. A gauge of consumers’ views on current conditions rose to 108.9 in June from 100.8 in May, while a barometer of their

expectations increased to 87.8 from 84.2.

However, U.S. consumers also face headwinds. After

Consumers voiced in the first half of 2015 the largest and most sustained increase in economic optimism since 2004

plunging in 2014, gasoline prices have been on the rise since January.

Further, some jobless workers continue to face a particularly harsh labor market — almost three-in-10 unemployed people have been looking for a new spot for at least half a year. Also, workers without permanent jobs have seen their share of the total labor force grow in recent years, a trend that cuts families’ financial stability. And the rebounding housing market hasn’t helped everyone — there are still pools of deeply distressed borrowers who are struggling to pay their monthly bills.

With $21trn, China’s savers are set to change the world

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ew events will be as significant for the world in the next 15 years as China opening its capital borders, a shift that economists and regulators across the world are now starting to grapple with. With China’s leadership aiming to scale back the role of investment in the domestic economy, the nation’s surfeit of savings — deposits currently stand at $21 trillion — will increasingly need to be deployed overseas. That’s also becoming easier, as Premier Li Keqiang relaxes capitalflow regulations.

The consequences ultimately could rival the transformation wrought by the Communist nation’s fusion with the global trading system, capped by its 2001 World Trade Organisation entry.

That stage saw goods made cheaper across the world, boosting the purchasing power of low-income families at the cost of hollowed-out industries.

Some changes are easy to envision: watch out for Mao Zedong’s visage on banknotes as the yuan makes its way into more corners of the globe. China’s giant banks will increasingly dot New York, London and Tokyo skylines, joining U.S., European and Japanese names. Property prices from California to Sydney to Southeast Asia already

have seen the influence of Chinese buying.

Other shifts are tougher to gauge.

International investors including pension funds, which have had limited entry to China to date, will pour in, clouding how big a net money exporter China will be. Deutsche Bank AG is among those foreseeing mass net outflows, which could go to fund largescale infrastructure, or stoke asset prices by depressing long-term borrowing costs.

“This era will be marked by China shifting from a large net importer of capital to one of the world’s largest exporters of capital,” Charles Li, chief executive officer of Hong Kong Exchanges & Clearing Ltd., the city’s stock market, wrote in a blog this month.

Eventually, there will be “fund outflows of historic proportions, driven by China’s needs to deploy and diversify its national wealth to the global markets,” he wrote.

The continuing opening of China’s capital account will also promote the trading of commodities in yuan, and boost China’s ability to influence their prices, according to an analysis by Bloomberg Intelligence.

As was the case with China’s WTO entry, where many of the hurdles had

been cleared in the years leading up to 2001, policy makers in Beijing have been easing restrictions on the currency, the flow of money and interest rates for years. What’s making 2015 notable is the International Monetary Fund’s once-in-five-year review of its basket of reserve currencies. China wants in, and is accelerating reforms to get there.

Recent steps to promote its currency have included setting up five offshore yuan centers, a new link between the Shanghai and Hong Kong stock exchanges and letting the tightly controlled yuan trade against the dollar in a wider band. It has promised to remove a cap on interest paid to savers.

“The integration of China –- the world’s second-largest economy with the highest saving rate but still a low per capita income -– into the global capital markets is an unprecedented event,” China International Capital Corp. economists led by Beijing-based Liang Hong wrote in a note this month.

There are already signs of that potential. Chinese buyers topped Canadians to rank as the biggest foreign purchasers of U.S. homes by sales and dollar volume in the year through March, accounting for more than a quarter of all international spending.

Ex-Jumia bosses’ ACE drives innovations in Nigerian logistics industry

By JONAH NWOKPOKU

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unde Kehinde and Ercin Eksin, both former cofounders and co-Managing Directors of Nigeria’s premier online retailer, Jumia.com have launched online logistics company, African Courier Express, ACE to drive innovations in the Nigerian logistics industry.

In an exclusive interview with the Vanguard, the duo said ACE leverages technology to drive direct to consumer delivery, helping retailers, banks, insurance companies and other businesses deliver goods directly to consumers all over Nigeria.

The service also allows users to track packages real time as well as make provisions for payment collection at point of delivery.

They said the service was inspired by their experience building Nigeria’s first online store, Jumia.com.

“With Jumia, we saw end to end what the customer challenges are between building operations and customer service. We saw that where the big pain was, was logistics. And that was why we said we could solve the problem we saw while we were at Jumia and most likely solve the same problems other retailers and businesses are having. It goes beyond delivering just an ecommerce item. For us, what we want is for that business that wants to get products across the country to be able to do that using this platform. That was what the Jumia experience has helped us to do,” said Kehinde.

He added: “We saw a big opportunity in logistics, so we scaled Jumia to the level it was at the time we left and then decided to build a platform that can power a hundred more Jumias. And when you think in that scale, it is an opportunity you cannot pass up.

"This is because, what is very clear all over the world is that e-commerce in developed markets can be as high as 6 per cent of GDP. This is means that in our country, ecommerce can be a $10 billion plus market. But right now, it is constarined by lack of structured logistics platform."

28 — Vanguard, MONDAY, JUNE 29, 2015

Corporate Finance

StanChart leverages international reach to boost customers’ needs

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tandard Chartered Bank has said that it is leveraging its international reach to meeting the needs of its customers in Nigeria.

Speaking at the Standard Chartered Bank recently cosponsored 5th EuroFinance Conference On Treasury, Risk & Cash Management in West Africa in Lagos, Remi Oni, Executive Director, Corporate & Institutional Clients, Standard Chartered Bank Nigeria expressed optimism that with the quality of topics and conversations at the EuroFinance conference, companies in the region would be better equipped to the face the challenging operating environment.

According to the Executive Director “Beyond the conference, Standard Chartered Bank is leveraging its international reach and robust local presence to help its clients not only survive the current unpredictability of the markets, but thrive in the midst of it”.

Delivering a presentation titled “Creating a successful strategy for RMB”, Jing Liu, Director RMB Solutions, Standard Chartered Bank, London highlighted that Chinese investment is becoming more highly sought in West Africa, which have important implications for treasurers in the region.

According to Liu, the RMB’s role in global trade has been expanded by China increasing its import and export trade flows in offshore RMB. In addition, over the past year the CBN has moved some FX reserves into RMB from US dollars.

Treasurers, thus, need to understand the RMB, and how its increasing global profile affects their operations.

In the session titled “Liquidity management essentials in West Africa”, Ibude Guobadia (Corporate Sales Head Transaction Banking, Standard Chartered Bank Nigeria) and Abisola Adefarati (Head Tax & Treasury, British American Tobacco, Nigeria) highlighted the critical role of cash management as a cornerstone of treasury management.

They further shared best practices for corporate liquidity management, to help companies improve intra-day liquidity, in spite of restrictions placed on different currencies in different countries and the drop in oil prices.

AC o AGM:: Shareholder Shareholderss caution C CA ovver unnecessar ovals unnecessaryy appr appro

BY PETER EGWUATU

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hareholders, under the aegis of Proactive Shareholders Association of Nigeria, PROSAN have berated the manner in which the Corporate Affairs Commission, CAC grants approvals to companies to host Annual General Meetings, AGMs without due process.

They further urged the regulatory bodies in the country to collaborate with one another for virile and sensitive capital market issues in order for the country to get global attractions. The shareholder group in a letter sent to the Registrar General of CAC and obtained by Vanguard expressed their displeasure over the manner in which the commission granted approval to Internationa Energy Insurance Plc without following due process.

In the letter signed by the National Coordinator, and General Secretary of PROSAN, Mr. Oderinde Taiwo and Mrs . Oluyemisi Fawunmi , it sated , I hereby write on behalf of the above named associations and the entire minority shareholders of International Energy Insurance Plc for your

insensitivity and for putting our investment at risk by granting approval to one of the shareholders of the company by name Pearlchris Properties Limited t hold Extra- ordinary General Meeting, EGM last month at Le Meridian Hotel, Uyo, Akwa Ibom State.”

Prosan warned the CAC not to allow such unnecessary approval to person other than the company to host AGM. “We do not want you to repeat this type of mistake whenever any other shareholder (s) of any quoted company

approach you in the nearest future for the same purpose” it added.

The shareholders cautioned CAC on the need to get in touch with the direct regulatory body overseeing such a company.

“For example, CBN regulates banks and Securities and Exchange Commission, SEC regulates quoted companies.

So, for approvals of AGMs to companies being regulated by these bodies there is need for CAC to always collaborate with them to clarify issues” the group advised.

