financial vanguard 11052015

CMYK

MAY 11, 2015

Continues on page 22

The inability of prospectivehomeowners to readily comeup with the required equity

contribution on mortgages has beenidentified as one of the factors slowingdown the process of mortgageorigination in Nigeria, FinancialVanguard investigation has revealed.It also partly explains the nation'shuge housing deficit of more than 17million homes.

Equity contribution is the initialamount of money to be paid by apotential home owner towards thepurchase of a property.

Under the National Housing Fund(NHF) scheme, managed by theFederal Mortgage Bank of Nigeria(FMBN), a borrower is entitled to amaximum loan of N15,000,000, or asdetermined by the bank. Borrowers areexpected to make equity contributionbased on the loan amounts as follows:N15 million — 30 percent (N4.5million); N10 million — 20 percent (N2million); and N5 million — 10 percent(N500,000). No individual can begiven a loan in excess of 90 percentof the cost or value of the property tobe mortgaged under the scheme.

Financial Vanguard's findings showthat majority of applicants for theLagos State Home OwnershipMortgage Scheme (Lagos HOMS) didnot succeed in owning homes underthe scheme mainly due to theirinability to come up with the required30 percent equity contribution of thevalue of their desired properties.Under the scheme, applicants arerequired to make 30 percent downpayment (equity contribution). Thisamounts to a down payment of N1.5million for a N5 million house, whichis beyond the ability of an averagesalary earner.

According to the Chief ExecutiveOfficer of Lagos Mortgage Board, MrAkinola Kojo Sagoe, as at March2015, a total of 1,716 people haveapplied for the scheme, out of which1,348 (78.6 percent) have been pre-qualified and over 600 applicantshave emerged as beneficiaries. Thisshows that less than 45 percent ofthose pre-qualified for the scheme orabout 35 percent of total number ofapplicants, actually emerged as

Why Nigerians shunmortgage schemes

By YINKA KOLAWOLE

homeowners.This development has prompted the

state government to initiate the Rent-to-Own housing policy which willwaive the 30 percent equitycontributions largely for artisans,traders and non-salary earners in thestate. Governor Babatunde Fasholasaid the rent-to-own scheme wouldallow artisans and traders to accessLagos HOMS without having to pay

the 30 percent down payment beforethey move into their apartments.

“We are working on the newhousing policy. It simply means thatonce they are qualified for the scheme,they will be allowed to move in underthe rent-to-own scheme. Thebeneficiaries will be paying rent whichwill eventually lead to mortgage. Butin an instance where a beneficiaryloses his job and cannot continue with

the scheme after some years, such aperson will get back all he has paid.Already, another person will bewaiting to buy the apartment,” hestated.

Similarly, Dr Ngozi Okonjo-Iweala,Minister of Finance and CoordinatingMinister of the Economy, while givinga progress report on the 10,000

CONFERENCE - From left Chairman, Centre of Excellence, University of Lagos, Prof. Ralph Akinfeleye (left) DeputyChancellor, Management and Services, University of Lagos. Prof. Duro Oni and President, Nigerian Institute of PublicRelations, (NIPR) Lagos Chapter, Barrister Joseph Okonmah at the 2nd NIPR Lagos Stakeholders' Conference held atJulius Berger Hall, University of Lagos, Akoka, last Thursday in Lagos.

Prospective home owners can't pay required contributionNMRC, PenCom to the rescuePension fund can now be used as equity payment

CMYK

22 — Vanguard, MONDAY, MAY 11, 2015

Economy

mortgages scheme launchedlast year by the federalgovernment under theNigeria Housing FinanceProgramme, noted thechallenge people face ingetting bulk money to pay offthe mortgage equity. Underthe scheme, an initialpayment of 20 percent oftotal cost of house ismandatory. She said thatonly 33 of the over 66,000applicants have been grantedmortgages after beingsuccessfully pre-qualified.“66,000 people applied forthe scheme. As at date,23,000 have been pre-qualified and 9,700 havebeen cleared as being eligibleto get it. And 33 people haveactually had money beingdisbursed to them to own ahome,” she said. Theminister also noted that thefederal government isconsidering the Rent-to-Ownmechanism to help peopleown their own houses. “Weare trying to work out downthe line, so that if you cannotput a down payment, youcan after years of renting, beable to own your own home,”she added.

