MARCH 7, 2016

CMYK

Having been in operation for overeleven years, investors are still

unable to access the accumulatedpension fund which is in excess of N5.3trillion due to inability to meet criteriain the investment guidelines.

Investigation by Financial Vanguardrevealed that Pension FundAdministrators, (PFAs) in charge ofchanneling the fund into qualifiedinvestment vehicles are yet to see any

credible investment vehicle fromNigerians.

Even government bodies, especiallystate governments that are clamouringfor the fund to be invested ininfrastructure have not been able tocome up with an infrastructure bondas the guideline stipulates.

Minister of Works, Power andHousing, Mr. Babatunde Fasholarecently approached pension operatorsto see if part of the fund could bechanneled into infrastructure but wastold that even the Federal Government

must meet the criteria in the guidelines.Aside from the government, other

interested investors have consistentlyfailed to meet the requirements asstipulated in the investment guidelines.As such, the fund has continued to beinvested in zero risk investmentvehicles, despite the fact that theinfrastructure deficit of the countryneeds long-term funds for investmentin the sector.

Although the guidelines clearly statethe investment criteria, Financial

Vanguard's findings showed that theNational Pension Commission,(PenCom) ensures that interestedinvestors abide strictly by the law.PenCom ensures that in the case ofinfrastructural investment, there mustbe a competitive bidding process forany contract, the bidders must bequalified to carry out the contract, theremust be a time limit for completion ofthe contract, there must be a monitoringteam to monitor the progress orotherwise of the contract, there mustbe experts to ascertain that the qualityof products the investors purport to buyare up to standard.

Due to these oversight functions ofPenCom, Nigerians have not been ableto access the fund as most investors thathave come forward to use part of thefund for investment are merely lookingfor quick profits, while PenCom on itspart stands guard to ensure thatpensioners’ money are not wasted onunrealistic projects.

Director-General of PenCom, Mrs.Chinelo Anohu-Amazu said, “I havealways been a proponent of investmentin infrastructure for a simple reasonthat this is one investment if handledproperly would benefit both thecontributors and retirees alike. TheFederal Government bonds are safe butit is not something you can see andfeel like infrastructure.

“When we were doing this reform in2001/02, we were in Mexico and hadgone to other South American countrieswhere they have implemented thecontributory system. We were goingdown a road and what we saw on thesignboard on the road was ‘contributorypension fund.’ This is the kind of thingwe want to see in Nigeria. Ten yearsdown the line there is no suchsignboard in Nigeria and the funds aregrowing. Who will use the roads?

“The reason for the criteria in theguideline is to make sure that the fundsare safeguarded, shrouded from thevagaries of human discrepancies andall. Countries like Singapore andCanada have utilized their pensionfunds effectively for their citizens. It isnot something that is outlandish; thekey thing is: How did that utilisationhappen?

“Why are Nigerians not meeting theguidelines? What is preventing thosewho are looking to build things for thecommunity from meeting the

LAUNCH - From left: Steve Judo, General Manager, Special Duties, Channels Television; Bola Onadele Koko, MD/CEO, FMDQ OTC Securities Exchange; John Momoh, Chairman/CEO, Channels Media Group, and Emmanuel Ukeje,Director, Financial Markets Department, CBN, at the live launch of FMDQ Price Ticker Tape on Channels Televisionin Lagos. PHOTO: AKEEM SALAU

Continues on page 18

By ROSEMARY ONUOHA

Why FG, other investorscan't access N5.3 trnpension fund

INFRASTRUCTURE:

18 —18 —18 —18 —18 — Vanguard, MONDAY, MARCH 7, 2016

Continues on page 19

Cover

The Nigerian Palm oil Industry:What went wrong and theway forward (2)

Continued from page 17

Palm oil owes its significance in the Nigerian schemeof things to several reasons. Besides conventionaluses in food-processing, every part of the tree has

economic value that can be employed in a variety of low-cost activities like roofing and wickerwork. Moreover, palmoil is a source of raw material for a whole range of industries;for instance, those involved in the manufacture of detergents,pomades, confectionary fat and margarine. By virtue of thisalone it offers massive scope for employment generation andincome distribution, to say nothing of other diversifiedproducts like palm kernel oil. The industry has thereforebeen widely regarded as a high-growth business by theprivate sector. In countries like Malaysia and Indonesia,which together account for 90% of current global exports,palm oil has proved to be a cornerstone of industrial growth.

For Nigeria, this dynamic crop represents an economic assetof incredible potential. It also represents huge opportunitiesfor rapid SME development as a means to economicdiversification, poverty alleviation and employmentgeneration. The palm oil industry is unquestionably vital inAbuja’s plans for accelerated growth and the establishmentof a sustainable and closely interdependent economy.Reinvigorating the industry can very well spark off theenterprise revolution that the country need to turn its fortunesaround. Government intervention in this sector must hencebe guided by a number of critical considerations:

? Maximising productivity in existing plantations sothat scattered smallholdings can be converted intoviable agricultural ecosystems.

? Minimising cost of production by developing high-yield varieties and improving efficiency in basicprocessing and refining activities.

? Creating effective backward and forward linkagesfor palm oil production and processing activities withfocus on the larger domestic economy.

? Directing investment at marginal farmers andcooperatives that rely on wild groves or practicemixed farming on small plantations.

? Facilitating research and development, promotingpublic-private joint ventures and encouragingforeign investment with tax breaks and financialincentives.

? Revamping distribution and marketing networks toexport-orientated standards; entering bilateralcounter-trade agreements to avoid high tariffs andimport restrictions.

? Ensuring compliance with international regulationson safety and quality of palm oil and processedproducts through wider use of technology.

? Implementing policies to address negative socialdevelopment issues; for instance, promotingbackward migration from urban areas to plantations.

A total of #746 billion worth of Agricultural products wasimported into the country in the third quarter of 2015, despitecurrency restriction imposed on manufacturers of someagricultural items. This is to encourage local products likepalm oil.

Palm oil producers desire to increase their production. Thiscould only be done by growing high yielding variety asmentioned above, improving efficiency in milling, crushingand refining and balancing the rising cost of land labour.

The Nigerian Institute for oil Palm Research (NIFOR) isnow producing hybrid seedlings capable of matchingMalaysian output of 4 tonnes per hecters. What is necessarynow is to improve capacity to use the most modern processingtechniques and also improve the infrastructure. All thesewill combine to boost production.

guidelines? What is preventingyou from having access to thepension fund?” Anohu-Amazuqueried.

“If the PFAs per chance investin something they ought not tohave invested in, it would readon its raider that instant andthey have two options, either torescind the transaction or wewill take our license back, verysimple. Now if we haven’t seena lot of investment ininfrastructure it is because a lotof people have not met theguidelines,” she said.

Guideline on investment ofpension fund in infrastructure

PenCom set the minimumvalue of individual projects thatpension fund assets could beinvested in at N5 billion.

According to PenCom, asmuch as 15 per cent of the totalvalue of pension fund assetsunder management could beinvested in infrastructurethrough infrastructure bondsand another 5 per cent of thetotal value of pension fundassets could be invested ininfrastructure throughinfrastructure funds, making 20per cent of the total value ofaccumulated pension asset.Also, both outlets must meet theconditions for the investment ofpension fund in infrastructurebefore PFAs could channelpension fund assets into suchinvestments.

The pension regulator citedsection 5.2.3 of the draft“Regulation on Investment ofPension Fund Assets” saying itprovided that pension assetscould be invested ininfrastructural projects througheligible Bonds, Sukuk subjectto two major conditions.

“The infrastructure projectshall be not less than N5 billion

in value and awarded to aconcessionaire with good trackrecord through an open andtransparent bidding process inaccordance with the due processrequirements set out in theInfrastructure Concession andRegulatory Commission Act(ICRC Act) and any regulationmade pursuant thereto andcertified by the InfrastructureConcession and RegulatoryCommission (ICRC) andapproved by the FederalExecutive Council (FEC),”PenCom said.

Other conditions for theinvestment of pension assets oninfrastructure include that theproject's business plans andfinancial projections indicatethat they are viable as well aseconomically and financiallyrewarding for investment bypension funds.

The Bonds or Sukuks issuedto finance the infrastructureproject shall have robust creditenhancements includingguarantees by the FederalGovernment or eligible bank/development finance institutionor MDFOs and a maturity datethat precedes the expiration ofthe concession.

It should also have a feasible

and enforceable redemptionprocedure in the event ofproject suspension,cancellation or, in the case ofregulated sectors, whenchanges in regulatory or policydecisions make the project todiffer significantly from itsoriginal financial projections.

Where infrastructure projectsare financed throughinfrastructure funds, the valueof the infrastructure fund shallnot be less than N5 billion andthe infrastructure fund musthave a well defined andpublicised investmentobjectives and strategy as wellas disclosures of pricing ofunderlying assets, includingany other necessaryinformation.

All annual financialstatements of the fund shall beaudited by reputable firms ofchartered accountants and theinfrastructure fund shall havesatisfactory pre-definedliquidity/exit routes such asIPO, sale to other PE Funds,Trade sale, sale to a strategicinvestor etc. The funds shallbe managed by experiencedfund managers, versed ininfrastructure financing andregistered with the Securitiesand Exchange Commission,(SEC) as fund managers.

Some other conditions for theinvestment of pension assets ininfrastructure include that aminimum of 60 per cent of theinfrastructure fund shall beinvested in projects withinNigeria and where aninfrastructure fund does nothave development financeinstitutions or MDFOs as co-investors, but the fund managerhas a minimum investmentmanager rating of BBB issuedby a rating company registeredor recognised by SEC and the

Infrastructure: Why FG, other investorscan't access N5.3trn pension fund

CELEBRATION - From left, Head, Corporate Communications Division, Ayoni Trimnell; Head,Transaction and E-Banking, Rob Giles; CEO, Diamond Bank,Uzoma Dozie; Head, MSMEProposition, Njideka Esomeju and Head, Corporate Planning, Lanre Showunmi during the celebrationof one millionth diamond mobile application user at Diamond Bank's head office, Lagos.

Now if wehaven’t seen alot ofinvestment ininfrastructureit is because alot of peoplehave not metthe guidelines

CMYK

Vanguard, MONDAY, MARCH 7, 2016 — 19— 19— 19— 19— 19

Continued from page 18

Cover

fund manager shall retain aminimum investment of 3 percent of the infrastructure fund.

Where the infrastructure fundhas development financeinstitutions or multilateraldevelopment financeorganisations as co-investors,the fund manager shall retaina minimum of 1 per cent of theinfrastructure fund and thefund shall have an advisoryboard with independentrepresentatives of institutionalinvestors being in majority.

And prior to investment andduring the tenor of investment

in any infrastructure fund, PFAsare to ensure that the advisoryboard has responsibility overaudit functions regarding theevaluation of projects prior toinvestment; transactions withparties related to theinfrastructure fund managerand strategies concerningdivestiture of investments inwhich the private equity fundhas interests.

Way forwardIn order to ensure maximum

utilisation of the pension fund,PenCom is of the opinion thateven before investors go aheadto float a bond, they shouldstudy the investment guidelinesthoroughly.

Anohu-Amazu said, “If youare desirous of the pensionfund going into yourinvestment, study theguidelines. So that at the timeyou are creating that bond youare ready.

Former Director General ofLagos State Pension

Commission (LASPEC), Mr.Rotimi Hussain said that it isideal that the pension industryleft the fund strictly in the handsof pension fund administratorsand custodians because theyare the professionals.

He said that pension fundshave been so seriously ring-fenced that in over eleven yearsof practice there has never beena single case of fraud beingreported.

Hussain said, “But it could getto a worrisome level where you

keep accumulating funds andyou leave that kind of fund inlow yield investment for yearsin a developing economy.PenCom have laid down theinvestment guidelines,however, if you study theinvestment guidelines closely,they are stringent because theconditions are so strict.