PROSAN further revealed that Pearlchris Properties with 10 per cent holding was owned by two former directors of International Energy Insurance who just bought the shares of the company few months from the floor of the Nigerian Stock Exchange, NSE for hostile takeover of the company without respect for other ninety per cent shareholders of the company.

According to the group “If you look critically at the agenda of the EGM, the first agenda is to convert the proposed EGM to an AGM which is by our understanding is a hostile takeover of our company if not for the timely intervention of National Insurance Commission (NAICOM) by dissolving the Board for proper investigation.”

AGM: From left: Managing Director/CEO Capital Bancorp Plc, Mr Aigboje Higo; Chairman, Mr Olutola Mobolurin and Company Secretary, Mr Olayinka Jafojo during the Annual General MEeeting, AGM of Capital Bancorp Plc in Lagos.

Infractions: SEC or der o appear bef ore APC A ugust 4 order derss BGL tto before August

BY PETER EGWUATUp

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ollowing the suspension placed on BGL subsidiaries as a result of alleged infractions in the Nigerian capital market, the Securities and Exchange Commission, SEC has ordered the management to appear before its Administrative Proceedings Committee, APC to explain the allegations of infractions against them.

The commission has disclosed that the management has been invited to appear before its APC on 4th and 5th August for hearing on the alleged infractions.

The SEC has explained that it received over 40 letters of investor complaints against BGL

Group Plc, alleging indebtedness to the tune of about N5.8 billion.

Investigations were conducted and all-parties meetings were arranged by

The Group’s management had progressively eroded its shareholders’ funds through losses sustained over a 5-year period totaling about N48 billion

SEC during which repayment agreements were struck between BGL and some of the affected investors.

Unfortunately, B GL continued reneging on promises to restitute investors.

Backed by a court order from the Investments and Securities Tribunal (IST), SEC said, it set up a 7-man Interim Management Team (IMT) for BGL Group.

According to SEC “This was a necessar y, wellconsidered action with the sole objective of protecting investors while a more detailed forensic audit was conducted to determine the financial health of the companies within the BGL Group and the nature/extent of infractions committed by the BGL management.”

From the preliminary

report of the forensic auditors, it was revealed, among other facts, that indeed BGL Group was in a critical financial state in which: The Group’s management had progressively eroded its shareholders’ funds through losses sustained over a 5year period totaling about N48 billion as at December 31, 2014; Billions of naira in investors’ funds were put at extreme risk through questionable investments by the BGL management in some illiquid, unlisted companies’ securities; one of which has been declared bankrupt ; The Group has significant liquidity challenges making it unable to meet its responsibilities towards clients and investors as evidenced by over N11 billion in unpaid matured funds to investors.

Vanguard, MONDAY, JUNE 29, 2015 — 29

Economy

110 million Nigerians impoverished by corruption – Osinbajo Stories by Emeka Anaeto, Economy Editor

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he All Progressive Congress (APC) led federal government of Nigeria may have put the number of Nigerians living in adversity as a result of corruption at 110 million.

It was not clear how they came about this figure but this was given last week by the Vice President, Prof. Yemi Osinbajo while speaking at the third annual Christopher Kolade lecture on business integrity in Lagos.

He said that such large number of Nigerian citizens live in deplorable economic conditions because a few cabals have undermined the system and cornered the resources to the detriment of the greater population adding that when public institutions are weakened by corruption the society is in danger of collapse.

According to him the current administration of Muhammadu Buhari is building a fair and inclusive society with a network of social services and anticorruption policy based on ethical values.

Speaking on the theme of the lecture, ‘’Beyond Compliance: Imbibing a Culture of Business Integrity ’’ Osinbajo noted that the level of integrity or otherwise in the society may not necessarily be a result of the copious legal or regulatory provisions as much as it is a function of the culture of the people evolved over time.

He explained that the functionality of the legal and regulatory provisions would imply the resolution of the ethical dilema Nigerians have found themselves where one either saves his relationships with corrupt family members in public offices and destroy the larger

•Prof Osinbajo, Vice President society or sacrifice such relationships and save the nation.

He said the decision to accommodate corruption because the person involved

is a friend, family relation, ethnic relation or religious member shows lack of integrity and makes whoever that is accommodating such vices guilty of corruption.

Osinbajo stated that the commitment of Muhammadu Buhari administration is to create an environment for resolution of such ethical dilemma without fear of victimisation or loss.

However he added that while government should take the lead and ultimate responsibility in the fight against corruption the civil society as well as corporate organisations should also be involved in taking positive actions against corruption and promote integrity as a culture in the various spheres of influence.

He also wants businesses to begin a paradigm shift in there Corporate Social Responsibility (CSR) to focus on sustainability and strategic scalability.

Speakers at the lecture urged government to adopt a preventive strategy in addressing issues of integrity in governance. They also asked the current

Private sector, analysts pick hole in new CBN’s Forex rule I

t appears that the recent efforts of the Central Bank of Nigeria (CBN) to stem Naira depreciation may not turn positive to the economy eventually.

Speaking at the third Christopher Kolade Annual Lecture last week in Lagos, chief executive of The Chair Centre Group, a leading furniture manufacturer in Nigeria, Mrs Ibukun Awosika, said the new policy which excluded some items relating to manufacturing inputs from accessing the CBN foreign exchange window would definitely sky-rocket cost of production, adding that

some local manufacturers may even shut down.

Awosika who is a director of many blue chip companies including First Bank of Nigeria Plc, Cadbury Nigeria Plc amongst others also lamented that the policy was coming at same time Nigerian Customs Services was throwing the furniture market open to massive imports by removal of the import ban.

At the weekend Afrinvest, a leading investment house also pointed out a number of draw backs in the new forex policy.

According to the analysts at Afrinvest ‘’the capability of this restrictions to stimulate domestic production of the

excluded items, as suggested by the CBN depends to a large extent on too many variables outside the CBN’s purview.

Structural weaknesses and infrastructural constraints which strains competitive local production and the rigorous discipline and tight border control needed to implement import substitute strategies are vulnerabilities yet to be addressed’’.

They added ‘’these factors will continue to dissuade the long-term benefits of this restriction until conscious structural reforms by fiscal authorities and supportive monetary policies are directed towards addressing the

administration to use incentives to drive whistle blowing and cultural reorientation.

Furthermore they reminded the vice president that the current government has the chance to succeed more than any other adding that if this chance to fight corruption is missed it is going to be difficult and long time to recover adding that this is why the APC government was elected in the first place.

In his remarks the central figure in the annual lecture, Dr Christopher Kolade, stated that in Nigeria the word ‘corruption’ is used far more frequently than ‘integrity’ and that is why it has become so dominant in our national mindset. He admonished that Nigerians have to reverse this in all public communications.

Reacting to insinuations that corruption is more attractive than integrity because corrupt people are seen as more successful Kolade said that Osinbajo is a proof that it is possible for a man of integrity to pass through public service and get to the top in Nigeria.

weaknesses’’.

Afrinvest analysts stated ‘’whilst we are somewhat startled that the CBN’s decision is coming ahead of President Buhari’s economic blueprint, it however underscores the responsibility and independence of the CBN - remaining proactive in taking critical monetary policy decisions that will guarantee external economic stability amongst other concerns’’.

They opined that this move may unintentionally limit fiscal revenue expansion sources of the Federal Government needed to fund budget deficit particularly from custom duties.

Pressure at the interbank foreign exchange market is expected to ease while the transferred effect will become visible at the parallel market segments as importers redirect demand.

C M Y K

30 — Vanguard, MONDAY, JUNE 29, 2015

Homes & Housing

Average UK mortgage deposit hits record high

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he average house buyer in Britain is putting down a record deposit of more than £72,000, according to an index. It is the highest level since the Mortgage Advice Bureau (MAB), a broker, began collating the figures in March 2009.

The previous peak was £71,474 in June last year. Last month, the figure rose to £72,302.

Rising house prices mean that not only do buyers need to find bigger deposits, but the increased equity also helps those already on the property ladder to put down larger amounts on their next home. The average deposit as a proportion of a loan rose from 28 percent to 30 percent.

Figures from Halifax showed house prices in the UK had risen by more than £100 a day in April, taking the average value across Britain to £196,412. MAB’s index – compiled using data from over 600 brokers and 900 estate agents – indicated that average mortgage sizes, as well as deposits, reached new levels in May with the typical homebuyer applying for a mortgage of £167,842 last month, 1 percent higher than April’s previous postrecession peak of £166,141.

LASG considers ‘rent and own’ housing scheme

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agos State government would consider adopting a ‘ rent and own’ housing scheme in resolving the housing deficit in the state.

Governor Akinwumi Ambode who disclosed this in his office, said it was not easy for a winner of a three-bedroom flat, under the state’s housing scheme, to make an initial payment of about N5 million, which is half the cost, before spreading the balance through monthly payments.