NMRC reach-outProf. Charles Inyangete,

CEO, Nigeria MortgageRefinance Company (NMRC),also agreed that the slowtake-off of affordablemortgages scheme under theNational HousingProgramme is partly due tothe equity depositrequirement. He however

noted that concerted effortshave been made over thepast year to address theproblem. “A lot of the peopleactually found out that theproperties they want aremuch more expensive thanthey expected and so thedeposit is a bit of a challenge.However, with this newarrangement coming in, wewould see that becomingeasier. We are also reachingout to the insuranceindustry to bring in a newproduct that allows you topay through insurance foryour deposit.

“We are reaching out todevelopers as well, not onlyfor the purposes ofaffordability but for qualityalso, and to ensure that theydon’t just build, but theybuild something thatNigerians want. Somethingthat looks good and stillaffordable. We have draftedand completed a model

mortgage and foreclosurelaw which we are going toput as a pilot through the 21states that signed up, so thatprocess is also starting. Thatwill bring to bear morestandardized and morestreamlined mortgageprocess. We do not have togo through the NASS. Wedrafted it as a state law. So,each state will have to adoptit by itself, that way it willbe faster to pass into law,”he stated.

Pension fundMeanwhile, the coast is

now clear for pension fundto be used as equitycontribution on mortgages.In a chat with Vanguard,Prof. Charles Inyangete,CEO, Nigeria MortgageRefinance Company(NMRC), said the nation’spension fund regulator,Pension Commission(PenCom), has amended itsguidelines to accommodatethis. “If you do not have a20 percent down payment,you would not qualify to berefinanced. Remember weare not primary lenders, werefinance. But the primarylenders have to meet ourunderwriting standards. Sothere is a 20 percentrequirement, and so inorder to make sure that itdoes not become a burden,we have reached out toother industries. Now thepension industry will allowyou to use your pension aspart of paying your depositfor your home. That is

AWARD: Maurice Newa, Chief Commercial Officer, Airtel Nigeria (right) receiving the CEO’sBrand Personality of the Year Award on behalf of the Airtel CEO, Segun Ogunsanya, fromformer President, Association of Advertising Agencies of Nigeria (AAAN), Mrs. Bunmi Okeduring the prestigious Marketing Edge Awards, held at the Civic Centre, Victoria Island,Lagos.

Why Nigerians shun mortgage schemes


Continued from page 21 A lot of thepeople actuallyfound out that theproperties theywant are muchmore expensivethan theyexpected and sothe deposit is a bitof a challenge

Airlines record more flightdelays, cancellations in April

The country’s AviationIndustry recorded more

flight cancellations anddelays in the month of April2015, the airlines' performance report hasindicated. According to thereport, from the Aviation Pas-sengers Service Portal inAbuja, a total of eight airlineswere involved in operationsduring the month. The air-lines are First Nation, DanaAir, Arik Air, Air Peace, Over-land Airways, Aero Contrac-tors, Medview and Azman.

The report said a total of7,364 flight operations werecarried out in April, of which1,235 flights were on-time,3,699 delayed and 2,430cancelled.

A breakdown showed thatFirst Nation Airways had 229flights of which 80 flightswere on-time flights, 123delayed and 26 cancelledduring the period. It alsoshowed that Dana Air had 505

flights of which 146 were on-time, 313 delayed and 46 can-celled, while Arik Air had2,506 flights with 464 on-time,1,336 delayed and 706cancelled flights.

Air Peace, according to thereport, had 782 flights with122 on-time, 288 delayed and372 cancelled flights whileOverland had 490 flights with55 on-time, 213 delayed and222 cancelled. Aero had 1,844flights with 287 on-time,1,036 delayed and 521cancelled, while Medviewhad 465 flights with 58 on-time, 286 delayed and 121cancelled flights during theperiod. A further breakdownshowed that Azman Air hada total of 543 flights of which23 were on-time, 104 delayedand 416 cancelled. The reportalso indicated that theaverage airlines performancefor the month was 17.68 percent.