“It is important to note thatsafety of the pension fund takesvery high premium over andabove returns. Nobody says youshouldn’t make returns but notat the risk of losing money. Sothe industry is not going tothrow money after riskyinvestments,” Hussain stated.

Infrastructure: Why FG, other investorscan't access N5.3trn pension fund

In the early 1970’s through to the 1990’s, the Nigerian industrial horizonwas dotted with textile manufacturing industries. In the Kaduna-Kanoaxis, one recalls with nostalgia several large textile companies employing

thousands of Nigerians. It used to be an intriguing experience to be close toa textile mill. At the close of business, several employees will be trooping outof the premises of a textile company. It was like a market that has sold out allits wares.

Nigerians used scarce forexto kill textile industry

These textile mills wereusing local materials thatfurther employed millions offarmers. At the same time,Nigeria was exporting anestimated 25 to 30 per cent ofproduction, making theindustry an important earnerof foreign exchange forNigeria. At that time, insteadof being a consumer offoreign exchange, the textilesector earned the countrysome foreign currencies thatadded to the build up of thenation’s external reserves.Looking back on those goldenyears, the Central Bank ofNigeria (CBN)'s AnnualReport for 1995 showed thatout of 13 sub-sectors in theManufacturing sector, theTextile sector (Cotton, Textileand Synthetic Fabrics)accounted for a significantproportion of the overallgrowth of manufacturingproduction.

The sector was saving a lotof foreign exchange for thecountry as between 60 to 70per cent of the raw materialsused in the industry weresourced locally. As the sectoris labour-intensive, itprovided an estimatedemployment of around1,500,000 direct jobs forNigerians.

During this period, thetextile industry was at itspeak with 124 companies inexistence. But there are only30 textile companies inexistence in Nigeria today.This is a shocking reductionof 70 per cent. Despite the factthat global textile trade isbooming, these industries aregradually diminishing inNigeria. The reason behindthis is the influx of smuggledforeign textile products intoNigerian markets. Hugequantities of both new andsecond-hand garments fromAsian countries flood the

Nigerian markets. Domesticmarkets are facing a majorthreat from smugglersimporting cheaper textilefabrics from other countriesand selling them at a price,which is lower than the marketprice of garmentsmanufactured locally.

Where do these smugglersget their foreign exchangefrom? Of course, the parallelmarket which many Nigeriansare now using as the referenceexchange rate. This anti-socialbehaviour has led to theclosure of 90 textile mills anda layoff of about 1,500,000workers during the last decade.Data quoted by a Nigerian

Garment union states thatmore than one million people,whose jobs were indirectlyrelated to the textile industrylike cotton farmers, traders,suppliers etc have lost theirsource of revenue as a resultof these shutdowns.

It is unfortunate that thereare only about 30 operationaltextile mills which are runningat an average of 40 per cent ofinstalled capacity in Nigeriatoday. The influx of cheaperfabrics from China and Indiahas been highlighted as oneof the reasons forunderperformance in thisindustry. Based on trade datafrom the National Bureau of

Statistics, Nigeria spent aboutN24.7 billion on textile importsbetween July and Septemberlast year. This represented a17 per cent decline in nairaterms from the N29.8 billionrecorded in the correspondingperiod of the previous year.

Nigeria had placed a ban ontextile importation in 2010 inorder to encourage domesticproduction. However, this ledto increased smuggling.Textiles also feature in theCBN’s circular of June 2015specifying 41 import items forwhich foreign exchange fromofficial sources is not available.Smuggled imported textilesaccount for over 85 per cent of

fabrics sold locally. It isNigerians that are buyingthese imported goods, killingthe local industry, sendingseveral Nigerians out of jobswhile increasing the jobopportunities in Asia, Europeand America by patronisingtheir products. It is the sameNigerians that are using thecountry ’s scarce foreignexchange to import thesegoods. Yet, they bendbackwards to accusegovernment and CBN of notmaking enough foreignexchange available to privatesector operators.

The annual global output oftextile firms is estimated at$400billion. China’sproduction accounts for half ofthis figure. According to theCBN’s 2014 StatisticalBulletin, the value of cottonproduction in Nigeriacontracted by -1.1 per centyear on year in 2014 andaccounted for 5.1 per cent ofcrop production GDP in thesame quarter. The Bank ofIndustry blames stategovernments’ failure toimplement the NationalCotton, Textile and Garmentpolicy in their respective statesfor the collapse of textilecompanies across the country.It is the shame of a nation thatgovernment officials fromTurkey are currently visitingNigeria and Turkey happensto be an important cottonproducer and has a well-developed domestic textilesindustry. Maybe thisgovernment wants to learnfrom Turkey, how to growcotton and develop the textileindustry that was oncebooming in the country. Nowthat Nigeria is cash-strapped,anything in the name ofdiversification goes.

What a shame, what a pity,what a nation to weep for.

CMYK

20 — Vanguard, MONDAY, MARCH 7, 2016

Business & Economy

FORUM - From left: Pharm Nkiru Omenyi, MD, Daruchi Products Ltd; Mr Nnamdi Okafor,May and Baker; Mrs Edith Nwachukwu, MD, Audion Pharmacy Store, Lagos and Pharm NgoziEzeani, Chief Pharmacist, Havana Specialist Hospital during the May and Baker 2016Customers forum held in Lagos.

BY NAOMI UZOR

Vice Chancellor, AhmaduBello University, Prof.

Ibrahim Garba, has said thatthere are about 40 differentkinds of solid minerals andprecious metals buried inNigerian soil waiting to beexploited.

The commercial value ofNigeria’s solid minerals hasbeen estimated to run intohundreds of trillions of dollars,with 70 per cent of theseburied in the bowels ofNorthern Nigeria.

The Professor stated this inhis paper presentation titled;Mineral Resources andMining in Nigeria:Investment Opportunities andChallenges’ at a seminarduring the 37th Kaduna

40 solid minerals awaitingdevelopment, says ABU V-C

International Trade Fair.He said If Nigerians were

taking data seriously; wewould have built a database,where we have authenticinformation, noting that thefailure of Nigeria, sinceindependence in 1960, to putin place a structure that willmake the benefits of theexploitation of solid mineralsavailable to all Nigerians hasbeen the bane of the nation.

At the moment, he stressed,

mining of minerals in Nigeriaaccounts for only 0.3 per centof its GDP, due to the influenceof oil resources. The domesticmining industry isunderdeveloped; leading toNigeria having to importcommodities it could producedomestically, such as salt oriron sheets and billets.

According to him, solidmineral deposits are scatteredall over Nigeria, with moredeposits in certain areas than

others. Over 40 million tonnesof talc deposits have beenidentified in Niger, Osun,Kogi, Ogun and Kadunastates. There are hugedeposits of coal ranging frombituminous to lignite in theAnambra Basin of South-Eastern Nigeria.

He noted that the low activityin the solid mineral sector isnot yielding the desiredfinancial benefit as there areno records of payment of taxesand royalty to the government.Nigeria is losing lots ofresources from untappedmineral deposit as well as fromthe little that is being minedmostly by illegal miners whosmuggle the products out ofthe country.

“Despite the fact that Goldand Barites were being minedacross the nation, there is norecord to show that theseminerals are among the minedor exported minerals. Furtherfinding shows that barites aremined in Benue andNasarawa states, despite highactivities of miners there areno record of royalty payments.

“From the available recordsof the Ministry of Mines andSteel Development, there wasno evidence of royaltypayment on these exportedminerals. The NigeriaMinerals and Mining Act 2007requires that any exporter ofsolid minerals must requestfor permit to export minerals.But in defiance to the Act,there was no availableevidence of request for permitor approval to export mineralsby the companies,” he stated.

ORGANISED Labourin the nation’s Textile and

Garment industry has called foran all inclusive presidential task-force not only against smuggling,but also to confiscate goodssmuggled into the country.

In a statement, Issa Aremu,General Secretary of the NationalUnion of Textile and Garment andTailoring Workers of Nigeria,NUTGTWN and Chairman,IndustriALL Global Union, SubSahara Africa, said: “We areexcited by President Buhari’scommitment to revive the textileindustry. All the administrationneeds is to immediatelyimplement the RobustRecommendations of the 2015Cotton, Textile and Garment,CTG, policy.”

He added that as recommendedin 2015, that “all military andPara-military agencies andGovernment schools are topurchase only Nigerian madetextile and garments for theiruniforms once the requisitestandards are met.

In addition, he said that theprivate sector (schools inparticular) should be encouragedto source their materials locally.

Aremu said between 30 percentand 35 percent of textile andgarment manufacturing costs areenergy related expenses, notingthat without addressing theindustry’s energy needs, theNigeria CTG sector simplycannot develop.

Labour callsfor presidentialtask-forceagainstsmuggling

By VICTORAHIUMA-YOUNG

Climate change has beendescribed as the greatest challenge

of all times for humanity, with potentiallyhuge, negative consequences foragriculture.

This assertion was made by ProfessorFrancis Adesina of the Department ofGeography, Obafemi Awolowo University,Ile-Ife, Osun State, while delivering alecture on the topic, ‘Some Thoughts onClimate Change, Agriculture,’ at theBritish American Tobacco NigeriaFoundation (BATNF) ImplementingPartners workshop.

Professor Adesina noted that the impactof climate change is felt most on “exposedsystems, “which he said include rain-fedagriculture.

He traced the genesis of global warmingto 1880, noting that successive years sincethe 19th Century have been hotter, with2015 being the hottest year. He regrettedthat Nigeria and other developingcountries are most susceptible to the harsheffects of climate change due to poor waterstorage system, which he said has graveimplication for agriculture.

Climate change, major challenge toagriculture development — DON

By NKIRUKA NNOROM “Considering the very high consumptionof rice in Nigeria, nowadays, if you mustcontrol climate change, one of the crops youneed to control is rice because of its highwater demand,” he said, while emphasizingthe need for farmers to be climate smart.

He noted further that climate change signsare evident and cited the example of theabsence of an August break in 2015.

Earlier in his address, a BATNF TechnicalCommittee member, Prof Chidi Ibe,reiterated the need for farmers to developthe capability to adapt to climate change.One of the achievements of climate changeadaptation, he noted, is the development ofa drought resistant rice variety.

Other contributors to the climate changediscourse also called for greater agriculturalwater management programme and thedevelopment of a water harvesting culture.The Implementing Partners were alsoadvised to regularly access information fromthe Nigerian Metrological Agency (NIMET)and interface with farmers in disseminatinginformation on climate change. A case wasalso made for the proper inspection ofbeneficiary farmers by the ImplementingPartners in some of the BATNF cropenterprise implementation projects to ensuregreater compliance.

Federal Institute ofIndustrial Research,

Oshodi (FIIRO) has enjoinedentrepreneurs who have beentrained by the Institute toembrace contract productionscheme it has put in place inorder to realize their dreamsof becoming entrepreneurs.

Dr. Gloria Elemo, DirectorGeneral FIIRO, made thisappeal in Lagos, during theTechno-EntrepreneurshipDevelopment Training forUbulu-Uku Youths, DeltaState.

She also urged them not tomind any challenge or barrierthey would face whilebecoming business owners

FIIRO tasks entrepreneurs oncontract production

By FRANKLIN ALLIand employers of labour.

According to the DG,acquiring the skill is just oneof many steps to becoming theentrepreneur of your dream,taking a step further to startingthe business is another bigstep.

“I can assure you that youwill find tones of reasons whyyou cannot start now, thoughsome of these reasons cannotbe ignored totally especiallystart off fund.

“I want you to know thatonce there is a will, there willalways be a way,” she said.

She also informed them thatthere exist collaborationbetween the institute and theBank of Industry (BoI) infunding their projects, be itsmall, medium or large.