He noted that it was unnecessary for a bachelor or spinster to own a threebedroom flat, stressing that it was better for those in this category to get studio apartments and upgrade to more spacious accommodations when they get married and start having children.

He appreciated the solid foundation already laid by his predecessors in office in the state, calling for suggestions and constructive criticism by all residents, including the media, so as to build on what was on the ground.

C M Y K

NMRC refinances 577 mortgages with N10bn bonds zTargets 400,000 mortgages in 5 years Stories by YINKA KOLAWOLE, with agency report

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n the bid to expand access to housing finance, Nigeria Mortgage Refinance Company (NMRC) is set to refinance 577 mortgages with the sale of N10 billion bonds this week, even as it targets refinancing 400,000 mortgages with N440 billion in the next 5 years.

Managing Director/CEO, NMRC, Prof. Charles Inyangete, said the bonds sale is the first step in a quarterly program to raise N140 billion.

He said the 15-year bonds will be used to refinance existing mortgages that meet specified underwriting requirements and will be listed on the Financial Market Dealers Association trading platform. “We

started by looking at the legacy loans – existing mortgages in the economy and bring them into conformity with what we now call the Uniform Underwriting Standards. We have done that

Our bond issue will allow us raise funds with government guarantee which allows us to come in at a cheaper rate than otherwise

and it drives our first process of the mortgage refinance,” he stated. According to him, an investment of N3.5 trillion is needed to cut the nation’s 17 million housing deficit by building 780,000 housing units annually.

The mortgages to be refinanced were originated by nine banks which met the NMRC requirements for uniform underwriting standards and were included in the provisional Series 1 Mortgage portfolio as at May 28. The banks shortlisted for the mortgage refinancing are: Aso Savings and Loans; Stanbic IBTC; Imperial Homes Mortgage Bank; Access Bank; Abbey Mortgage Bank; F H A

*High-end private estate development

Firm reveals real estate hotspots in Lagos

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research carried out by Lamudi Nigeria, an online real estate marketplace, has revealed the most popular spots for house-hunters in Lagos.

According to the research, these neighbourhoods in Lagos dominate property searches in the country’s most populous city, attracting 89 percent of all searches. Data shows Lekki as the most popular area for house-hunters in Lagos, attracting 38.33 percent of all property searches in the city.

Breaking down the data, Lamudi reveals that house-hunters in Lekki are looking predominantly for properties to rent (70 percent), with only 29 percent looking to buy.

A mere one percent of searches were for land in the area.

The second most popular district, according to the report, is Ikeja with 12.32 percent of house-hunters in Lagos searching for property in this area.

At the other end of the scale, the research highlights 10 areas in the city that generate less than one percent of all Lagos property searches combined.

According to the survey, renting dominates property searches in all the top 10 neighbourhoods in Lagos. In Yaba - the

fourth most popular district for property seekers in Lagos - 93 percent of searches are for rental properties, with only four percent looking to buy.

In Shomolu, 94 percent of property searches are house-hunters who want to rent. Data shows the most popular of the top 10 neighbourhoods for purchasing property in Lagos is Ikoyi; 42 percent of searches in this area are carried out by house-hunters aiming to buy.

Obi Ejimofo, Managing Director of Lamudi Nigeria, said: “Lagos is at the forefront of Nigeria’s dynamic property market, as highlighted by such a high number of searches in this area. We believe it should be important for both sellers and investors to understand the breakdown of demand for properties by neighbourhood in order to better understand where people are looking to settle down within the city. We have seen that the Lagos rental market is much more active than the sales market. This trend is confirmed by our data for the first quarter of 2015, where searches for rentals dominate over 75 percent of all searches in the city.”

Mortgage Bank; Resort Savings and Loans; Suntrust Savings and Loans; and Trustbond Mortgage Bank.

Inyangete noted that while the NMRC has been able to provide a uniform underwriting standard for the country’s mortgage market, the absence of a foreclosure law is hampering quicker expansion. “We see a need for a legal structure that is clear and simple for the creation of mortgages,” he said.

The NMRC boss said the company plans to sell shares to the public before the end of the year to dilute its ownership. He said: “Our ideal scenario is to have every bank that is interested in providing mortgage financing to be part of it. Our bond issue will allow us to raise funds with the government guarantee which allows us to come in at a cheaper rate than otherwise. If the government is borrowing at double-digits, it means that [our] cheaper rate will be at about the same rate that the government is borrowing.”

According to him, Nigeria’s property market is currently valued at $41 billion, representing about 8 percent of gross domestic product, asserting that the company plans to more than triple this over the next few years as it helps extend maturities for Nigerian home buyers to as much as 20 years.

NMRC was set up to encourage and promote home ownership in Nigeria by providing financial facilities to the mortgage lenders, thereby increasing the availability and affordability of mortgage loans to Nigerians.

Twenty member mortgage lending banks are currently enlisted with NMRC. These include: Sterling Bank Plc, Access Bank Plc, Heritage Bank Plc, Stanbic IBTC Bank Plc, Infinity Trust Mortgage Bank Plc, Homebase Mortgage Limited, FHA Homes Savings & Loans Limited, Aso Savings & Loans Plc, Trust Bond Mortgage Bank and, Imperial Homes Mortgage Bank.

Others are: Abbey Mortgage Bank Plc, Resort Savings & Loans Limited, Platinum Mortgage Bank Limited, Jubilee Life Savings & Loans Limited, Haggai Savings & Loans Limited, Refuge Home Savings & Loans Limited, New Prudential Building Society, Sun Trust Savings & Loans Limited, Nigeria Police Mortgage Bank Limited and, Mayfresh Savings & Loans Limited.

Vanguard, MONDAY, JUNE 29, 2015 — 31

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Vanguard, MONDAY, JUNE 29, 2015 — 35

Recovery of delinquent credit facilities and the economic calamity ahead

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The Central Bank of Nigeria, (CBN) has recently directed all banks in Nigeria to periodically publish, in at least three national dailies, names of their delinquent debtors, whose accounts remain non-performing.”

DIAMOND BANK PLC, Punch, June 22, 2015, p 39.

Permit me to mention that VANGUARD is one of four newspapers which can truly be called “national papers”. The rest, including three published in Lagos, are mere pretenders. So, the banks know where to go when they are ready to publish the names of the national dead beats. Readers should rest assured that a lot of names and reputations of business “moguls” will be tarnished for ever. However, before going into the finer details of this CBN directive, let me digress by pointing to another CBN directive whose terminal date is drawing close.

The Biometric Verification Number, BVN, exercise will end this month. From July 1, 2015, anybody without a BVN will not be permitted to operate his/her account in any bank. Unlike the customer number issued to

customers by every bank, the BVN is applicable nationwide.

Apart from helping to identify customers more easily, the BVN will serve another function which many people, especially fraudulent individuals, are not aware of; it will help to uncover those operating several accounts under various identities. The finger prints collected will be put through computer matching process and very soon thousands on Nigerians and foreigners residing here, who had escaped the law will find themselves exposed. Millions of accounts will be affected eventually. Some of your neighbours might soon be visiting the nearest EFCC office to explain how the same person can be John Doe and Sam Bird.

Interesting times await us.

However, the one that will create the greatest disaster, at least temporarily, is the directive about delinquent accounts.

Thousands of companies operated by Nigeria’s big business people are heading for crash on account of this. For instance, on the same day, in the same paper, on page 68, there was a Police Bulletin regarding one Stella Dike

Ozoemene, who defrauded Guaranty Trust Bank Plc of N150 million using Ohzed Oil and Gas Company as the conduit. Yet on the same page, a Lagos State High Court attached the accounts of an oil marketing and distribution company, Nitrend Limited over N150 million debt. This time Access Bank was the victim.

These two cases might be the first in a series of desperate actions by banks which had treated their non-performing debtors with kid gloves — especially when the debtors are well-connected.

Perhaps, it is just a coincidence that these cases are coming out in the open at this time. But, it is doubtful. Apart from the amounts involved being the same, the guarantor to the Nitrend Limited loan was also a female former Managing Director of defunct City Express Bank, which went down with millions of depositors’ funds. If indeed, Access Bank and Guaranty Trust have diligently applied the basic principle of Know Your Customer, it is difficult to imagine how the damages could have occurred.

Now they are now chasing

money which should not have left the bank in the first instance.

Heads will, and must roll, in the banks for these.

However, the two cases merely reveal a tip of the nose of the submerged monster waiting to send shock waves through the Nigerian economy.