Stakeholders blame Apapagridlock on tank farms

Activities in theMaritime sector closed

for the week withstakeholders blaming theweek-long traffic gridlock inApapa and its environs onthe concentration of tankfarms in the area. Thegridlock which arose fromthe blockade of the highwaysleading to the Apapa depots,literally brought vehicularmovement to a standstill inLagos.

The traffic situation wasactually the point of focus forthe week as the situationworsened by the day sincethe beginning of the week. MrBolaji Akinola, theSpokesman for the SeaportTerminal OperatorsAssociation of Nigeria(STOAN), said that the tankfarms must be de-centralisedas a major solution to theproblem of traffic jams inApapa. He noted that theassociation had alwayssuggested that petroleumproducts could be pipedcloser to different geo-political zones, movedthrough rail wagons andbarges to avoid the extendedpressure on the road.

Mr Lucky Amiwero,President of the NationalCouncil of ManagingDirectors of LicensedCustoms Agents(NCMDLCA), said theconcentration of tank farmsin Apapa was not in theinterest of the maritimeindustry. He said the nation

should first consider criticalactions like building ofrefineries, rather thanremaining import-dependent for petroleumproducts.

Amiwero urged theministries of transport,finance, works andpetroleum resources toconvene a critical meetingwhere the issues should beaddressed in the interest ofthe nation’s economy. Heblamed the Nigerian PortsAuthority (NPA) for notworking with the provisionsof the NPA Law, Section 32A,which prescribes that theAuthority should regulatetraffic within particularradius of the port. Hestressed that if the NPA hadacted accordingly, the portswould not have beensubjected to what it wasexposed to for the whole ofthe week.

In the same vein, Mr NasirMohammed, the PortManager, Lagos PortComplex, Apapa, said thetraffic situation degeneratedbecause petrol tankers camefor loading simultaneouslyfrom across the country. Hesaid that the NPA hascontinued to work with thesecurity and traffic agencies,to resolve the imbroglio toenable trucks to have freeaccess to the ports. The portmanager, however,expressed fears thatactivities in the port may begreatly affected if thesituation persisted.

Vanguard, MONDAY, MAY 11, 2015 — 23

Cover

CMYK

starting as we speak. TheNigeria Pension Commission(PenCom) has changed itsrules and guidelines to allowthat to happen,” he stated. Thepension fund has so far pooledunder the contributory pensionscheme is over N4.5 trillion.

Relevance of insuranceSpeaking to Vanguard on the

relevance of the insuranceindustry to the mortgagesector, Mr. Olorundare

Thomas, Director General ofthe Nigerian InsurersAssociation (NIA), said: “Theinsurance industry is quitecentral to sustainablity ofpolicy initiatives within thehousing sector. Much moreso, when you talk aboutmortgage. It’s a case of, rightfrom the beginning to the end;insurance becomes quiterelevant because the lenderis interested in recovering hisfacilities. So whateverhappens to the borrower, thelender is quite interested.And the insurance sector is

there to provide the securityand assurance that will re-establish the fact that what isbeing given out is not goingto be lost in the process.

“For example, mortgage lifeinsurance will guaranteerecovery in the event of death.Of course, there are riders,should in case there is anaccident or somethinghappens to the borrower andhe loses his job and cannotcontinue, the insurance canalso package a product thatwill take care of that. Wheneven the building is in the

course of construction, ifanything happens to it,insurance can also takeresponsibility, a product isalso available to take care ofthat. When the building isstanding, and somethinghappens like flood, fire and allof that, insurance takesresponsibility. So in thetotality, insurance is there tore-assure the lender that theinitiative is not misplaced, issustainable and that they arethere when the need arises.”