CMYK

Vanguard, MONDAY, MARCH 7, 2016 — 21

Send your reactions to:news@vanguardngr.com

The respectedeconomist, Mr.

Henry Boyo has neverceased to amuse me withhis numerouscommentaries in bothelectronic and printmedia. He has taken somuch pleasure and relishin every opportunitygiven to him by themedia to unleash his

Re: Devaluation: IMF versus Buhari— Henry Boyo’s ranting

By BAKAREADEMOLA

acerbic commentaries onthe Nigeria’s apex bank– the CBN. As if it wasorchestrated mediaappearance, the abovetitled caption at the backof The Punch andVanguard newspapersedition of Monday,February 29, 2016 and onthe popular Sunrise Dailybroadcast programme ofthe Channels Televisionof same day, therenowned economist and

characteristic of himsince I have beenreading his opposingviews of virtually every ofthe CBN monetarypolicies dated back toChief Joseph Sanusi’sdays as the Governor ofthe Bank to the presentleadership sounded as arehash of his usualplaying of the brokenrecord of excess liquidityin the system as theintractable problem of the

fate of the naira and theeconomy.

Though I had oncetaken the respected oldwar horse on sometimelast year on one of hisunpatriotic and selfishcomment on themanagement of theeconomy, particularlywhen the apex banksuspended 41 items fromit FOREX shop.However, I would haveignored him knowing

him for who he is, but theuncontrollable visible theanger on his face whenMaupe Ogun, one of theanchors of theprogramme asked himwhat he would have donebetter with his acerbiccriticisms of CBN’smonetary policies, if hewas in the saddle as thegovernor of the bank. Mr.Boyo responded almostjumping out of his seatthus, “it is a commonsense thing”, and you themedia have been soldlies over time and havebecome culprits in themismanagement ofeconomy”. Watchinghim in my view proffersno reasonable solutionbut his ritual rantinginability of every CBNgovernor to arrest themenace of excessliquidity in the economywhich he claimed was adeliberate scam beingperpetrated by the Bank.

Also in his back pagewrite up column of theabove namednewspapers, he wasquoted - “Indeed, if theIMF team sincerelyexpects sustainableinclusive growth forNigeria, there is no waythey would have failed toexamine the persistentcause of the systemicsurplus naira, whichforces the CBN toregularly commit toreckless. Some would sayfraudulent, financialmismanagement to fightinflation when itcompulsively sets torestrain borrowing andconsumer demand bymarginally reducing thepersistent irrepressibleliquidity challenge, withunreasonably highinterest rate paid onfunds which CBNborrows and simplystores as sterile and idledeposits”. In my view,there seems to be adisconnect betweenpolicies and expectedeconomic gains which isnot the fault of themanagers at the apexbank, but the efforts of thefifth columnist in theeconomy, the speculatorwho engages in roundtripping in order to shortchange the financialsystem. Even when theIMF team visited, led byits Managing Director,Ms. Christine Largade,they acknowledged the

efforts of the CBN and thefederal government forwhat they have done inthe economy, andobserved that if theNigeria can fix somenoticeable structuraldefects in the system,Nigeria would be one ofthe best economies the21st century is waitingfor. But rather than Mr.Boyo joining hands toapplaud the CBN asdone by the BrettonWood institutionventilated his frustrationon the IMF for closing itseyes on what he called‘CBN distortionalmonopoly of dollarsupply and serial nairadevaluation …’ While Iagree with him and manyother commentators thatdevaluation will not helpNigeria at this moment,the clamour fordiversification of theeconomy to makeNigeria competitiveinternationally is what weall should join handswith the CBN and thefederal government tobring to fruition what wehave mouthed fordecades, rather thanrubbishing every effort ofthe economic managers.This is not to say that Mr.Boyo’s commentaries arevalueless or unpatriotic,but he would haveemployed a better andmore dignified ways toget his views across tothose in authority insteadof trading them at themarket place for reasonsbest known to him. Itdiminishes his statureand the values he standsfor.

If he has beenthreading a moredignified path, those inauthority, past andpresent, would not haveignored him. He wouldhave been invited intogovernment to contributeand practice what hepreaches, butsurprisingly no one hasfound him useful. If heever wanted the positionof the governor of theapex bank, there aremore honourable anddignified ways to achievethis purpose thanrunning down orimpugning the integrityof those God has placedin those positions ofauthority.

The Holy Scriptureadmonished that‘promotion comes fromabove’, not byintelligence nor mightand those he haspromoted must besupported not to bepulled down.

CMYK

22 — Vanguard, MONDAY, MARCH 7, 2016

Banking & Finance

BY BABAJIDEKOMOLAFE

At a time when theNigerian bankingindustry is showing

signs of weakness in riskmanagement practices asreflected in resurgence ofhuge non performing loans,Fitch Ratings havecommended Access Bank forits ‘strong risk management’,and thus upgraded thebank’s rating to long-termNational Ratings to “A” from“A-” with a stable outlook.

The rating upgradeaccording to Fitch is areflection of theimprovement in thecreditworthiness of AccessBank over time relative topeers and to the best creditsin Nigeria.

Announcing the ratingupgrade, the companystated, “Fitch Ratings, aglobal leader in credit ratingsand research, has affirmedthe Long-term IDRs of AccessBank Plc (Access) andupgraded the NationalRatings. The NationalRating of the Bank has beenupgraded to ‘A(nga)’/‘F1(nga)’ from ‘A-(nga)’/‘F2(nga)’ to reflect theimprovement increditworthiness over timerelative to peers and to thebest credits in Nigeria.

“In Fitch’s opinion, bankswill continue to face multiplethreats in the course of 2016,particularly from tightforeign currency liquidity,worsening asset quality andpressure on regulatorycapital ratios. However,Access’ Viability Rating(VR) is affirmed as theserisks are to a large extentalready captured in theratings.

“Access Bank’s majorstrengths, which underpinits long and short-termratings, include its size andfranchise, its strong riskmanagement and thegroup’s solid capitalization.The bank’s improved ratingfurther reinforces its resolveto deliver leading innovativeand differentiated productsand services to its customersin its quest to become theworld’s most respectedAfrican bank by 2017.”

The upgrade corroboratesfeedbacks from RenaissanceCapital’s visits to NigerianBanks under its Client grouptrip to Nigeria, which stated“Overall, Access Bank cameacross as being the most ontop of risk management”.

Access Bank: Fitch upgrade forstrong risk management

Navigatingeconomicheadwinds

While the rating is anendorsement of the strong riskmanagement, corporategovernance and procedures ofAccess Bank, it is alsosignificant, given the concernsover the Nigerian economyfuelled by dwindling revenuefrom oil, decline in externalreserves and apprehensionover the value of the nation’scurrency, all occasioned by the70 percent decline in price ofcrude oil. Given the ubiquityof government spending in theNigerian economy, the fall inoil revenue has triggereddoubts over governmentsability to fund its budget andhence possibility of furtherslowdown in economicactivities. The Fitch upgradehowever indicates that AccessBank is able to effectivelymanage all the anticipated riskassociated with theseeconomic headwinds, and stillremain profitable.

Improved Earnings,Asset Quality andEfficiency

This is reflected in thebank’s operating results for thethird quarter ending 30thSeptember 2015. The resultsshowed that Access Bank,despite economic pressures,was able to increase itsearnings, grow its balancesheet size, and improved itsAsset quality as well as itsoperational efficiency.

According to the bank, grossearnings increased year-on-year by 42 percent to N258billion from N182 billionrecorded nine months endedSeptember 2014. Profit beforetax and profit after tax rose by

43 percent and 34 percent toN60 billion and N48 billionrespectively from N42 billionand N35 billion in 2014. TotalAssets grew to N2.4 trillion,up by 14 percent compared toN2.1 trillion as at end of 2014.

Reflecting improved assetquality, Credit qualityimproved in the third quarterof 2015 as the percentage ofnon-performing loans to totalgross loans was recorded at1.7 percent, a 50 basis points(bps) decrease from 2.2percent as at December 2014;while Coverage Ratio (withregulatory risk reserve)increased to 196 percent inQ1 2015 from 154 percent asat December 2014.Impairment charges increasedto ¦ 11.6 billion from ¦ 7.0billion in 9M 2014, with acorresponding rise in cost ofrisk at 0.8 percent from thesame period in 2014 (9M 2014:0.4 percent) largely incurredby collective impairmentrecognized on medium tolarge sized exposuresfollowing the reassessment ofloans, on the back of prevalentmacro-economic conditions.

In terms of operationalefficiency, the bank recordedNet Interest Margin (NIM) of5.9 percent in nine monthsended September 2015, upfrom 5.6 percent in Q2 2015,reflective of improved yield onassets on a quarter-on-quarter basis. Cost of Fundsincreased by 90bps y/y to 5.4from 4.5 percent in 9M 2014but improved by 40bps on aq/q basis (Q2 2015: 5.8 percent); reflective of the continuedhigh interest rateenvironment. Cost to IncomeRatio (CIR) was recorded at59.6 percent, down 160bpsfrom 61.2 percent in 9M 2015,supported by strong revenuegrowth during the period.

In addition to showing the

resilience of Assess Bank, theresults, also show theemergence of the bank as the3rd largest bank in allindices, and its steady accentto becoming largest bank inthe country.

Commenting on the results,Group Managing Director/Chief Executive, Access BankPLC, Mr. Herbert Wigwe,said, “The Bank continues tomaintain strong growth inearnings reflecting ourcommitment to deliver on ourobjectives for 2015. TheGroup posted a PBT of ¦ 60bn(Sep’14: ¦ 42bn), in spite ofthe significant policyheadwinds in the first ninemonths of the year.

“We continue to invest intechnology, enhance ourprocesses and improveservice delivery whilstreducing cost as we deploysimple and efficient digitalsolutions to meet the needsof our customers. The recentupgrade of our core bankingapplications will act ascatalyst for the sustainablegrowth of our retail base anddeepen our share in key focusmarket segments”.

Since its transformation in2002, Access bank has growninto, with a network of 364branches and service outletslocated in major centresacross Nigeria, Sub SaharanAfrica and the UnitedKingdom.

Ranked amongst Africa’stop 20 banks by total assetsand capital in 2015, AccessBank is a financialpowerhouse which hasconsistently defied industryand economic challenges tocreate value for stakeholdersand benefits for customers.The bank under its currentleadership is poised tocontinue with its rich historyof accomplishments.

ASSEMBLY- From left: Mr. Olalekan Akodu, Permanent Secretary, Ministry of Commerce,Industry and Cooperatives; Prince Rotimi Ogunleye, Honourable Commissioner for Commerce,Industry & Cooperatives: Hon. Oladele Adekanye, Chairman, House Committee on Commerce,Industry & Cooperatives and Chief (Mrs.) Nike Akande, President, Lagos Chamber of Commerceand Industry at the 5th Lagos Corporate Assembly held recently in Alausa, Ikeja.

Concerned about thecountry ’s gnawing

economic challenges, theGroup Managing Director ofCFL Group of Companies, Mr.Lai Omotola at the weekendproposed the establishment ofCollateral Bank, which hesaid, could help over 10million businesses accesscapital.

Omotola, an infrastructuredevelopment financier,argued that the establishmentof the bank became imperative“to unlock access to capital bybusinesses and entrepreneursin Nigeria.”

He advocated theestablishment of the collateralbank in a letter he addressedto President MuhammaduBuhari and the Governor ofCentral Bank of Nigeria(CBN), Mr. Godwin Emefieleon February 29.

In a two-page document hepersonally signed, the chiefexecutive lamented diversedifficulties the lack ofcollateral securities hadcreated for businesses,entrepreneurs and high-netindividuals in the country,which he said, had contributed“to our prevailing economiccrisis.”

Omotola cited the case ofvarious intervention fundsthat the CBN “has providedfor different sectors of theeconomy.” He also cited thecase of thousands ofindividuals, who havebeautiful business plans, butcould not access capital toexecute their business plan.