Last year, the CBN Governor revealed that less than one thousand Nigerian firms account for over seventy per cent of all bank loans; the remaining one million-plus companies make do with the little that is left. Left unsaid by the CBN Governor, either deliberately or inadvertently, is the fact that virtually all these companies operate multiple accounts with many banks and the main function of their directors of finance is to juggle funds from one bank to the next; to allow some accounts to become delinquent until pressed by the banks and to delay payments as long as possible. A look at the list of toxic loans, acquired by Asset Management Corporation of Nigeria, AMCON, will reveal that it might as well be published as a WHO IS WHO AMONG NIGERIAN BILLIONAIRES. The “professional” dead-beats

are all the people we routinely applaud. The list of delinquent accounts and the names of their directors will include almost all the “usual suspects” – who are uniformly incorrigible debtors.

The CBN directive will however result in very painful readjustments – at least in the short term. Most of these companies have operated on the principle of not allowing the left hand to know what is happening on the right hand. Each bank had guarded jealously its transactions with the biggest customers. That is precisely what the dubious business people want. Until a loan goes terribly bad, and it is large enough, most banks will not disclose to other banks their experience with the customer.

That way, the same customer can dupe several banks at the same time.

With the new CBN directive, “professional” delinquent customers will be revealed for all to know; they will not be able to access foreign exchange and the banks will take steps to recover their loans. Several thousand companies might be liquidated in a short time exacerbating the nation’s unemployment problem. But, it is task that must be done sooner or later. It might as well be now.

Micro-Finance Foundation seeks enabling environment for entrepreneurs Stories by PROVIDENCE OBUH

T

h e To n y E l u m e l u Fo u n d a t i o n ( T E F ) has called on government at all levels and politicians to create enabling environment for entrepreneurs in the country to thrive.

Founder, TEF, Mr. Tony Eleumelu, said this at a media brief heralding the two days Boot Camp session designed to equip the successful 1,000 entrepreneurs with skills needed to build a successful business from July 10 to 12, in Ota, Ogun State.

Elumelu said, “In Africa, over 90 percent entrepreneurs dies within the first year. It is very difficult for entrepreneurs to succeed but the only option is that our government should do something by creating the environment that would enable entrepreneurs to survive in our country.”

Recall that the entrepreneurship programme launched in December 2014 is a $100 million initiative to discover and support 10,000 African entrepreneurs over the

next decade with a target of creating one million new jobs and $10 billion in additional annual GDP contribution Africawide by end of the programme.

The programme received over 20,000 individual applications from 52 African countries with ideas ranging from fish farm to fashion, web apps to wellness centres, education and energy, among others and in March about 1000 entrepreneurs whose ideas can transform Africa were selected.

Meanwhile, the 1000

entrepreneurs are expected to converge for a two-day maiden boot camp session of the Tony Elumelu Entrepreneurship Programme (TEEP) where participation will earn them $5000 seed capital funding as well as continued monitoring and support as they refine and execute their business plans.

Upon completion of business plans, select businesses would receive a further $5,000 low interest loan and access the programme’s Angel Investors network.

“I am confident that these entrepreneurs are Africa’s hope for the future. In empowering these emerging entrepreneurs, we are providing the capital, the networks, the training and

'Shoe manufacturing, revenue spinner'

A

shoe manufacturer, Chief Executive Officer, Kene Rapu Nigeria, Ms. Kene Rapu, has said that shoe manufacturing would be a huge source of revenue to the

Airtel primary sale hit N22bn in December, rewards trade partners

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irtel Nigeria, penultimate week, disclosed that in December alone, its primary sales hit N22 billion, rewarding top performing trade partners with Sports Utility Vehicles (SUVs) among other luxury prizes.

Speaking at the Airtel Channel Partners Awards 2015, tagged: “Hunger to Win Customers for Life,” Managing Director/ C E O, A i r t e l N i g e r i a , M r. S e g u n Ogunsanya, commended the channel partners for commitment, loyalty, focus and hard work. He attributed company’s growth in the last financial year to support from the par tners, stating: “With your

support for them to drive economic and social transformation throughout Africa, providing solutions to its problems as well as securing their future and that of generations to come, Elumelu said.”

support, we have over 130 Express Shops today. You, our esteemed channel partners, have also contributed immensely to the development of our business. In December 2014 alone, we achieved the highest ever primary sales of N22 billion and a growing contribution of over 65% in GADs performance coming from our partners.

“We thank all our Channel Partners for demonstrating exceptional zeal towards the achievement of the business objectives of our company. As partners in progress, they have contributed immensely to our success and fulfilment of promises made by the Airtel Nigeria to its teeming customers.

federal government and the economy if well utilized.

Also she urged the government and the Nigerian Export Promotion Council (NEPC) to create a better awareness and value addition to locally manufactured leather to increase revenue for the government and create jobs.

Rapu, made the appeal while speaking with news men on the sidelines of the official opening of her showroom and factory in Lagos.

AShe said that shoe manufacturing could be a huge revenue-spinner for the government and it was creating not less than 20,000 jobs in its value chain for Lagos residents alone, and it was capable of creating more, if better value was placed on locally-manufactured leather.

36 — Vanguard, MONDAY, JUNE 29, 2015

People in Business

Lagos becomes Lufthansa sales hub for Sub-Sahara Africa

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ufthansa German Airlines has designated Lagos as the centre and regional headquarters of its Sub-Saharan sales, station and administration organization leading marketing and sales for the airline across the continent, including East African and Southern Africa countries.

Managing Director SubSahara Africa, Claus Becker, made this known recently in Lagos. He said Nigeria is the most populated country in Africa, also with the highest GDP and geographically located within 6 hours from all other Lufthansa Sub-Sahara markets hence it was the natural choice for a regional head office in Africa.

“Nigeria has always played a key role in Lufthansa’s intercontinental network and now we are creating a new organization that will benefit from the country’s economical size and business prospects as a leading regional business hub” said Claus Becker, Managing Director Sub-Sahara Africa, who will head the new organization. The decision of choosing Lagos as the headquarter of Lufthansa sales organization will not only secure jobs here but also bring more employment opportunities for Nigeria.

The country which boasts three Lufthansa destinations (Lagos, Abuja and Port Harcourt) has been served by the German carrier since 1962 and is a pillar in the burgeoning economic relationship between Germany, Nigeria as well as businesses in both countries. Becker was joined by Tamur Goudarzi Pour, Lufthansa Vice President Sales & Services for the Middle East, Africa & Southeast Europe to discuss the aviation group’s upcoming plans for the African continent including the new and revamped cabins of services to be offered on all flights from Nigeria as well as other key African gateways.

“Sub-Sahara Africa is one of the Lufthansa Group strongest markets, with around 150 weekly flights byLufthansa, Swiss/Edelweiss and Brussels Airlines serving 30 destinations in 26 countries and we plan to continue expanding services across the contact,” noted Goudarzi Pour.

Already scheduled for the end of October, Lufthansa will commence service to Nairobi, Kenya with initial four-times weekly and Brussels Airlines will offer customers in Accra direct service to Brussels.

*Soybean seeds

*Mr. Ifeanyi Ukegbu that you can produce oil from soybean, maize and sunflower and they are very healthy for human consumption, I settled for soybean.

*Soybean cake

Boko Haram insurgency affecting our business — IFEANYI UKEGBU

By EBELE ORAKPO

M

r.

Ifeanyi Ukegbu is the Chairman/ Chief Executive Officer of Colectic Resources Nigeria Limited, a company that is into agricultural material production, specializing in animal feeds raw materials.

After obtaining a Higher National Diploma in Urban and Regional Planning from the Federal Polytechnic, Owerri, Ukegbu went on to read Project Management at the University of Calabar, Cross River State. He spoke to Financial Vanguard on why he went into his line of business and the challenges involved.

Excerpts: Why I started Colectic: In the last few years, I discovered that the economy was becoming agriculturally–driven. If you look at the focus of the last administration, you will see where the policy was going

and when I saw the emphasis being placed on agriculture, I started researching into which area I could go into. I have passion for vegetable oil; in fact, that was what gave me the push to go into this business. When I found out

They provided us the opportunity to incubate our businesses and mature so that by the time we are leaving here, we would have already developed the tentacles to spread out

Experimenting: You know, education gives you a wide horizon to dive into anything you want so that was why when I found I had this passion, I started studying all I could about soybean, from the planting of the seeds, to harvesting, the drying and the usage. I started experimenting, first, with the soybean and I saw that the oil was very good. We tried maize and the oil from maize is very good too but when we analysed the three and compared the soybean, maize and sunflower oils, we discovered that the maize oil has a better oil production but because of the interest we have in the soybean cake, we settled for the soybean seed because of the need of farmers.