NMRC is a vehicle set up tobridge the funding cost of

residential mortgages andpromote the availability andaffordability of good housingto working Nigerians byproviding mortgage lendingbanks with increased accessto liquidity and longer termsfunds in the mortgage market.Its role is to providem o r t g a g e - l e n d i n ginstitutions with access tolong-term finance at anaffordable interest rate,thereby enabling mortgagesto be issued by theseinstitutions to Nigerians, atlonger tenors and affordablerates.

WhWhWhWhWhy Nigerians shun mory Nigerians shun mory Nigerians shun mory Nigerians shun mory Nigerians shun mortgage sctgage sctgage sctgage sctgage schemeshemeshemeshemeshemesContinued from page 22

Last week, President-elect, Major-GeneralMuhammadu Buhari

(retd) surprised Nigerianswhen he said that he iscurrently at a loss on how bestto tell Nigerians that hispromise of turning theeconomy around quickly uponassumption of office on May29 may not be feasible. Onewould have expected therenowned general to knowbetter. He was swept intooffice by the propaganda ofchange. Nigerians bought theslogan line, hook and sinkerand voted him to power.

Change, it is said, is the onlyconstant thing and does notcome by wishes. It is no newsthat whenever there isdownturn in oil prices, theeconomy experiencesfinancial stress. The economiccircumstance that broughtabout a military coup thatmade Buhari head of state in1983 has not changed. It wasthe fall in oil prices that madethe Shagari-led FederalGovernment to introduce thevery first austerity measure inthe country. Buhari knew whatfollowed during his 18 monthsin the saddle. It should not benews to him that the economyis down, almost on its kneesbecause there is no money toshare at the federal level.

APC and Buhari must notethat it is by dint of hard workthat change comes about. Ifthere was surplus money inthe treasury, I am sureNigerians would not havevoted for Buhari. They votedfor him to lead a team that willchange the political, as well asthe economic situation in thecountry. Whatever it will take,Nigerians expect Buhari andhis APC co-political travellersto find a winning formula torestore the economy and notgive lame excuses.

Buhari is already looking forexcuses to explain possiblefailure on his part and thoseof his governors and party inthe future.

Buhari premised his fear onthe perception that the

APC and Buhari, no excuse forfailure, change must be change

economy has been battered bythe out-going government ofthe People’s Democratic Party,PDP. This was even asgovernors elected on theplatform of the AllProgressives Congress, APC,

said empty treasuries may beawaiting them in theirrespective states. Thegovernors cried out that moststate governments had gonebankrupt and, therefore,cannot pay workers’ salaries.

According to them, it wasobvious that they were goingto inherit huge debts whichmay delay speedy progress intheir respective states.

The state governors thatwent to Buhari were sheddingcrocodile tears. Governors arethe major problem of the

economy. They failed in theirrespective states to build aviable economy, dependingtotally on proceeds from thefederation account shared onmonthly basis. How many ofthe 36 federating states wereable to attract direct foreigninvestment in their domain inthe last four years? How manynew factories and industrieswere established in the statesduring this period? How havethe governors built theeconomy of the various states?Those who went to Buhari did

not tell him that APC states likeLagos, Edo and Osun, arecurrently the most indebted inthe country.

They did not tell thePresident-elect that Lagoswhich was run by APC all thiswhile, had an economy whereits internally generatedrevenue has been on theincrease. In 2010, LagosState’s internally generatedrevenue was N149.966 billion.It rose to N202.761 billion in2011. It further went up to219.202 in 2012 and again rose

to N384.259 billion in 2013.Figures for 2014 are yet to bemade public. If the economyof Lagos was damaged, howcome its internally generatedrevenue had been on the rise?

In the same vein, Kano Stategoverned by APC hadinternally generated revenueof N6.618 billion in 2010; itwas the same for 2011 but roseto N11.051 billion in 2012 andfurther to N17.142 billion in2013. Rivers State that wasinitially PDP but later APC hadan internally generatedrevenue of N49.632 billion in2011, N52.711 billion in 2011,N66.275 in 2012 and N87.914in 2013. In Edo State, theinternally generated revenuestood at N10.651billion in2010, N14.764 billion in 2011,N18.88 billion in 2012 andN18.89 billion in 2013.