He thus said the need toprovide collateral securities toaccess either the funds orbusiness capital “hasremained a huge challenge.This is not only for theintervention fund, but also thebank loan and other capital.”

The chief executive thereforenoted that the market for thecollateral bank “is estimated atN15 trillion. If fully harnessed,it can be a panacea forunlocking capital for theeconomic growth of Nigeria.”

He further explained themarket worth of the collateralbank, noting that thecountry’s total exposure ofbanks, governments andorganised private sectors tocapital “is N12 trillion.Currently, we do not have upto 10 percent people andbusinesses that should haveaccess to capital.”

Industrialistwrites Buhari,proposesN15trncollateral bank

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Vanguard, MONDAY, MARCH 7, 2016 — 23

Corporate Finance

By NKIRUKA NNOROM

Niger Delta Exploration&

Production (NDE&P)Plc listed on NASD OTC Plc,an over-the-counter securitiesexchange, has assured itsshareholders of enhanceddividend payment in thecoming years, even as it hasrevealed plans to raise $400million from the domesticcapital market.

Speaking at NASD OTCMarket analysts forum andconference call in Lagos, theManaging Director/CEO, Dr.Layi Fatona, said thecompany has consistentlypaid dividend in the last eightyears, in addition to enjoying10 years of uninterrupted oiland gas production in thecountry.

He said: “For ourshareholders, there has beensubstantial value add. Wehave successfully andconsistently paid dividend inthe last eight years and forthose of our shareholders whoactually know us, I think

Stanbic IBTChighlightsopportunities innew bankingsolutions

By NKIRUKA NNOROM

Stanbic IBTC Bank, amember of Stanbic

IBTC Holdings Plc, haslaunched a nationwidecampaign that offers bespokefinancial solutions to helpindividuals and businessesachieve their aspirations.

Tagged Switch, thecampaign aims atencouraging individualsand businesses to harnessvast opportunitiesembedded in Stanbic IBTCBank’s bouquet of productssuch as its salary or businessaccounts.

Speaking at the launch inLagos, Executive Director,Personal and BusinessBanking, Stanbic IBTCBank, Mr. BabatundeMacaulay, said the need toenrich the bankingexperience of Nigeriansnecessitated the launch.According to him, thefinancial needs of today’sbank customer are verydynamic and as a result,there is a constant demandfor financial solutions thataddress specific needs inreal time. The expertise andexperience of the StanbicIBTC Group across thespectrum of financialservices ensure that the bankis able to provide solutionsthat meet and exceed suchneeds, Macaulay said.

“The Switch campaign isaimed at ensuring thatNigerians enjoy the bestfinancial servicesexperience. At StanbicIBTC, we fully understandthe need by bankingcustomers for quality andtimely financial solutions atminimal cost, and weconstantly strive to provideinnovative banking solutionstailored to those needs,”Macaulay said.

The bank highlighted someof the benefits an individualstands to gain by switchinga salary account to StanbicIBTC Bank to include: access to 55 days interestfree credit card, the best inthe market now; access to upto 100% of salary advance;best rates on internationalspend on debit cards; accessto personal loans; adedicated relationshipmanager that will ensurethe customer ’s needs areattended to promptly; andaccess to internet and mobilebanking.

Vitafoam embarks on cost reductionmeasures to boost profitability

BY PETER EGWUATU

Vitafoam Nigeria Plc hascommenced measures

of reducing operating cost toboost profitability and enhanceshareholders’ value.

The company has noted thatit has almost concludedarrangements to commenceproduction of oil filters andallied motor spare partsthrough its newly establishedsubsidiary.

Addressing shareholders atthe company’s Annual GeneralMeeting (AGM) in Lagos, theChairman, Dr. DeleMakanjuola explained thatthe on-going inclementoperating environment hadforced the company’s Boardand Management to embarkon cost saving initiative inorder to sustain the company’scompetitive edge.

Makanjuola who reviewedthe current challenges facingmanufacturing firms inNigeria stated that Vitafoamwas able to remain profitabledue to the prudent approachtowards management ofhuman and material resources:“The foam business isoperating in a verycompetitive environment.There are over 300manufacturers. It is stressful tooperate in the foam industry.As professionals, we havetried to keep administrativeand financial cost undercontrol. This prudent approachenabled us to generate profitsand declared dividend. of 25

kobo per share in anenvironment where manycompanies are closingbusiness. We were able toachieve this feat despite thehigh cost of operationbecause of our carefulmanagement practice.

“ As we try to control ourcost, we have decided to limitour exposure to our

subsidiaries to a maximum of40 percent. This is expectedto relieve us of financialburden of 100 per centownership. We can alwaysraise 60 percent equitythrough private placement.

“ We have almost concludedplan to commence productionof oil filter in our newsubsidiary . As for Vono

Products, we shall keep thebrand. We have gone to theCorporate AffairsCommission (CAC) to ensurethat the brand is not takenaway” Makanjuola said.

Corroborating him, theGroup Managing Director,MrTaiwo Adeniyi said thatthe decision to float a newsubsidiary, Vitaparts NigeriaLimited was to provideproducts for motor spare partswhich is in high demand. Weshall enjoy pioneer status inthe country as there is nomanufacturer of these partsyet in the country.

Adeniyi who assured theshareholders of higher valuelamented the effects of forexscarcity and imported rawmaterials on the production offoams in Nigeria .He howeverexpressed optimism thatVitafoam would continue tooperate optimally asmeasures have been put inplace to strengthen thecompany’s operations withcost saving approach.

Many shareholderscommended the company’sboard and management forthe good performance in spiteof the tough businessenvironment while someadvised for more cost controlmeasures. In givingassurance of continuousimproved performance, theMakanjuola declare that:“Despite this uncertaindisturbing outlook, ourcompany will remain resolutein the implementation ofnascent strategies that willenable the harvesting of low-hanging opportunities in theeconomy to improve growthprospects across severalmarkets.”

Niger Delta E&P pledges enhanceddividend payment to investors

waiting for our dividend is anannual ritual at our AnnualGeneral Meetings (AGMs).

“So when you put all thesecharacteristics of the company;producing oil, producing gas,processing oil and processinggas, I think we truly qualify tobe described as a fullyintegrated Nigerianindependent oil and gascompany.”

On the fresh capital raise, hestated that the company hascommenced raising $100million, while raising of theremaining $300 million wouldstart on conclusion of the firstphase in the next couple ofweeks.

According to him, the fundraising exercise would enablethe company to reposition byincreasing its refining capacityfrom 1,000 barrels per day to5,000 barrels per day. It wouldalso enable it to acquire newassets and capitalize on its gasproducing ability.

“As Oil Company, ourappetite for money is voracious,and three years ago, we endedup in N600 million

transactions, buying 45 percent divested interest of Shell,Total and Agip from one of theoil and gas producing assets,west of the Niger Delta. So, fewyears ago, we decided that forus to continue this kind ofinvestment, we need verysignificant wallet, and wedecided that with theauthorization of ourshareholders, we will raisesome $400 million dollars,”Fatona explained.

Laying the company’s 2015results before the analysts, Mr.Deji West, Group ChiefOperating Officer, NDE&P Plc,explained that the companyhad a tough year in 2015, butnoted that measures are beingput in place to cushion thelosses in current financial year.

Speaking at the event, Mr.Bola Ajomale, ManagingDirector, NASD OTC Plc, saidthe markets analyst forum is inline with the Exchange’stradition of promoting atransparent market. He notedthat NDE&P has been tradingon its platform for the twoyears.

AGM: From left: Company Secretary, Vitafoam Nigeria Plc, Mr. Olalekan Sanni; Chairman,Dr. Bamidele Makanjuola; and Group Managing Director, Mr. Taiwo Adeniyi, at the AnnualGeneral Meeting, AGM of Vitafoam in Lagos.

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24 — Vanguard, MONDAY, MARCH 7, 2016

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Vanguard, MONDAY, MARCH 7, 2016 — 25

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26 — Vanguard, MONDAY, MARCH 7, 2016

Homes & Housing Finance

Stories byYINKA KOLAWOLE,with agency report

Another USmortgage crisislooming

The U.S. could beheaded for a new

mortgage crisis by thissummer, Richard X. Bove,Vice President of EquityResearch at RaffertyCapital Markets, said in areport.

Bove highlighted howmuch control thegovernment now has overthe nation’s mortgagemarkets and explainedhow this could be a recipefor disaster. He pointed outthat the U.S. governmentnow insures one-fourth ofall new residentialmortgage loans andpurchases one-sixth of allresidential mortgage loansissued.

Further, government-sponsored enterprisesFannie May, Freddie Macand Ginnie Mae own orensure three-fifths of allcurrent outstandingmortgages in the country,and the problem is gettingworse and worse everyquarter, he said.

APBN seeksimprovementin housing

President, Associationof Professional

Bodies of Nigeria (APBN)Mr. Foluso Fasoto hascalled on the federalgovernment to improve thehousing development inthe country to ensureaccess to habitable andaffordable housing byNigerians.

Fasoto stated this inAbuja during the Boardmeeting of theprofessional bodiescomprising presidents of28 professional bodies andState chapters ofChairmen of APBN. Hedebunked claims that thedrop in price of oil in theinternational market wouldaffect housingdevelopment.

He maintained thatmembers of APBN in thebuilt sector wascollaborating withrepresentatives of thefederal government toimprove housing deliveryin line with globalstandard adding that thepublic would soonappreciate their effortstowards sustainablehousing delivery.

The foreign exchangecrisis currently rockingthe Nigerian economy

has rendered most ongoingconstruction projects in thecountry unviable, accordingto the Federation ofConstruction Industry(FOCI), the employerorganisation for building andcivil engineering contractors,sub-contractors, as well asplant and equipmentsuppliers in Nigeria.

FOCI disclosed in astatement jointly signed by itspresident and DirectorGeneral, Mr. SolomonOgunbusola and Mrs.Olubunmi Adekoje,respectively, that the state ofthe construction industryrequires urgent intervention,and therefore called on thefederal government set up abail-out fund to rescue theindustry.

“Most projects wereawarded when the exchangerate was $1 to N165.00.However, the currentexchange rate of $1 to aboutN400 has rendered theprojects non-viable and totallyunprofitable. Thedepreciation of the nairaagainst the dollar has led to

Forex crisis renders constructionprojects unviable —FOCIserious difficulties inprocurement of machinery,spare parts and payment ofexperts for specialisedassignments. Constructioncompanies have been forcedto leave construction sites dueto lack of funds. This leads tochallenges in payment of

workers’ salaries and parkingof capital intensiveconstruction equipment. Theparked constructionequipment are depreciatingfaster due to non-usage andare at a risk of being renderedobsolete.

“To compound the

challenges, workers in theindustry are agitating forupward review of theconditions of service. This isdespite the fact that about 75percent of the workers havebeen laid off while theremaining 25 percent arebeing maintained on highinterest loans rate from thecommercial banks”, the groupstated. To effectively tacklethe challenges, FOCItherefore appealed togovernment “for an urgentbail-out and quickintervention so that workerswho have not receivedsalaries for some months canbe paid and members canreturn to sites to resume theiroperations before the fastapproaching rainy season.”

According to FOCI, manyplayers within the industryhave been forced to close theirfirms, compounded by overN600 billion Federal and stategovernments’ indebtedness toits members. The contractorsasserted budgetary allocationalone is not adequate to meetthe industry’s financial needs,hence their call for directintervention to solve the debtproblem.

“FOCI expected that by nowthings would have improved;however, it is disheartening tonote that the debt profile hascontinued to rise since alltiers of government have beenunable to pay their debts.FOCI fears that if theGovernment has to rely ononly budgetary allocationwithout direct interventioninto the debt owed theconstruction industry, theconstruction industry inNigeria could be movingtowards a total collapse,” thegroup added.