What we do: We use soybean seed to produce soybean cake and oil. The soybean cake is used purely by those involved in poultry and piggery and also those that are into feed production use it as a source of raw material for the production of feeds. They blend it with other ingredients to form what they want. For instance, the mixture for growers is different from the mixture for layers. So they use the cake in their production. They also use the oil as a mixture. If the oil is refined, it is good for human consumption as vegetable oil but in the state it is here, we still call it raw material because it still needs to undergo refining process.

What we only have here is the filtration process. We filter out the impurities from the oil but in the proper refining, they separate the odor and the moisture because in the state it is here, it still has moisture but one good thing is that the oil is cholesterol-free. You can use it as it is now but the only thing is that it foams

because of the moisture content.

We imported the machine, finished installation in October and commenced production in December last year.

Challenges: Our major challenge is the Boko Haram insurgency. As you know, we get our raw materials mainly from the northern part of the country so the Boko Haram issue has affected the rate of soybean seed production and consequently, the price at which we buy the seeds and the prices of our products.

But all in all, by the grace of God, it is a good business and we are doing well.

Incubation Centre: I want to appreciate the Federal Government for encouraging small businesses and for the opportunity given to us here to start. If they had not given us this place, definitely, the cost of production would have been higher because you have to look at the cost of renting a place. But here at the Technology Incubation Centre, under the National Board for Technology Incubation in the Federal Ministry of Science and Technology, we are provided free accommodation otherwise, cost of production would have been higher. They have provided us the opportunity to incubate our businesses and mature so that by the time we are leaving here, we would have already developed the tentacles to spread out; this place is like a formative stage for any serious-minded person that wants to go into industrial production or entrepreneurship so the government actually did a good thing by encouraging us. Apart from giving us this place, they also organise seminars for us to enhance our businesses free of charge, bringing in quality people to talk to us on how to grow our businesses.

Vanguard, MONDAY, JUNE 29, 2015 — 37

Tax Matters

Value Added Tax (VAT) in Nigeria (ii) All goods and services are ‘VATable’, except those that are exempted under schedule 1 of the Act. These are: Goods Exempted All medical and pharmaceutical products Basic food items Books and educational materials Baby products Fertilizer, locally produced agricultural and veterinary medicine, farming machinery, and farming transportation equipment All exports Plant and machinery imported for use in the Export Processing Zone Plant, machinery and equipment purchased for utilisation of gas in downstream petroleum operations.

Tractors, ploughs,and agricultural equipment and implements purchased for agricultural purposes Services Exempted Medical services Services rendered by community banks, People’s Bank and mortgage institutions Plays and performances conducted by educational institutions as part of learning.

All export services.

Note also: Exports are zero rated.

VAT is leviable at the time of supply of goods and services.

companies A non-resident company that carries on business in Nigeria shall register for the tax with the Board using the address of the person with whom it has a subsisting contract as its address for purposes of correspondence relating to the tax.

Records and Accounts A registered person under shall keep such records and books of all transactions, operations imports and other activities relating to taxable goods and services as are sufficient to determine the correct amount of tax

VAT paid on inputs are creditable against output tax.

Tax returns are to be submitted on monthly basis.

Administration of VAT The tax shall be administered and managed by the Federal Board of Inland Revenue (in this Act, referred to as “the Board”)

Registration A taxable person shall within six (6) months of commencement of this Act or within six (6) months of commencement of business, whichever is earlier register with the Board for the purpose of this Act Registration by government ministries, etc as agents of the Board Every government ministry statutory body and other agency of government shall register as agent of the Board for purpose of collection of tax under this Act. Every contractor transacting business with a government ministry, statutory body and other agency of federal state or local government shall produce evidence of registration with the Board as a condition for obtaining a contract.

Registration by non-resident

The input tax to be allowed as deductions from the output tax shall be limited to the tax on goods purchased or imported directly for resale and good which form the stock-in trade used for direct production of any new product on which the output tax is charged

due under the Act. Offences by law Furnishing false documents Evasion of tax Failure to make attribution Failure to notify change of address

Failure to issue tax invoice Resisting authorised officers Issuing tax invoice by unauthorized person Failure to register Failure to keep proper books and accounts Failure to collect tax Failure to submit returns Aiding and abetting commission of offence Offences by body corporate.

Explanation of Some Terms in VAT Taxable Goods and Services The Act says the tax shall be charged and payable on the supply of all goods and services (in this Act referred to as “taxable goods and services”) other than those goods and services listed in the First schedule to this Act. Allowable Input Tax The input tax to be allowed as deductions from the output tax shall be limited to the tax on goods purchased or imported directly for resale and good which form the stockin trade used for direct production of any new product on which the output tax is charged.

This means input tax on: Any overhead, service and general administration cannot be charged as input tax but expended through the profit and loss account On capital item and asset too should be capitalized along with the cost of the item and asset.

Distribution of Revenue 15% Federal Government.

50% States Government & FCT, Abuja.

35% Local Governments.

Input Tax Tax charged on purchases made

Output Tax Tax charged on sales made

Taxable Person Means a person who independently carries out in any place any economic activity as a producer, wholesale trader, supplier of goods, supplier of services or person exploiting tangible or intangible property for the purpose of obtaining income therefrom by way of trade or business and includes a person and an agency of government acting in that capacity.

Zero rated goods If you sell zero-rated goods or services, they count as taxable supplies, but you don’t add any VAT to your selling price because the VAT rate is 0 per cent. Thus while no VAT is charged on providing goods and services taxable at zero-rate of VAT, you are still able to deduct VAT on costs and expenses you incur in making zero-rated supplies.

Examples are (1) all non-oil exports (2) goods and services purchased by diplomats (3) goods and services purchased for use in humanitarian donor funded projects

Exempted Goods/Services If you sell goods or services that are exempt, you don’t charge any VAT and they are not taxable supplies. This means that you won’t normally be able to reclaim any of the VAT on your expenses. Generally, you don’t register for VAT or reclaim the VAT on your purchases if you sell only exempt goods or services. In this case you may not be able to reclaim the VAT on all your purchases

38 — Vanguard, MONDAY, JUNE 29, 2015

Interview

BY EMMA UJAH, Abuja Bureau Chief, MIKE EBOH & GABRIEL EWEPU

H

ow would you rate the capacity of the Solid minerals sector in the nation’s economy?

To talk about the capacity of the solid minerals sector in the country, how important it is and what it can contribute to the economy, let’s take our minds back to the past. There was a time in the economic history of this country when the solid minerals sector was contributing as much as 12 per cent to the GDP (Gross Domestic Product). From the late 1950s before the discovery of oil, the solid minerals and agriculture were the main stay of the economy. From that period up till 1973 , to be conservative, because 1972 was the turning-point between the benefits we derived from the mining and the curse that oil brought us.

Up until 1972, we were having about 12 per cent contribution from solid minerals to the GDP. But the Indigenisation Degree of Gen. (Yakubu) Gowon in 1972 to transfer the solid minerals industries from foreigners to indigenous operators seemed to be our undoing, unfortunately. Like we often say that management is the problem of the African race, it all played out in the solid minerals sector at that time.

From that particular time till date, mining has been in decline. And today, we are talking generously, based on the data by the Nigerian Bureau Statistics, of 0.3 per cent to the GDP. Imagine the fall from 12 per cent to the GDP to as low as 0.3 per cent.

The questions everyone is asking are: Does it mean that skills in the sector have been deteriorating? Does it mean that in this age of science and technology, when people are acquiring better ways of exploration and mining, are we on the decline? Or is something really wrong with us? There is advancement in the industry as technology advances, worldwide. But the major problems towards harnessing the sector and having the sector and the comatose situation in the sector is the fact that certain people are profiting from the crisis.

What you are saying is that some people are benefiting from the lack of development of the nation’s solid minerals sector?

Absolutely. The situation is such that the more the sector is declining , the more the purses of some of these set of cabals within the sector are enlarged.

If by 1972, the sector was

Nigeria loses over N8trn annually in untapped gold — EKOSIN Nigerians are sitting on top of billions of dollars in untapped solid minerals and yet lamenting dwindling economic fortunes owing to over dependence on oil. In this interview, the President of Miners’ Empowerment Association of Nigeria, Mr. Sunny Ekosin, reveals that Nigeria loses N8 trillion annually in unexploited gold alone. He also says that Ajaokuta remains the key to Nigeria’s industrialisation and that getting it back to work is a matter of patriotism for President Buhari and his team.

Excerpts:

contributing 12 per cent to the GDP, what could have been missing, averagely, on an annual basis, by abandoning the industry?