In all the states sampled, theinternally generated revenuewas rising rather than falling.It thus suggests that stateswhich took steps to boost theirrevenue sources hadincreased revenue profile.Curiously, the external debtprofile of states has shownthat Lagos State has thehighest with a profile of$1.087 billion, followed byKaduna State with a total of$234 million. Cross River Statefollowed closely with anexternal debt profile of$131.469 million. Other stateswith relatively large externaldebt are Edo - $123 million,Ogun - $109 million, Bauchi -$87million, Enugu - $62million, Katsina - $78 million,Osun - $67 million and OyoState - $72 million.

A breakdown of the debtshowed that $3.146 billion ofthe debt owed by states wereborrowed from multilateralinstitutions while $118.9million were bilateral loans.

Based on the rising debtprofiles of state governments,the Federal Government lastyear directed banks not togrant fresh loans to stategovernments until they gotthe relevant approval andclearance from the FederalMinistry of Finance. TheFederal Government haddefended its decision todissuade banks from grantingunsecured loans to stategovernments, saying it was toprotect the states fromexcessive accumulation ofdebts.

States have not doneenough to boost their revenueprofile. They have reliedmostly on federal allocation tosurvive.

If Buhari wants to make adifference, he should begin byimplementing true fiscalfederalism. The change thatbrought him to power shouldembolden him to change thefinancial anomaly thatimplements a unitary fiscalpolicy in a federation.Whatever line of action theAPC-led Federal Governmentwould want to take that is notbased on fiscal federalism, thehues and cries about damagedeconomy will continuewhenever there is no moneyto share.

So, APC and Buhari, noexcuse for failure, changemust be change.

Buhari is already lookingfor excuses to explainpossible failure on his partand those of his governorsand party in the future

Buhari


Business & Economy

AUN set to enter GuinnessWorld Record

BY EBELE ORAKPO

American Universityof Nigeria’s Officeof Sustainability is

set to place the institutionin the Guinness Book ofWorld Records (GWR) viaits unique waste-to-wealthmanagement programme.On Friday, April 24, anunprecedented 485 peopleended 20 minutes ofsimultaneous crocheting,using plastic yarn madefrom waste polythene.

The Most PeopleCrocheting Simultaneouslyrecord, was achieved fiveyears ago in New York Cityat a Stitch ‘N’ Pitch eventorganised by the NationalNeedlearts Association, atthe Citi Field stadium, NewYork during which 426people crocheted for 15minutes using yarn.

The unique thing aboutthis event is the ecologicaltwist where the crocheters’use plarn, the yarn madefrom used polythene bags.Members of YolaEcoSentials (YES), a groupof female socialentrepreneurs promoted byAUN, took participantsthrough the process beforethe kick-off of thesimultaneous crocheting.The event served toenlighten the communityabout the university ’swaste-to-wealth initiative.

The group needleworkwas sponsored by theStudent GovernmentAssociation of AUN, tosensitize residents of Yola,the Adamawa State capitalabout the hazards of non-biodegradable litter. It was

also aimed at surpassing thecurrent Guinness WorldRecord held by Americans.

“We have yet to receiveofficial notice from theGuinness World Recordadministrators who are basedin the USA,” according toJelena Zivkovic, the Directorof the AUN LearningResource Center andcoordinator of the GWRcommittee.

Ms. Zivkovic read out therules of the competition and

urged the participants toadhere strictly to rules toavoid the AUN attempt beingdisqualified. The activityended at exactly 20 minutes.There were external observersas witnesses.

“You can make money fromit,” says Jennifer Che, Co-ordinator of SustainabilityOutreach Programs andLaboratories.

Chief Information Officer,Mr. Julius Ayuk Tabe,representing the AUNPresident, Professor Margee

Ensign at the kick-off, said:“In the light of negative newscoming from the north-east,whenever the story of tenacityand togetherness is told, yourachievement today will be areference. This is what yoursense of togetherness,teamwork, and can-do-it spirithas made possible today.”