Property eviction: The rights of a landlord

It is generally believedthat landlords arebelligerent, troublesome

people who lord theirproperties over tenants and tryto make life uncomfortable forthem but this is not alwaystrue. Just as tenants have beenat the mercy of landlords,landlords have also beentreated with contempt andmaligned by tenants.Frustrated with tenants whorefuse to pay rent, damagetheir properties and causeconflicts amongst othertenants, landlords are oftenfaced with the option ofejecting such a tenant. Thereare however rules by law thatmust be followed and alandlord needs to know theserules so as not to be in err ofthe law.

By law, it is wrong for alandlord to forcibly eject atenant no matter how muchrent he or she owes or howcantankerous such a tenant is.The recovery of property bylaw in most states in Nigeriaand anywhere in the worldreally unfortunately forlandlords is in the favour ofthe tenant. This is done by thedifferent law-making bodies ofthe states to curb the excessesof landlords and ensure thattenants are not entirely attheir mercy to be treatedanyhow. A landlord who

A landlordmust give histenantreasonabletime to vacatethe property byserving him aquit notice andthis isdependent onthe tenancyperiod

therefore wishes to eject histenant for whatever reasonmust use the methodprescribed by law.

The law states that alandlord must give his tenantreasonable time to vacate theproperty by serving him a quitnotice and this is dependenton the tenancy period. For ayearly tenant, the lawprovides that he must be givena six months quit notice, aquarterly tenant - a quarter’snotice, monthly tenant - amonth’s notice and a weeklytenant - a week’s notice. Thequit notice must be writtenand served on the tenant.These provisions are howeversubject to the tenancyagreement between the tenantand the landlord. In a casewhere it is expressly stated inthe tenancy agreement that no

notice will be given to thetenant, the landlord can goahead and eject such a personwithout notice as long as thetenant duly executed thetenancy agreement.

In the case where a quitnotice has been served andthe tenant still refuses tovacate the property after thenotice has elapsed, the lawstill does not permit thelandlord to take matters intohis hand and forcibly evict thetenant. Rather, the law expectsanother seven days notice ofowner’s intention to recoverproperty to be served. Thisnotice is usually from thelandlord’s Lawyer or Agent’sLegal Unit, informing thetenant his intention ofproceeding to court to recoverthe property on behalf of thelandlord. It is important tonote that this seven daysnotice of owner’s intention torecover property can only beserved on a tenant after theexpiration of a valid “Noticeto Quit”. If served before anotice to quit or during the lifespan of a notice to quit, it isinvalid and discredited. Also,this seven days notice iscounted seven days from thedate the notice is served. If itis less, the court will mostlikely reject its validity.

*Culled from Nigeria RealEstate Hub

A private bungalow under construction

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VISIT — From left: Chief Pilot, Arik Air, Captain Adetokunbo Adekunbi; Deputy ManagingDirector, Arik Air Captain Ado Sanusi and Governor of Kaduna State, Nasir El-Rufai duringKaduna Governor's visit to Arik Headquarters in Lagos.

Vanguard, MONDAY, MARCH 7, 2016 — 27

Insurance

As the economy of thecountry continues to

witness challenges due to thefluctuations in foreignexchange rate, insurancepractitioners have said that thesituation is having adverseeffects on insurance business.

Managing Director ofUniversal Insurance Plc, Mr.Ben Ujoatuonu said thatinsurance is an internationalbusiness as such the marineaspect of insurance business isbeing affected becauseimportation is at its lowest ebb.

Ujoatuonu said, “Because ofthe problem of exchange rate,every insurance company isfeeling the brunt in the hype inexchange rate and it hasaffected the marine aspect of ourbusiness. Of course every otherperson within the society isfeeling the heat of the economicsituation and because insurancebusiness is not insulated, theinsurance business will feel theheat as well.”

Also President of the NigerianCouncil of RegisteredInsurance Brokers, Mr. KayodeOkunoren said that it is mostdisheartening that the value ofthe naira has continued to takea downward plunge against thedollar, pound sterling and othercurrencies, to the detriment ofthe nation’s economy.

Okunoren said, “The resultanteffect of this is negative on thenation’s economic revivalefforts. Aside from the possibilityof stagnating industrialdevelopment and favourabletrade, the situation is alreadycausing increasing inflationaryrate that is affecting thecommon man in the street. Themono economy has left thecountry helpless, consideringalso the continuous downwardslide in the price of crude oil inthe international market,upstaging the budgetary

Insurance operators lament impact offorex crisisBy ROSEMARYONUOHA

anticipations of government.Definitely, the insuranceindustry is not insulated fromthese grievous indices ofeconomic recession. It is atough time we must all admit.

“As a critical stakeholder in thenation’s economy, it is our takethat the present situation servesas a good avenue forgovernment to begin to paymore emphasis to diversificationof the nation’s economic

mainstay from oil, as we havehad till now. There must be are-tuning of the minds ofNigerians from rabidconsumption of foreign goodsand services at the expense ofthose produced locally. Also, thepenchant for luxuries has to becurtailed so as to preserve thenation’s available meagerforeign monetary reserve for theessentials, rather than fritterthem on irrelevances. It is

definitely a period that calls forsacrifice on the part of allNigerians, including theleadership, if the presentcrusade would achieve longlasting positive results. I wholeheartedly align myself with thetimeless wisdom that “to besuccessful as an individual or anation, you must decide exactlywhat you want to accomplish,and then resolve to pay theprice,” Okunoren said.

Stanbic IBTC InsuranceBrokers is set to provide

bespoke risk management andinsurance services in Nigeria.

The company announced thatit has commenced fulloperations sequel to thegranting of a licence by theNational Insurance Commission(NAICOM) in January 2016,paving the way for the firm tooffer the full spectrum ofinsurance brokerage services, adevelopment that will help indeepening insurancepenetration in Africa’s largest

Stanbic IBTC insurance brokers begins operations

economy.According to the broker,

global best practice, includingfacilitatory prompt payment ofclaims, will underline theoperations of Stanbic IBTCInsurance Brokers as theinsurance brokerage firm entersthe Nigerian market.

Part of the Stanbic IBTCGroup, which has a clear focuson corporate and investmentbanking, personal and businessbanking and wealthmanagement, the new businessbroadens the scope of financialservices offered by the groupwhile widening its holdingcompany structure.

Chief Executive of StanbicIBTC Insurance Brokers, Mr.Anselem Igbo, said the businesswas established to fill perceivedgaps in the industry, part ofwhich includes helping clientseffectively manage their risksand claims processes, therebyensuring peace of mindthrough risk transfer, efficientinsurance claims payment andexceptional quality of service.

On claims management, Igbostated, “We believe that the testof any insurance arrangementis in prosecuting claims to asatisfactory conclusion for ourclients. Our role as brokers alsoensures that insurers, as a

matter of obligation, pay claimsequitably and promptly. Promptpayment of claims is a keyfactor in any insurance contract.We continuously develop keyrelationships and requisitelogistical processes to ensurethat your claims are promptlysettled.” Whilst benefiting froma strong, dynamic and vastgroup structure, Igbo said thecompany will be differentiatedfrom the competition as it willbe driven by a team ofreputable and financially strongunderwriters; fully customizedsolutions, and innovativeinsurance products at noadditional cost to the client.“Stanbic IBTC InsuranceBrokers’ professional servicesare at no additional cost. We willnegotiate your insurancepremiums and get the bestquotes available,” Igbo said.

“Our services apply to bothindividuals and corporateentities. Our services are alsooffered to both existingcustomers and non-customersof the group. As insuranceprofessionals with a vastknowledge of the workings ofthe insurance market, we areable to arrange the mostsuitable policies for ourindividual and corporateclients.

Insurance Brokers underthe aegis of the Nigerian

Council of RegisteredInsurance Brokers (NCRIB)have joined scores of otherNigerians in sharing the griefof the Nigerian Film Industryover the demise of no fewer thanfour of its brightest actors andactress within the last onemonth.

The actors included MikeOdiachi, Sikiru Adesina,popularly known asArakangudu, Festus Aguebor aswell as a Kano based actress ofKannywood (Kano sub sector),Aisha Dankano.

President of NCRIB, Mr.

Brokers sympathise with movie industry

Kayode Okunoren, said theCouncil described the death offour prominent actors within amonth as a colossal loss to thenation. The Council lamentedthat the actors who had livenup the entertainment space haddeparted at a time when theirvalues was most desired in thecountry.

While praying for the reposeof the souls of the departed, theNCRIB lamented the pooracceptance of insurance by theactors, a situation that usuallyleave the families in precariousfinancial state after the painfulof their loved ones and breadwinners.

Workplace unveilsinitiative to benefitbusinesses

Workplace Plus Limited,operators of the Regus

franchise in West Africa, hasunveiled a cluster initiativethat will offer Small andMedium Enterprises (SME’s)the benefit of maximizingprofit in Nigeria’s currentharsh economic environment.

The initiative, which is thefirst of its kind, bringscompanies under oneoperating environment withthe necessary infrastructuresthat will enhance businessdevelopment.

Speaking about the initiative,Executive Chairman of thecompany, Ayo Akinmadeexplained that the firm whichwas registered in Nigeria in2003, engages in the businessof providing infrastructure tosupport companies to carryout their businessesseamlessly in Lagos, Abuja,Port Harcourt and AccraGhana.

According to him, we providerepresentative offices forcorporate bodies, organisationsand individuals, with fullyfurnished and equipped shortstay office accommodations.We also provide conferencingservices to corporate bodies andorganisations. Our clients,including many multinationalcompanies, are some of themost respected names in theworld.

Akinmade noted that one ofthe challenges of businessoperations in Nigeria isinadequate provision ofinfrastructure which include,electricity, informationtechnology and a conduciveworking environment tofacilitate business contacts,development and capacity topromote efficiency.

He said the company is thelargest provider of virtual officespace in Nigeria, providingover 150 customers with officeand related facilities fromgrade- A buildings.

Giving further insight intothe initiative, the ExecutiveChairman stated that RegusVirtual Office provides bestpossible first impression toclients as well as offering agreat corporate image at afraction of the cost of runningan individual office.

Describing the initiative ascost saving for entrepreneurs,he said, “Our business is tomake sure that you focus 100%on your core business. Ourfriendly and professional teamwill answer your dedicatednumber in your companyname, take and pass on yourmessages in the way youchoose ad give your businessthe due representation”.

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28 — Vanguard, MONDAY, MARCH 7, 2016

Challenges bring out the best inhumans — UMOEFIK

People in Business

Upon completing hissecondary school education atthe School of Arts & Science,Uyo, Akwa Ibom State,Umoefik attended trainingcourses in textile and fashiondesign in Europe and Asia.

Going into business:According to Umoefik, he got

into the business because ofinterest, an interest born out ofhis desire to make his ownclothes by himself and avoidproblems with tailors.

"I developed interest in thebusiness, first of all, to be ableto make my own dress bymyself since it was alwaysdifficult to get a tailor to makeyour dress when you want it.There was a brother who wasdoing the business at home andwhen I completed mysecondary education, I usedthe opportunity to learn."

Fast learner:"Within a week, I was able to

sew a pair of trousers and a bedsheet for myself.

Although the brother did notlike me using his machine forthe fear of damage since I wasnot proficient, but when herealised how fast I was tounderstand the skills withoutguidance, he decided to guideme through the skills and showme how to use the sewingmachine.

"The more I learnt, the morethe passion increased andmaking dresses for peoplebecame my desire despite thefact that I didn’t want to learnthe skills for profit-making.