Assuming Nigerians take data seriously, assuming we build a database where we have authentic information, in 2012 the Permanent Secretary of the Ministry of Mines and Steel, came before the nation and said, that from our precious metals alone, specifically from our gold exploitation alone, Nigeria was losing $ 50 billion on annual bases.

Do you mean $50 million or $50 billion?

I said $50 billion. If you convert that amount to the Naira, as the exchange rate of that time, it would be about N8 trillion which is about the budget of the federal government for two years.

What you are saying is that, if we had pursued the development of the sector, gold alone could have given the nation as much as $50 billion annually?

Yes. That is exactly what I

am saying. Only gold. We are not yet talking about our potentials in bitumen; we are not yet talking about our potentials in our traditional export.

Niobite (Columbite) and Cassiterite (Tin ore) .Mind you the only two major minerals prior to 1972 that gave us a very high percentage of contribution to

My argument is that the sector has the potentials of diversifying our economy

the GDP were only exploitation of calciterite and niobium.

Those were the only two dominant minerals as at that time.

W

e cannot talk about what we are losing without knowing what we have left untapped. What solid minerals do we even have in Nigeria in terms of deposits in commercial quantities?

Based on the data at the Federal Ministry of Solid Minerals, we have 34 exploitable and exportable minerals across the country.

Back to the issue of abandonment, we don’t need to ask why the sector was abandoned because we all know it is because of the shift of attention to oil. Where are other countries with similar endowments on the scale?

There must be interest in solid minerals because without solid minerals, there will never be industrialization. Without minerals, there will be no meaningful economic development. This must be underscored. So it is imperative for nations with solid minerals to develop them.

It would interest you that some nations that don’t even have natural endowment like United States of America you see them having strategic mineral deposits that even surpasses those nations that are endowed in terms of their solid minerals.

It is so critical because

without solid minerals development in any nation there is no industrilisation and there is no meaningful economic development of such nation. That is why it is so important that the solid minerals aspect in particular in Nigeria should be developed if we are to realize our vision 20:2020.

What is the cause of a declining productivity in the solid minerals sector?

I will handle the problem in two ways. Unfortunately, they are not well educated on the potentials of solid minerals in the country. One is that the government agency saddled constitutionally with the powers to serve the sector, do not have adequate knowledge on what potentials we have in the mining industry. Two, we also have a situation that the government being so satisfied and benchmarking their annual budget only on the revenue that comes from oil and gas, do not think of diversification of this economy.

And the political will is not even there to look at alternatives.

Number three is the deliberate efforts of some few privileged people within the sector to emasculate this sector and shield it from some from initiatives coming from the outside.

Those who are saddled with the responsibility of manning

Continues on page 41

Vanguard, MONDAY, JUNE 29, 2015 — 39

Interview

Nigeria loses over N8trn annually in untapped gold — EKOSIN

Continues from page 40 this sector like the Ministry of Mines and Steel Development and some few persons have taken the sector captive and have shielded it from outside initiatives.

A

s an organisation what have you done on your own to deal with these challenges?

In 2006, when I assumed the leadership of the Mining Association in this country time till date, about 10 years ago, I consistently articulated the problem within the mining sector, looked at the in and out; and putting my years of experience and operation in the industry for 25 years, I have consistently maintained that two million jobs from 2006 to date could have been realised within the tenure of any regime of four years.

And with revenue that will compete with revenue from oil and gas can be realised from solid minerals development in the country. I have done a lot on this by my letters, memos, articles and position papers to both the National Assembly and the Ministry, and all are documented.

My argument is that the sector has the potentials of diversifying our economy and I have consistently maintained this for the past 10 years.

The sector over the years has been plagued with issue of funding which has led to the abysmal performance of the sector, what do you think as a mining professional should be done to address this challenge?

I have come to a conclusion that funding is not a problem to this sector after my long assessment of the sector with my 25 years experience.

Any public money you put into the sector right now will be as a vapour in the hands of these cabals.

Their antecedents are up there because all the intervening of funding that have gone into the sector like Ajaokuta, Aluminum Smelting Company at Ikot Abasi, The defunct Nigeria Mining Corporation, and all other companies the government have delved into, what have

they given to us and is nearly zero.

The solid M i n e r a l s Development Fund is what I advocated when I took over the mantle of leadership in 2006. The clause 34 is where you have that Solid M i n e r a l s Development Fund in the Mining and Minerals Act What the agency under the Act set out to achieve is to give developmental funding to the sector, to enable off-takers in the sector to reduce geological funding that will generate data for the sector, and nothing more than that.

Is the objective of the Solid Mineral Development Fund achieved?

Never!

Could it be because there is not enough data?

Nothing. We got some data from them and according to them they have done airborne geophysical survey; done 100 percent, we have mapping of 1-250, 000 on the scale of geophysical mapping of the country. The question is where is the development?

What further data do you require in the industry?

We can have better geological data that will reduce the mapping to a smaller ratio, maybe 1-100, 000. This one can be done by the investors themselves. The one required generally is already there according to the information by the Nigeria Geological Survey Agency under the Ministry of Mines and Steel Development.

Trying to reduce the mapping to a smaller ratio of say, maybe 1 to 100,000 or 1 to 10,000, like it is done in most places. These ones can be done by the investors themselves. The basic one that is required generally is already there, according to the information given to us by the Nigerian Geological Survey Agency (NGSA), which is an agency under the Ministry Of Mines And Steel. If you say the problem of data is our problem,

to the leadership of NAFDAC, it was to many of us, not existing, even though by law and structure, it was existing.

But it came into limelight and to the knowledge of everybody when a person with capacity assumed the leadership of that institution. This is similar to other institutions.

•Mr. Sunny Ekosin before 1972, what was the position of the data; when the sector was contributing 12 per cent to GDP? The truth is that data is not the issue. The issue is not funding also.

The government officials in the Solid Minerals industry, three years down the line, what have they done for us? If you analyse the Ministry’s annual budget, 90 per cent is going for payments of their own pockets, servicing the people that they put in there, when the people that they put in there were supposed to generate funds.

They lack the capacity, because their antecedent is zero.

I

s it not because they are civil servants and by nature of their jobs they are supposed to create the enabling environment rather than generating funds ?

Unfortunately, like I told you, I initiated, essentially part and parcel of that clause, clause 34 (of the Mining Act). There was no way we would have,

I have come to a conclusion that funding is not a problem to this sector after my long assessment of the sector with my 25 years experience

knowing the bureaucracy of the civil service, left that thing (Mining Development Fund) in the hands of the civil servants. We requested specifically that the chairmanship of that place should be somebody with capacity, independent of the civil service. It is supposed to be an entity that can be sued and have the right to sue. It is supposed to be an autonomous agency. So, it was not supposed to operate within the civil service bureaucracy, never.

That was not the concept. But unfortunately, you see that because of the kind of stooges that have been planted to manage the agencies were of the minister and of course, everybody is subjected to the ministry and looking up to the ministry for money and other things.

The day the agency was inaugurated, I came before the media to say that this is going to be blackmail against operators in the mining sector, because it is going to be a failure. What we are seeing today has brought to question the essence of setting up the agency in the first place; it has become a blackmail.

Anything we now ask of the government, they will say that everything they have done for us has resulted in a failure.

These are deliberate booby traps set up by these cabals to continue in their hegemonies.

If the Fund is given a leadership of an operator, will we see any difference?

Absolutely. Any institution, no matter how good the policy establishing it, without men and women with integrity running it, the result will be a failure. For example, prior to (late) Dora Akunyili coming

What are the expectations of the operators from this Fund?

The agency is to create fund, because mining is a long gestation operation. Before you can begin to get the dividends from mining, you must put much into exploration. One can be involved in exploration for one year and at the end of it, might not get anything that is of economic value.

Again, one can also find out that at the end of exploration, certain elements in the ore body may be harmful and may not be suitable for the market, so you discard it and move on.

Those kinds of fund, which I call developmental fund is to aid the organization, so that at the end of such things, one do not have heart attack, knowing that all one’s livelihood have been pumped into the activity without yielding anything positive. It is supposed to be for that kind of cushioning effect.

How do you help government to mobilize professionals to make the sector viable?

We are using this opportunity to appeal to the conscience of the nation, the fourth realm, to sensitise the government. Like I told you, one of the major problems is that government lack good and credible information regarding the mining sector. The government should be sensitized that the country has an alternative in solid minerals that can diversify the country’s economy from oil and gas.

Once the government can have that, the government should not just listen to its agencies alone. For example, in the ministries, one should not expect anything different from the back tapping and ego massaging, because they want to speak well of themselves.

They told us in 2013 when there was the media chat by the then Minister of Mines and Steel, that 1.25 million jobs were created from the mining sector, those kind of thing, you take them up on it. Ask them to show the indices.

Meanwhile, the economic manager of the country, the Minister of Finance, told us that the whole nation recorded about one million jobs on an annual basis; what a contradiction? If a ministry alone is saying it created 1.25 million jobs, then who is fooling who?

40 — Vanguard, MONDAY, JUNE 29, 2015

Advertising & Promotions

Digital age and Gulder storytelling analogy Valmont water hits market

Stories by PRINCEWILL EKWUJURU

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well executed TV commercial has the power to make consumer (s) experience all kinds of emotion – laughter, sadness or fear, all in a matter of seconds.

One of the most interesting type of commercial is the tourist commercials of various countries.

The recent commercials of India and Malaysia get viewers struck in such a warm, emotive way and in such a short period of time.

Today, a number of mediums have joined television as lucrative ways to market businesses. From social media platforms like facebook, Twitter and Instagram. Modern-day companies have come to get a firm grasp of all these available methods of promoting their brand (s).

TV is and always will be the source of huge spending on advertising, but how has it changed over the years and what is expected in years to come? Before now, TV commercial was virtually conventional in nature, not taking into cognizance the storytelling analogy recently deployed by Gulder beer which depicted a real life scenario.

However, viewers are still willing to engage with TV content and one in ten Nigeria consumers search for a product after seeing an advert on TV. The new TV commercial of Gulder beer from the stable of Nigeria Breweries Plc

•Screen shot from the latest Gulder TV commercial employed all the story telling ingredients to deliver its brand promise of making its consumers; men.

The ad could be said to be a revolutionary move by the brand to takes its rightful place in the array of beer brands in the market, particularly as it relates to bringing out the man in the consumer.

In the new commercial however, Gulder beer presents three different scenarios that explains the boldness exhibited in achieving the unimaginable.

The first story is a young man caught between sitting back and receiving no positive attraction for his stellar performance in the office. He eventually grows up to become a ‘MAN’ by walking up to his boss to eventually get his

reward. The second, a gentleman was mistaken for an attendant by a lady, while in the third story, a man who is in love with a General’s daughter is afraid of going before his supposedly father- in- law to express his feelings for the daughter, but took a bold step in confronting the General

Today, the brand stands on the table of men to reclaim its rightful place; thereby making itself a beer for ‘men’

MediaReach OMD, Google partner on brand marketing

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he West and Central Africa’s independent media specialist, mediaReach OMD has aligned forces with Google Global Services Nigeria Limited to take brand marketing in Nigeria to another level.

The alignment will see both companies exchanging ideas on survival strategies for different brands now that the players are faced with stiff competition not only in Nigeria but across the world.

The agency, mediaReach OMD, and Google traded ideas at an event christened “Google Day”, organised at the mediaReach office in Lagos.

Addressing members of staff of both companies, Juliet Chiazor, the Country Manager of Google, said it is imperative for any organisation that will survive to develop a strategic marketing campaign that can stand out in the competitive market.

She noted that customers are faced with a minimum of 2,000 marketing messages streamed on different communication platforms every day. Chiazor therefore said for any player to excel, its communication must be appropriate and target the right audience.

Meanwhile, she said innovation is at the heart of everything Google does as the C M Y K

company is aware of dynamism of different market the world over.

As a result, Chiazor said Google has different solutions that corporations anywhere in the world could use to achieve their goals in the target markets. Some of those solutions, according to her, are: Google Voice Search; Google Maps; Google Now; and Google Photo Sphere.

She declared that television viewership is slowly declining as audiences are shifting online. Specifically, she stated that there is an increase of 60 percent of online video streaming that customers are faced with.

“Brand building elements still entail awareness and emotional engagement just as the case with traditional marketing platforms”, she said. Based on this, she advised that video should be seen as an integral part of brand building and should be used more in brand communication.

Corroborating her view, Tolu Ogunkoya, the Chief Executive Officer of mediaReach OMD noted that there are still many players who are undecided about the relevance of digital brand marketing despite its importance in today’s marketing communication. His words: “It is high time we decided to take active steps in the interest of our corporations”.

father of the girl, a confidence that can only be exhibited by the ‘Brand made for Men.’ However, these are unusual stories even for a beer commercial but the signature that runs through the thread is that Guilder signs off these stories at the very end of the commercial rather than interrupting the stories with the brand’s value propositions.

On the contrary, the stories subtly sell these propositions of strength, bravery, intelligence and daring which are the hallmarks of a real man. The commercial is the story of the man (and we are faced with such challenges everyday) rather than essentially the story of Gulder.

On the other hand, the transformation of Gulder from its old bottle over 40 years ago gives it the edge over others, making it manly in presentation.

Recalled that the Anambra state Governor Obiano who hosted the Ultimate search team said: ‘’the brand’s new look made it outstanding among other bottles.’’

Today, the brand stands on the table of men to reclaim its rightful place; thereby making itself a beer for ‘men’ a proposition that has repositioned the brand in the market. Vanguard spoke to Digital Advertising Age, a group that helps to analyse brand and watch the impact of TV advertising.

According to Maxwell Udoji, Director of Analytics, Digital Advertising: “Seven years ago there were no iPhones and tablets, meaning TV audiences focused solely on the big screen. While the actual amount of television that people watch has not changed much – in 2006 Nigerian viewers watched an average of 3.6 hours of TV a day, while in 2013 they watched 3.9 hours – today the degree of viewer distraction has changed.

oised to make a debut in the Nigerian market, Giant Beverages Limited, a Lagos based beverage outfit has unveiled Valmont, a water brand. The introduction of the product is coming on the heels of the company’s resolve to ensure that Nigerian brands join the league of internationally renowned brands.

The company, according to its General Manager, Mr. Ayo Afolabi, is travelling this route because of its firm belief that a brand is a mark of quality which is one of the key characteristics of the company.

To this end, the new product, Valmont is produced to attain a super-premium brand status in taste, look and feel. “Our water is produced to the best of international standards. It goes through our ultrapurification processes without being exposed to air until it enters our unique bottles, thus preserving its freshness and purity. It is called ‘Valmont’ for its strong, rich, luxurious and sophisticated background.”

He added that Valmont is natural and produced to accompany fine food and luxurious lifestyle.

Cussons Baby fulfils brand promise, takes winner to Dubai

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ussons Baby has fulfilled its brand promise by taking the winner of the Cussons Baby competition and family to Dubai, the United Arab Emirate on a 7days all expense paid trip.

The Brand Manager Cussons Baby, Oluwaseun Ayeni who declared that the brand has fulfilled its promise and is ready to offer more to Nigerians said that the brand has taken Miss.

Morireoluwa Davids and her family on the account of winning the second edition of Cussons Baby Moment 2014 competition.

On the competition and its essence, Ayeni pointed out that it is about rewarding the customers and giving parents the opportunity to showcase their beautiful babies.

She said “It is all about giving families an opportunity to showcase their beautiful bundles of joy for a chance to go on an all-expense paid trip.

It is also about providing a platform to communicate one on one with our consumers and the opportunity to meet new consumers”.

On the preparation for Season 3, Ayeni said.

Vanguard, MONDAY, JUNE 29, 2015 — 41

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42 — Vanguard, MONDAY, JUNE 29, 2015

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Vanguard, MONDAY, JUNE 29, 2015 — 43

Aviation Airport Security: Arik Air faults restrictions on police movement

By LAWANI MIKAIRU

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he restrictions on police personnel movement at the airport, especially the airside area, may be one of the reasons Nigerian police is unable to effectively curb the cases of stowaways and other crimes at the airports across the country. This is the view of Arik Air Managing Director, Mr. Chris Ndulue.

Ndulue made his view known while receiving the new Commissioner of

Police, Airport Command, CP Taiwo Lakanu at Arik Air Corporate Head office in Lagos. He said airports in Europe and America allow the police to access all parts of the airport including the airside. And this has helped in minimizing and preventing crime in any part of their airports.

He added that the irony of the security situation at Nigerian airports is that touts at these airports are allowed to access the restricted areas including the airside once they have

their On Duty Card , ODC, on. Ndulue also solicited the assistance and cooperation of the new commissioner to make the airport a safe environment for aviation business.

Arik Air has suffered series of security breaches of his planes at airside at some of the nation’s airports. The celebrated one being the case of a young boy of Fifteen years that entered the wheel hole of one of its planes at Benin city airport and stowaway to Lagos.

From left: Deputy Managing Director Arik Air,Captain Ado Sanusi; Mr. Paul Cooper Insurance expert, Mr Hugo Hill Broker Africa/ Middle East Global Specialist Aerospace and Managing Director Arik Air-Mr. Chris Ndulue, during the visit of Arik re-insurers and Brokers to the airline office in Lagos.