I was actually waiting foruniversity admission that didnot come for so many years,and at this point, I sawopportunities in the businessand that was how I settled for

BY EBELE ORAKPO& VERA SAMUEL

ANYAGAFU

this line of business," he said.Start-up capital:"This type of business doesn’t

really need start-up capital.When it was time to start myown business, I hired a second-hand sewing machine from aneighbour and my mother alsogot one for me. My parentspaid the rent for the house wewere living and gave me oneroom to live in but it was thisroom that I used for thebusiness.

In 2012, this business won theprestigious Presidential Awardof Youth Enterprise withInnovation in Nigeria(YouWiN).

Challenges:Every business has its

challenges and thesechallenges vary from one levelof the business to another.Even now, there are stillchallenges but where there isa will, there is a way.

Most of the challenges dealwith skills upgrade, expansionand product improvement butthe other challenges such aspower, raw materials, influx offoreign products into thecountry, etc., does not reallypose a challenge to me sincethey are beyond my powers soI do my business as thoughsuch challenges do not exist."

Staff strength:"The staff capacity for the

business is 50 persons but youcannot operate on this capacityfor a long time except you haveproduction orders that cansustain such payroll. So theactual staff strength dependson the size of responsibility ata given time.

"When we have many orders,we increase and when theorders are less, we downsizethe labour force.

Lack of forex:The lack of foreign exchange

is really affecting this businessbecause about 90 per cent ofinputs, except labour, issourced abroad. This is sobecause the fabrics andaccessories for the product linethat caught my interest themost (the industrial work-clothes), are imported.

We have approached sometextile mills in Nigeria to getthem to produce that quality offabric suitable for theproduction of work-wear butthey gave us conditions wecannot meet.

"Asking a Small and MediumEnterprise to deposit N 20m forsuch order and a guarantee ofmonthly purchases of betweenN10-15m is really difficult.

They equally said that theywould need to import somechemicals that will be used toachieve that quality. One isthen bound to ask: 'what wasthe agreement with theseinvestors when they weregranted licence to operate inNigeria? Some of them areIndians, some Chinese and

Mr MbetobongUmoefik is theM a n a g i n g

Director/Chief ExecutiveOfficer of Port Harcourt-based Pride GarmentsCompany (PGC), an outfitthat specialises in industrialwork-clothes & Personalprotective Equipment (PPE),skills training, bulkproduction and consultancy.In this chat with FinancialVanguard, the University ofPort Harcourt Managementstudent, speaks on why hegot into his line of business,the challenges and says influxof foreign products does notreally pose a challenge tohim. Excerpts:

I developedinterest in thebusiness, firstof all, to beable to makemy own dresssince it wasalways difficultto get a tailorto make yourdress whenyou want it

these countries have this veryquality of fabrics and theyexport same to Nigeria."

Local content:"Local content is 100 per cent

workforce, other inputs such asequipment/machines areimported except for rawmaterials which is determinedby client’s specifications that is,where the requested order suggestNigerian print textile, then thefabric which is 80 per cent of anygarment product can complementthe local labour thereby increasingNigerian content to about 90-95per cent. Most accessories are oftenimported."

*Mbetobong Umoefik.....Asking an SME to deposit N20m forsuch order and a guarantee of monthly purchases of betweenN10-15m is really difficult

*Staff of Pride Garments company at work

Over 150 internationalcompanies in food and

beverage sector from aroundthe globe will have theopportunity of experiencingfirst-hand, opportunities inNigeria’s growing foodmarket at the forthcoming FoodNigeria exhibition.

The companies will representmore than 20 country pavilionswelcoming an expected 6,000attendees.

The event being organisedby Informa Life SciencesExhibitions is supported bythe Association of FoodVendors in Nigeria (AFVN),the National Agency for Foodand Drug Administration andControl (NAFDAC), isscheduled to kick-off 18-20May, 2016 in Lagos.

The event will provide aplatform for international andregional food and beveragecompanies to network andcultivate business ties in thecountry.

“Food Nigeria is a business-to-business platformpromoting supply chainpartnership along withimports and exports.

Participants who will comefrom Nigeria and West Africa,will benefit from meetingindustry leaders from regionaland internationalorganisations, showcasing anextensive range of the latestproducts and services,” saysJamie Hill, Director, InformaLife Sciences Group, Africa.

McKinsey Global Institutereported in July 2015,Nigeria’s consumption couldrise to $1.4 trillion every yearby 2030, at an average annualincrease of eight per cent. Thisrise in consumption will likelybe driven by higher incomelevels, significantlyexpanding the middle-incomebracket.

This increased affluence isexpected to result in 7.1 percent annual growth in sales offood and non-food consumergoods.

“It is important to recognisethe opportunities currentlypresent in the Nigerianmarket.

By organising Food Nigeria,we aim to provide anopportunity to support thegrowing market and hostinternational and regionalfood brands to build businessties.

Food exposhowcasesopportunities inNigeria's growingfood market

By Nkiruka Nnorom

*Some of the products ondisplay

CMYK

Micro Finance

“The moving finger writes; and having writ, moves on. Nor all your piety nor witshall lure it back to cancel half a line; nor all your tear wash out a word of it.” OmarKhayyam, 1123AD. (VANGUARD BOOK p 57).

Most of our Fellow Countrymen (“How many fools make up Fellow Countrymen”,asked Thomas Carlyle, 1795-1881, in despair) are emotional and unrealistic.

Less than one tenth of one per cent understands the basic principles of economics.

“““““No” ” ” ” ” to protest against tariff increaseMost of the leaders, drawnfrom the same pool of people,are not different. Even thoseamong the leaders whounderstand the principles ofeconomics lack the moralcourage to tell the truth whenissues pertaining to economicsbecome contentious. Theychoose to play to gallery bytelling the “masses” what theyprefer to be told instead oftelling the truth which mightbe unpopular. Electricity tariffincrease is another example ofhow the masses and spinelessleaders can inducegovernments to take decisionswhose consequences laterprove disastrous e.g tariffreversal. About three yearsafter the Structural AdjustmentProgramme, SAP, which hadhelped the “Tiger” nations inAsia to achieve economicrecovery, President IbrahimBadamasi Babangida, IBB, wasscratching his head in Nigeriaand wondering “why the lawsof economics, which workelsewhere, don’t work inNigeria.” The answer givenwas direct to the point. “Theprinciples of economics addressthemselves to reasonablepeople. Nigerians are nothingbut reasonable – includingmost of the leaders.” What weare reading in the papers thesedays prove the pointconclusively. In a nation whereseventy per cent of the peoplelive on $2 [N600 at N300/US$1] per day, a “leader”distributed 23 exotic carscosting N310 million to peoplewho already had more than adozen cars each! Furthermore,some Nigerians still defend thegiver and the takers of thatdemonstration of economic

lunacy. While that was goingon, the former Minister ofFinance was preachingeconomic inclusiveness – whilethe government she served wasexcluding 170 millionNigerians from the dividendsof democracy. The flight ofeconomic reason from Nigeriacannot be more total.

It is once more beingexhibited in the nationaldebate regarding electricitytariff increase. Some of thoseopposed have made severalsuggestions which will beexamined separately and theconsequences of each will bepointed out to those who thinktheir suggestions will solve theproblem. But, before looking atthe objections to tariff increase,we need to remind ourselvesof certain facts which suggestthat we might be blaming thevictims – DISCOs – for the sinsof commission and omission ofgovernments from the time theElectricity Corporation ofNigeria, ECN, was established;until the Power HoldingCompany of Nigeria, PHCN,was liquidated.

Fact 1. The DistributionCompanies, DISCOs, don’tgenerate electricity. That is theresponsibility of another unitstill under government control.DISCOs cannot supply powerin excess of what the FederalGovernment makes available tothem. Thus, when powersupply is withheld (ithappened here two minutesago this Saturday February 27,

2016) Nigerians, presumed tobe sane, let loose curses andmaledictions on DISCOs andtheir staff. On one occasion, aDISCO van passing by waspelted with stones. MostNigerians, including peoplewho should be knowledgeableand responsible, fall into theblame trap and unleashexpletives. Why? It is obviouslyirrational; and partly insane.As the lawyers have alwaysreminded us, “You can’t givewhat you don’t have”. So whyare My Fellow Nigeriansasking DISCOS to supply morepower and more regularly thanthey receive?

FACT 2. Power generation inNigeria had remainedstubbornly below 5,000MW formore than sixteen yearsdespite the US$13-16 billion,Obasanjo’s governmentallegedly spent on it. Meanwhile, the nation hadbeen fed on several diets of liesby PDP Presidents and theirMinisters of Power. Obasanjo/Lyel Imoke promised10,000MW by 2007. That wasthe excuse for the raid ofUS$13-16 billion. They addedless than 1000MW by the timethey left office. Nobody stonesthem. Jonathan/ProfessorsNnaji and Nebo promised14,000MW by end of 2013.They left office with capacityless than 4500MW. Nobodydirects curses and maledictionstheir way any time there ispower failure.

Yet, at the time privatization

was being seriously embarkedupon, the prospective DISCOswere deceived to believe thatpower supply would havereached at least 10,000MW by2015. Had that promise beenredeemed, the noisy citydwellers, constituting thenuisance to DISCOs, should beenjoying at least twelve tofifteen hours of power supplyby now. Instead of directingtheir anger at those who weresharing our money rather thanapplying it to provide power,they vent their spleen on thefirst victims of the swindleperpetrated by the Jonathanadministration. DISCOs werepromised power supply;governments have failed todeliver. We should blamegovernments; not the DISCOs.

FACT 3. The Minister forPower, Fashola, was absolutelycorrect. You cannot divorce theprice paid from the valuereceived and by looking at thealternatives. DISCO powersupply is still far cheaper thanany other means of generatingpower – even with the newtariff. On the average, it is amere 20 per cent of the closestalternative – petrol or dieselgenerators. A meticulouscompilation of expenditure onelectricity by different meanshas established that DISCOsare almost operating as acharity compared with gen-sets. So, why curse thebenefactor for increasing theprice when the new tariff is stillakin to robbing the DISCOs?

How many Nigerians, if givena DISCO free today will lowerthe tariff? Hypocrites!!

FACT 4. Scarcity alwaysdrives up prices/costs.Nigerians should countthemselves fortunate that thepower sector had not beentotally privatized; a regulatoryagency still regulates the tariff.Had the free market beenallowed to operate in the powersector, most of us would nothave been receiving powersupply at all. Corporateentities, the wealthy and therich would have bought theentire supply if it was madeavailable to the highest bidder.The Chief Executive Officer ofa multi-national disclosed thathis company would save up tothree billion a year usingDISCO exclusively if the tariffis three times what it is now.Most critics are actually cynicalindividuals. And as OscarWilde, 1854-1900, hadobserved, “A cynic is a personwho knows the price ofeverything, but the value ofnothing.” Most of them lack asense of the economic value ofmass produced power supply.Incidentally, how many ofthem, who have tenants, haveretained the rent at the samelevel since 2010? Yet, their“services” to tenants have notimproved (actually deterioratedas the buildings aged). Yet,they increase rent. Ask themwhy? And get ready to listento the malarkey offered asexplanation. The new tariffmust stay; painful as it is, it isstill in our interest.

To be continued…

Chairman of Board ofAcademy Press Plc,

Chief Simeon Oguntimehin,has affirmed that the countrydoes not need to importprinting products as a nationbecause local printers can doit.

He made the observationduring the company’s 50th Anniversary Dinner in Lagos.

“We do not need as a nation,to import any of our printproducts such as books,magazines, annual report,calendars, diaries, fliers, bankforms, flow lines, tickets,vouchers and all othersensitive materials includingelections papers, revenueagencies forms, bank forms andother security agencydocument needs,” he said.

He noted that Academy Pressis now positioned to lead theindustry to fully cater for theentire needs of the country.