FAAN sets up task force to enhance revenue generation

By LAWANI MIKAIRU & DANIEL ETEGHE

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anaging Director of the Federal Airports Authority of Nigeria ,FAAN, Engr.

Saleh Dunoma weekend revealed that the agency has established a special task force to enhance revenue generation at the various airports across the country.

Confirming the move, Mr Yakubu Dati , General Manager, Corporate Affairs, FAAN, said “In a bold move to improve the revenue base of airports for greater productivity, the Managing Director of the Federal Airports Authority of Nigeria (FAAN) Engr. Saleh Dunoma has established a special task force on revenue enhancement.

The task force will be headed by the Managing Director himself”.

Dati added that Engr.

Saleh Dunoma made the revealation in Lagos at a meeting with Regional and Airports Managers where he urged them to recover revenue at the point of collection as and when due, and applying sanctions where necessary.

Dunoma also urged the managers to step up efforts in recovering debts and “initiating nonaeronautical revenue streams in order to meet up with revenue targets based on the authority’s 2015 approved budget”.

He also reiterated the authority’s commitment to delivering services at international quality standards in line with its mission statement as well as in compliance with the global aviation standard.

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44 — Vanguard, MONDAY, JUNE 29, 2015 Email:lesleba@lesleba.com, lesleba@gmail.com Blog page:www.lesleba.com/blog2 Website: www.lesleba.com Tel:0805 220 1997

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ccording to recent media reports, almost N5tn was disbursed as subsidy payment on fuel consumption between 2006-2012? Thus, the annual average provision of about N1tn is probably equivalent to about one fifth of total annual federal budget in the same period. In effect, subsidy payments clearly exceeded the consolidated annual allocations for health, education, transport and agriculture every year.

Worse still, the alleged benefits of subsidy are not direct or tangible as progressive drivers of social welfare. Nevertheless, the more relevant question, however, is probably what would be the result on the economy and poverty alleviation if fuel subsidy was summarily abolished and pump price of fuel rises to about N140/litre, when crude oil price is about N62/ barrel and Naira exchange rate is N200/$.

Experience has taught Nigerians to expect the prices of most goods and services to head northwards as fuel price rises to induce higher transport cost which trigger an upward spiral on the general price level.

Nonetheless, some Nigerians may insist that if the higher price of N140/litre would eliminate the perennial problem of fuel scarcity and the attendant social stress and economic dislocation and minimise corrupt leakages, then, so be it, “let subsidy be removed”, they would chorus!

After all, they would also argue that if Nigerians readily paid over N200/litre during the most recent fuel scarcity, then N140/ litre should be no big deal!

Instructively however, Nigerians may change from this same melody if a N50/litre rise in petrol price pushes the rate of inflation, beyond 10% within six months or so from the date of subsidy removal. Inevitably, the prices of foodstuffs and all earners of static income would probably be hardest hit. The

In any event, the current 10% gap between official and parallel market exchange rate of the Naira will certainly widen with CBN’s exclusion of importers of rice and some forty other commodities from official foreign exchange window. Ultimately, the increasing margin between official and black market rates will encourage malfeasance, as witnessed over the years in the foreign exchange market; in order, to “save” the Naira, the CBN would respond by raising the official exchange rate closer to the rates in the parallel market, this reaction would inadvertently induce higher fuel prices, and ultimately threaten the capacity of the CBN to achieve its prime mandate for price stability.

The outcome of such failure would be reflected as double digit inflation rates, higher cost of funds to the real sector and an even weaker Naira exchange rate; the combination of these indices will contract consumer demand, stifle investment and promote a higher level of unemployment as poverty deepens nationwide.

Instructively, the solution to rising fuel price will actually be found in a more sensible process of managing money supply to induce a stronger Naira exchange rate. For example, if the Naira exchanged for N100=$1, the “subsidy free” price of fuel will fall below N70/ litre, so that a minimum sales tax of N17/litre can be imposed on each of the 40million litres of petrol consumed daily in this country, if market price remains at the current price of N87/litre.

Meanwhile, such a stronger Naira exchange rate would gradually evolve if dollar denominated revenue is not substituted with fresh creations of Naira values as monthly allocations to the tiers of government.

Save the Naira, Save Nigerians!!

Mr. President: Beware of the day of subsidy removal N18,000 minimum wage earner, for example, would struggle to keep alive, and pensioners would also groan under the yoke of inflation; consumer demand would contract and industrial capacity utilisation would also further recede, while new investments may be put on hold; clearly, such outcomes will not improve the level of employment in the country and will certainly deepen poverty nationwide.

Despite such a desperate social scenario, subsidy abolitionists would counter that at least fuel supply and price will be stable and Nigerians do not have to spend the whole day searching for petrol. Besides, it is assumed that once price control is eliminated, more investors would establish new refineries and the resultant competition will bring down prices; notwithstanding, the reality, of course, is that the expectation for lower prices may regrettably never materialise if the experience of diesel price deregulation is anything to go by; diesel currently sell well above petrol despite its deregulation, and there is nothing to suggest that the price of petrol would fall if subsidy was also abolished from PMS (petrol) pricing.

Besides, it is also uncertain how long the deregulated market price of N140/litre, would hold, particularly if the Naira exchange rate suffers further depreciation.

This correlation between fuel price and Naira exchange rate

is clearly demonstrated in the recent past, when a ‘lowly’ crude price of about $60/barrel (down from over N100/barrel) instigated actual market petrol price of about N140/barrel; the unexpected price rise was clearly the result of the fall in value of the Naira from less than N160/$ to almost N200/$. Indeed, even if crude price further slides below $60/barrel, petrol price will still rise well above the subsidy free price of N140/litre. For example, if in response to market pressure, the Naira further depreciates to say N300=$1, the deregulated pump price of fuel may still spiral well above N200/litre!

The inevitable public resistance to a higher fuel price will temporally stall supply from marketers, scarcity will persist and long queues will surface once more, while fuel will sell on the black market for over N400/litre, and the usual pain from the resulting social and economic

Despite such a desperate social scenario, subsidy abolitionists would counter that at least fuel supply and price will be stable and Nigerians do not have to spend the whole day searching for petrol

dislocation would prevail once again. Ultimately, as in the past, the public will succumb and accept what is clearly the more ‘benign’ price of N200/litre, with the expectation that adequate supply will become available to once again reduce their sufferings.

Incidentally, the higher fuel price also comes with the collateral of spiraling inflation, which will threaten the purchasing value of the Naira; ironically, if the systemic burden of surplus Naira in the economy also subsists, further Naira devaluation would become inevitable. In such event, the Naira could subsequently exchange for between N250N300=$1. Thus, even if crude price remains low, domestic pump price will still rise if the Naira exchange rate further depreciates. Sadly, this cycle of inflation, devaluation, higher fuel price and more devaluation would become endless with disastrous social and economic consequences; clearly, efforts to alleviate poverty or jumpstart agricultural or industrial growth would fail in such a disenabling environment. This phenomenon has been replicated in several African countries, notably, Ghana and Zimbabwe.

Don’t let anyone tell you it cannot happen in Nigeria; indeed no one would have believed that the Naira which once exchanged for 50 kobo=$1 will today exchange on the black market for over N220/$1, yet the pressure on the Naira remains unabated.

Business & Economy

Deposit rules hurting profits, says FirstBank boss G roup Managing Director/ CEO of FirstBank of Nigeria Limited, Bisi Onasanya has called on the Central Bank of Nigeria to ease regulations as they are hurting profits and causing some foreign investors to shun Nigeria’s economy.

"A rule forcing banks to place 31 per cent of deposits with the regulator needs to changed.

The requirement should be lowered or the central bank should pay interest on the funds," he said.

“The existing cash reserve regime is not helpful,” Onasanya said in an interview during a Bloomberg conference

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at the Nigerian Stock Exchange in Lagos.

“First Bank has close to N650 billion ($3.3 billion) sterilised at the central bank at zero per cent interest. These are funds we pay interest on. So you can imagine the impact this has on our revenue-generating capabilities and our ability to fund loan obligations.”

The Central Bank of Nigeria has increased reserve requirements as part of measures to bolster the naira, which fell 18 per cent against the dollar in the past year as crude prices slumped.

Ratcheting up the ratio reduces

the amount of naira in circulation, helping to bolster its value.”If the central bank must keep that level, which I feel is very high, it should be complemented with some cushioning effects,” Onasanya said. “The central bank should consider remunerating, even at the average cost of funds, for banks to be able to meet their funding costs.”

International investors are shying away from Nigerian stocks partly because of the regulations, Onasanya said.

“You can see portfolio investors now taking a wait-and-see attitude,” he said.

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