‘’We have remained strongover the last 50 years as a result

'Nigeria has no business importing print products'

CONFERENCE - From left: Banjo Adegbohungbe; GeneralManager Access Bank, Charles W J Weller; Managing DirectorFinancial Institutions Barclays, Paul Greetham; ManagingDirector Global Trade Review (GTR) and Tampiri IrimaghaAkemu; Managing Director Sesema PR at the West Africa Trade& Export Finance Conference 2016 by GTR recently.

Stories byPROVIDENCE OBUH

of continued re-investment inmodern printing equipmentand we just launched new setsof printing equipment worthN1.5 billion. Academy Pressis Nigeria’s one-stop shop forworld class printing.”

“In fact, we do not end any

five years without investing inmajor modern equipment. Thisis to ensure that wet catch upwith the latest skills andtechnology and to always be atpar with the rest of the world.”

Also speaking, ManagingDirector of the company, Mr.

Gbenga Ladipo, added: “Wehave been financing the growthand retooling from our own

internally generated funds. Forsix years we were gettingequipment one after the otherand demand was ahead of usuntil the Bank of Industry’sintervention and that led to aleap within that year.”

Simba Group says itwelcome business

owners and aspiringentrepreneurs who want toopen authorized service centresfor its products across thecountry.

The company distributes andservices power backup productssuch as inverters, batteries,online UPS and integratedpower management systemsincluding luminous, genus,epsilon and exicom.

In a statement, Chief VinayGrover, Managing Director ofSimba, said that they haveeleven service centers in keycities in Nigeria with plans tofurther open 20 service centerswithin the next few months.

“We have always believed that

Simba woos entrepreneursover service centres

a good quality product meansvery little unless it is supportedby a high level of service before,during and after the salesprocess. It is with this in mindthat we recently launched ourone-of-a-kind 24/7 nationwidecontact center and exclusivecustomer-service online portal,”he said.

Chief Grover explained, “Asmore and more customers turnto our award winning customercare offering, it becomesimportant that we bring theseservices closer to them. It is withthis in mind that we committedto extending our servicethrough the creation of newAuthorized Centers, which I’mhappy to announce are fullyoperational now.”

Vanguard, MONDAY, MARCH 7, 2016 — 29

CMYK

Economy

30 — Vanguard, MONDAY, MARCH 7, 2016

A new report by themonetary policy

department of the Central Bankof Nigeria, CBN, has indicatedthat a full-fledged inflationtargeting framework may not bevery relevant in the prevailingeconomic dispensation,popularly called the newnormal, as it may not addressthe exchange rate and foreignreserves variability, economicgrowth as well as employmentobjectives of the Nigerianeconomy.

Inflation targetingencompasses a monetary policyframework in which the centralbank sets an explicit target forfuture inflation, usually lowinflation rate, and work towardsachieving this goal.

Consequently, the inflationrate serves as the nominalanchor on which the centralbank relies to maintain pricestability.

Since the first adoption ofinflation targeting by NewZealand in 1990, severalcountries from developed andemerging market economies aswell as developing countriesincluding Nigeria haveadopted the framework.

The policy framework,according to the CBN, provedto be quite successful in theprevious two decades.

However, the recent globalfinancial and economic crisishas put a severe dent to thismonetary policy framework.

During the crisis, most centralbanks fell into the liquidity trapas the target interest rates werecut to the zero bound tostimulate the economy. ‘

But when there was noincentive for a further loweringof the nominal interest rate,unconventional monetarypolicy was adopted evidencedby several rounds of

New CBN study discredits inflation targetingmodel for economic devt

Stories ByEMEKA ANAETO,Economy Editor

quantitative easing followed.Yet, unemployment remained

very high indicating that thesteps taken were not sufficientto reverse the recessionarytrend. In spite of the persistingunemployment and lowgrowth, inflation rates in mostadvanced economies such asthe United State of America,remained very low.

It was obvious that theachievement of the lowinflation target, with lowinterest rate and low volatility,did not guarantee favourablegrowth and improvedemployment.

At this point, economistsbegan to question the wisdomin the inflation targetingframework.

It was this abnormalenvironment, termed by someanalysts as the new normal,and under whichunconventional monetarypolicy appeared moresuccessful in addressing the

imbalances in the economy.According to the CBN report,

“in the new normal, centralbanks have the additionalmandate of maintainingfinancial system stability andeconomic growth in addition tothe price stability objective ofmonetary policy.

“In the particular case ofdeveloping economies withsubstantial output gap, wequery the continued relevanceof the conventional focus of

monetary policy.In the CBN report titled

‘relevance of inflation targetingfor developing countries in thenew normal: a case of Nigeria’,published last week as CBNworking paper series, the apexbank’s monetary economistssaid however, that thealternative scenario of nominalgross domestic product, GDP,targeting framework seemsmore plausible, as it generateshigher economic growth,increment in foreign reserves,more stable exchange rate aswell as lower inflation rate.

According to them “thisposition is consistent with thenew Keynesian theory, whichposits that an economy withhuge output gap could boosteconomic growth andemployment through a lowinterest rate policy.“Furthermore, the theoryargues that with financialfrictions in place, strict inflationtargeting may be sub-optimal

under conditions of financialmarket imperfection as iscommon in most developingeconomies”.

The conclusions of theresearch team was derived froma study and reviews of theconceptual as well as theoreticaland empirical literature on thesubject, and employed variousestimation techniques.

The outcome of the study, theteam stated, “demonstrates thatin post crisis Nigeria, under thenew normal paradigm, strictinflation targeting would not bea suitable framework to addressthe key macroeconomic issuesconfronting the economy, suchas inclusive economic growth,price instability and exchangerate stability.

The estimation techniqueadopted in the studydemonstrates that nominalGDP targeting could be moresuitable than inflation targetingin pursuit of the broader set ofobjectives highlighted underthe new normal paradigm.Inflation targeting, according tothe report, however, stillremains a relevant policyapproach but is consideredweak in its ability to deal withfinancial and economic crisis ifdeployed solely.

The approaching double-digitinflationary economy is around

the corner with analysts expecting theFebruary figures at a border line.

In its current analysis of the economicsituation economists at FSDH MerchantBank said they expect the February 2016inflation rate to trend up to 9.85 per centyear-on-year, y-o-y, up significantlyfrom 9.62 per cent recorded in January2016.

According to them the increase in theinflation rate would be as a result of thevolatility in the foreign exchange marketduring the month.

National Bureau of Statistics, NBS, isexpected to release the inflation rate forthe month of February 2016 by nextweek.

Food Price Index, FPI, which the Foodand Agriculture Organization, FAO,released last week shows that food pricesincreased marginally in February from

February inflation rate may hit 2-yr high... FSDH Forecasts 9.85%

January level. FPI increased by 0.14 percent from the revised figure in January.

Price of vegetable oil surged inFebruary while meat prices recorded asmall recovery. The increases in thesetwo categories were more than enoughto offset the decline in cereal, sugar anddairy prices.

FAO Vegetable Oil Price Index wasup significantly by 8.04 per cent fromJanuary, the highest value since June2015.

The upswing was primarily driven byreports of falling inventories in SoutheastAsia coupled with poor productionprospects in the coming months.

FAO Meat Price Index was up 0.67 percent as prices for the different categoriesof meat went in different directions.

The FAO Cereal Price Index wasmarginally down by 0.55 per cent, dueto ample global supplies and increasedcompetition for export markets. Wheat

prices were mostly affected while on theother hand, rice prices firmed slightly.

The FAO Dairy Price Index fell by 2.13per cent, due to lackluster importdemand, especially by China, andincrease in supply for export.

FAO Sugar Price Index recorded thehighest loss. The Index was down 6.16per cent due to better than expected cropconditions from Brazil.

FSDH stated “our analysis indicatesthat the value of the Naira remainedstable at the inter-bank market while itdepreciated at the parallel market by9.85 per cent to close at USD/N340.00from USD/N306.50 at the end of January.

“The depreciation at the parallelmarket led to an increase in the pricesof imported consumer goods in Nigeriabetween the two months under review.

“The prices of most of the food itemsthat FSDH Research monitored inFebruary 2016 increased.

During the crisis,most central banksfell into theliquidity trap asthe target interestrates were cut tothe zero bound tostimulate theeconomy

CMYK

Vanguard, MONDAY, MARCH 7, 2016 — 31

Advertising & Media

MEETING - From Left: Dr Rotimi Oladele,PresidentNIPR;Dr Grace Achum,Special Assistant to NIPR Presidenton Media and Ethel Agbeyegbe,Acting Chairman,Lagos StateChapter of NIPR.At the breakfast meeting of NIRP Team andBrand Journalist Association of Nigeria held in Lagos. PHOTO:AKEEM SALAU.

Association of AdvertisingAgencies of Nigeria,

AAAN, says it’s taking the fightagainst corruption, terrorismand other vices to the billboardsas their contribution towardsgovernment’s effort at tacklingthe menace.

The AAAN president whospoke to Vanguard said theAssociation had reached anagreement to complimentgovernment’s efforts through acampaign that will unify andmotivate Nigerians to supportthe war against corruption andterrorism.

According to him, thecampaign is meant to supportthe war against corruption ,terrorism, mobilise, inspire, andmotivate Nigerians to join in thewar.

He further stated “there iscurrently a lot of apathyamongst Nigerians about theviolence going on and that hascontinued to go on especiallyin the North Eastern part of thecountry. That is what ourcampaign on Anti-Terrorism isall about.”

The AAAN president who

AAAN creates campaign against terrorism, corruption

STORIES BY PRINCEWILLEKWUJURU

Nigeria to usher in creativityin Cannes’ Style

MTN, Goldman Sachs, Rocket Internet commitN48bn to grow AIG

VISIT — From left: Mr. Oscar Onyema, Chief ExecutiveOfficer (CEO) Nigerian Stock Exchange; Alhaji MuneerBankole, Managing Director/CEO, MED-VIEW Airline andRasheed Yussuff, MD/CEO, Trust Yields Securities Ltd duringthe courtesy visit of Med-View Airline to Nigerian stockExchange, Lagos, preparatory to listing.

stated that the campaign wasfirst conceived beforegovernment thought about thewar against corruption, ismeant to be an integratedcampaign that will support thewhole war against terrorismusing very effective media todeliver the message and solicitsupport of Nigerians for thegovernment.

His words, “it is really acampaign to support the war

against terrorism. We have alsodeveloped two othercampaigns. So there is this oneagainst terrorism; there is oneagainst corruption and there isanother one for unity. As youknow, one of the big issues inour country is Unity or the lackof it. This country is so divided;divided along tribal lines,political lines, religious linesetc. We believe therefore that weneed to have a campaign to

unify us.” “It is a behaviourchange campaign such as theone we are working on requiresdeep insight and expertise.You’ve got to build it with deep,resonant insights; sometimes

you might need to pre-test thecreative work. So governmenthas got to be deliberate indesigning these campaignsotherwise they will not beeffective.

As Cannes LionsInternational Festival of

Creativity launches itscommunications campaign for2016 tagged, “Thank YouC r e a t i v i t y ”(www.thankyoucreativity.com),the official Festivalrepresentative in Nigeria,CHINI Productions has alsorolled out plans for the preCannes local events in Nigeria.Activities lined up in Nigeriainclude the Roger HatchuelAcademy, the Young LionsCompetitions, the Miami AdSchool ScholarshipCompetitions, Lions Edit andLions Night & Awards. Theseactivities are scheduled to takeplace from April 5 to April 9,2016. Entries for Roger HatchuelAcademy, Young Lions Competition and Miami AdSchool Scholarship competitions

are already open atwww.canneslions-ng.com.

The Roger Hatchuel Academyis the oldest academy in CannesLions and is named after the firstFestival chairman. It is a highprofile intensive training forstudents in the university whointend to work in advertising ongraduation. In Nigeria, CHINIProductions has partnered withAPCON for about 9 years topromote this programme. In2016 again, this programme willsee talented students gather fromcampuses around Nigeria tolearn from leading professionalsin Lagos and visit organisationsin the industry during their 3-day intensive residentialprogramme. Companies thathave already decided to host thestudents include Noah’s ArkCommunications and STBMcCann.

e-Commerce

Africa Internet Group,AIG has received

additional investments totalling$245 million, about N48 billion,from South African telecomsgroup, MTN, Americaninvestment banking firm,Goldman Sachs and RocketInternet.

Recall that MTN had bought33 per cent in AIG in 2014 to

join other AIG shareholdersincluding Rocket Internet.

AIG, founded in Nigeria in2012 as an e-commerceconglomerate has leverageddeepening internet penetrationin emerging markets includinggrowing middle class to meetincreasing demands for onlineproducts.

Over the past three years, thegroup has launched andoperated e-commercecompanies in 26 countries

across Africa. These companiesinclude: Online retailer,Jumia.com, food delivery appHelloFood, hotel bookingplatform Jovago, online realestate marketplace Lamudi,online marketplace,Kaymu.com, taxi hailingapp,EasyTaxi and onlinevehicle marketplace,Carmudi.com.

Recall that barely a monthago; AIG raised £75 million byselling 8 per cent stake of thecompany to French insurancegiant, AXA.

Speaking on the investments,Founders and Co-CEOs ofJumia and AIG, SachaPoignonnec and Jeremy Hodarasaid the funds will significantlystrengthen the balance sheet ofAIG enabling the company toleverage the significant growthof Jumia and other AIGsubsidiaries and to capitalizeon the significant opportunitiesin Africa.

“This investment isrecognition of the success thatJumia has already achieved andprovides us with a strategicflexibility to further support our

efforts to offer the best shoppingexperience to our customers,” said Sacha Poignonnec andJeremy Hodar in a joint statementmade available to Vanguard,adding, “We are delighted towelcome AXA and Goldman Sachsas new investors and are alsograteful for the continuedconfidence from our existingshareholders. To us, it isarecognition of the quality of ouroperations across the Africancontinent and an affirmation of thesignificant growth potential ofJumia.”

The statement further said Jumia,intends to use the funds to supportits continued growth, and to executeon attractive developmentopportunities in Africa along withAIG’s other e-commerceplatforms.

Carmudi, Nigeria’s online vehiclemarketplace, and Concept Nova, a fast

growing information technology andsoftware development company havepartnered to provide a premium anti-glassbreak solution called C-Protect for carbuyers and owners in Nigeria.C-protect is an invisible film which can beapplied to car windows, windscreens andglass vents protecting the glass frombreaking in the event of accidental break,vandalism or robbery.

Carmudi, Concept Nova partner to combat vehiclevandalism

Speaking on the research and partnership,Managing Director Amy Muoneke said‘Carmudi Nigeria is not just focused onproviding a fraud free platform for car buyersand sellers but we also make it a point ofduty to partner with organization thatprovide services and products that wouldbenefit car buyers. Security has always beenan important issue and we are proud offerNigerians who buy cars from the CarmudiNigeria website C-protect at a discountedprice."

STORIES BY JONAHNWOKPOKU

CMYK

32 — Vanguard, MONDAY, MARCH 7, 2016

Omoh Gabriel - Group Business Editor

Babajide Komolafe - Deputy Business Editor

Clara Nwachukwu - Energy Editor

Peter Egwuatu - Asst. Business Editor

Yinka Kolawole - Snr Bus. Correspondent

Favour Nnabugwu - Insurance Correspondent

Godwin Oritse - Maritime Correspondent

Godfrey Bivbere - Maritime Correspondent

Michael Eboh - Energy Reporter

Franklin Alli - Industry/Agric. Reporter

Ifeyinwa Obi - Maritime Reporter

Rosemary Onuoha - Insurance Reporter

Nkiruka Nnorom - Capital Market Reporter

CONTRIBUTORS

Princewill Ekwujuru - Media/Marketing

Jonah Nwokpoku - E-Commerce

Naomi Uzor - Industry

Providence Obuh - Micro Finance

LAYOUT - Graphics Department

(0805 220 1997)

Business & Economy

In strict adherence to thecurrent national

automotive policy of theFederal Government topromote the culture of drivingnew cars by Nigerians, somestrategic alliances have begunto emerge between the majorstakeholders in thetransportation sector and thefinancial services industry.These alliances are designedto ensure ease of acquisition ofnew cars by the members of thepublic as well as ensuringflexibility in paying for the carsover a period of time.

The major stakeholders thatare involved in this new driveto relegate used cars to thebackground and facilitate the

Skye Bank, KIA Motors offer new car acquisition window

easy acquisition of new cars arethe car manufacturers/marketers and banks that areproviding the fundingrequirement to the prospectivecar owners and members of thepublic.

The idea behind this newtrend is to discourage the habitof buying used cars byNigerians and embrace a morepleasant driving experience.

Skye Bank Plc. and KiaMotors recently signed astrategic auto financeagreement to enable customersof Skye Bank acquire brandnew Kia vehicles withoutdifficulty. The arrangementcovers Kia models such asPicanto, Rio, Cerrato, Optima

and Sportage. The partnershipis borne out of the zest of bothKia Motors Nigeria and SkyeBank Plc to promote acustomer-driven corporateculture by providing the bestquality service and exceptionalbuying experience with allvalues centered on thecustomers.

The joint partnership bringsto the fore an auto financescheme that is geared towardssatisfying customers’ needswith manageable monthlyrepayments and is best suitedfor individuals, organizations,corporate bodies andinstitutions who are availedconvenient and flexible financeoptions.

It is, inexplicable, thatdespite Nigeria’s rankingas a major oil producer,

our economy is still literallyin shambles with a tatteredcurrency and a crushingunemployment rate above25%; we still unfortunatelypresently expend almost 50%of our total export revenue onfuel imported from some ofthose refineries which buy ourcrude oil.Regrettably, despite theregular recurrence of fuelscarcity, with its severe publicdiscomfort, and ravagingeconomic dislocation, there isstill no assurance that thistortuous cycle will ever end.However, if the inefficient,and wasteful sporadicoperation of existinggovernment refineries isanything to go by, any seriousproposal for government tobuild and operate morerefineries may just be a deathwish.Although, it has beensuggested that public/privatesector partnership refinerieswill guarantee efficiency andbest practice management,serious investors may,however, never emerge, iffuel price remains regulated;furthermore, if government’splans to collaborate withprivate investors have still notadvanced beyond an M.O.U,then it will be unrealistic toexpect steady fuel supply, forat least another two years.It has, also, been suggestedthat several small modularrefineries can be establishedvery quickly nationwide;evidently this strategy mayonly be feasible if pipelinesare already laid from oil wellsin the South/South todesignated refinery sites, inwidespread locations, beforemodular refineries become

Will agonising fuel queues ever end?practical propositions.Furthermore, the concept ofmodular refineries may notalso attract private sectorinterest, if fuel price stillremains regulated. Nigeriansmay readily recall that theapproval given in 2012 to aN i g e r i a n / A m e r i c a nconsortium to construct, 6modular refineries within 30months, has regrettably alsofailed to materialise; morethan 20 other licensees havealso remained inactive.The preceding narrativesuggests that the possibility ofmore refineries to augmentfuel supply and possibly alsoearn additional exportrevenue may not materialisefor a while yet, at least notuntil fuel pricing isderegulated. Nonetheless,our hope for fuel sufficiencymay still be spurred by thesteady progress of themultibillion dollar Dangote’sLekki refinery. Dangote’srefinery, will produce about500,000 barrels per day tocover over 50 % of our dailydomestic requirement of over40m litres. Anyhow,Dangote’s refinery may notcome on stream until 2018, sofuel supply will still largelyremain import based and willtherefore continue to severelydeplete our foreign exchangereserves.Incidentally, the eventualcommissioning of Dangote’srefinery in 2018 will certainlyimprove fuel supply but itmay not significantly reducethe heavy depletion of ourforeign exchange reservesfrom fuel imports.Furthermore, the location ofthis gigantic project in anExport Processing Zone,connotes product prices willbe denominated in dollars.

Indeed, the Project’s Sponsorhas never hidden the fact that,in addition to personal equity,foreign loans, which would beserviced and repaid in foreigncurrency were also secured tofund the projects; thus,Dangote’s Refinery will notsell its fuel in Naira and thenproceed to buy dollars fromCBN to service its externalloans; indeed with such tradeterms and, the continuousslide in Naira exchange rate,this multibillion dollarinvestment would invariablybecome a nightmare for theowners. So, fuel supply may stillpredominantly come fromNNPC imports, and fuelscarcity will unfortunately alsoremain abiding with NNPC’smonopoly; this, would be badnews for the market becauseprivate sector marketers willbe happy to avoid the heavyfinancial burden whichresults when subsidy refundsand exchange differentialsare not promptly settled torepay their high interest bankloans with the usualoppressive penalty clauses.Indeed, Fuel merchants areprobably, presently, morecomfortable with simplypaying Naira to lift suppliesdirectly from NNPC to servicetheir own petrol outlets andearn a modest profit marginwithout much sweat, as thisstrategy invariably drasticallyreduces both the tenor andthe high interest paid onloans that marketers incur toimport fuel.Nonetheless, althoughNNPC’s monopoly willreduce the level of petrolmarketers’ loans well belowthe present estimated 40% oftotal bank credit, sadlyhowever, commercial banks

will probably still choose to re-invest the resultant surplusfunds, in governments’ billsand bonds, to reap easy moneyrather than support thefamished real sector with lowcost funds.Conversely, however, NNPCoperations will inadvertentlybecome challenged, as over50% of its forex earnings willalso have to be dedicated topay for fuel imports. It is notyet clear how this system iscurrently playing out,particularly with themandatory requirement forthe Corporation to domicile itsfunds in CBN in compliancewith the T.S.A system.Obviously, the sales incomefrom petrol and kerosenesupplies comes into NNPCcoffers in Naira, so how willthe Corporation account forunavoidable exchange ratedifferentials, when it has topay for its fuel supplies indollars?The question is clearly, atwhat rates the NNPC willrepurchase dollars with itsnaira sales income from CBNto pay for its fuel imports;conversely, NNPC mayactually require an approveddollar denominated budgetannually, for its fuel importsso as to avoid recourse to thedangers inherent inprocuring dollars from CBNfor this purpose.It would seem from thepreceding narrative, thatthere is no easy quick fixsolution to the challenge offuel supply without pricederegulation. Nevertheless,deregulation will invariablyalso fail if the Naira exchangeremains weak. Thus,government’s apparentinability to deregulate isactually because of the

apprehension that suchpolicy position will not besustainable if Naira’sunending slide is notarrested. For example, if theNaira is allowed to depreciatebelow N300=$1 because ofdollar demand pressure, thepump price of fuel which ispresently below the N87/litreregulated price, willimmediately spike aboveN140/litre to make abolition offuel subsidy very unpopular;invariably, furtherdepreciation will expectedlyfurther increase fuel pricebeyond N140/litre.Conversely, if the Nairaappreciates to N100=$, forexample, fuel price will fallbelow N50/litre, i.e. wellbelow the regulated price,and support sustainablederegulation of thedownstream market;furthermore, withderegulation, the market willembrace competitive pricingand services amongstmarketers, so that, ultimatelyNNPC may withdraw andfocus on more specialisedsubsectors of the oil industry.Evidently, with the eternalpresence of systemic surplusNaira in the money market,not even increasing dollarrevenue will save the Nairaexchange rate from furtherdepreciation; however, a morecompetent management ofnaira liquidity by CBN willgradually redress the marketimbalance in favour of Nairaand steadily induce a strongernaira exchange rate thatwould support and sustainderegulation of fuel pricing.Instructively, Naira liquiditywill be minimised if Nairaallocations are not substitutedfor dollar denominatedrevenue.

CMYK