The GWR attempt was anillustration of AUN’ssustainability programs anddemonstrates commitment tochallenging the status quo -getting AUN studentsinvolved in world events bypromoting recycling andsustainability.

In Yola, the lack of aconventional waste collectionsystem and bins/dumpsites isone of the main reasonsresidents dump their waste(including grocery bags), andthen burn it, causing a majorhealth hazard for humans andanimals, including respiratoryillnesses, gastric problems,and shortened life expectancy.

The University began aprogram some years ago toaddress local unemploymentand this environmentalhazard. As a result, Yolawomen, under the auspices ofYES, have made waste plastic(plarn) into colourful, eco-friendly accessories.

“It is our hope,” says Ms.Che, “that this event will raiseawareness on how recyclingour products, in this case,plarn, can keep theenvironment clean andhealthy, and as well providean income for the needy in thecommunity.”

AWARD - From left: Benson Oraelosi, Regional Manager, Ikeja Region, Diamond Bank Plc;Ashaka Victory Thona, First-Prize Winner - painting category, Vision of the Child 4, FolukeGeorge, Festival Secretary, Lagos Black Heritage Festival and Nike Okundaye, ManagingDirector/Chief Executive Officer, Nike Centre for Art and Culture at the Award Dinner forVision of the Child 4 sponsored by Diamond Bank PLC in Lagos.

Appeal court sets aside orderwinding up Afribank

BY INNOCENT ANABA

The Court of Appeal sittingin Lagos, has set aside thewinding-up of AfribankNigeria Plc by an order of aFederal High Court, Lagos.

The lower court hadfollowing a petition by theNigeria Deposit InsuranceCorporation, NDIC, wind-upthe bank.

The appellate court, set asidethe winding up of Afribankfollowing the appeal byshareholders of the bank, whohad appealed against thejudgment of the lower court.

The shareholders IgbrudeOke, Rasak Mumini,Akinsanya Sunday, SuleimanBabatunde, Igba Olatomide,for themselves and otherAfribank shareholders, had atthe lower court, challengedthe petition by NDIC, seekingto wind-up the bank, arguingthat there were other pendingcases against the take over ofthe bank that would be

prejudiced if the lower courtgoes ahead to wind-up thebank.

The shareholders had at thelower court, in challenge to thepetition, argued that it was anabuse of court process, asthere was a case pending incourt, challenging the powerof the Central Bank of Nigeria,CBN, in the way they did andwithout that being resolved,NDIC went ahea to file thepetition to wind-up the bank,claiming that since Afribanklicense had been revoked bythe CBN, the bank is dead andshould be wind-up.

The lower court on 07/02/2012 after being told that thereother pending applications inthe case, including apreliminary objection,challenging the petition,adjourned the matter formention. The lower court alsoon 02/04/2012 furtheradjourned the case formention. On 02/07/2012, thelower court, on the day thematter was fixed for mention,

and in the absence of theshareholders counsel, wentahead to hear NDIC counselargument on the petition andpreliminary objection,contrary to decided SupremeCourt judgments, that on theday a matter is adjourned formention, major applicationswould not be taken unless withthe agreement of counsel. Thelower court on the same daywent ahead to wind -up thebank. The shareholders hadasked the appellate court todetermine “Whether it is opento the lower court to proceed,on a day date in which the suitwas expressly and specificallyfixed for mention by the court,to strike out the appellanthearing’s notice ofpreliminary objection to thecompetency of the suit and/or to entertain the petitioncomprised in this suit withoutany prior notice to thecontrary and in the absence ofan order setting aside itsearlier ruling to wit: That thereare suits that may beprejudiced.”

High interestrate‘llpressurizeoperating costsin the economy–LCCI

BY NAOMI UZOR

The Lagos Chamber ofCommerce and

Industry, LCCI, has said thatthe implication of theMonetary Policy Committee(MPC) decision to sustain thetight monetary policy regimeis that interest rate wouldcontinue to remain high andcontinue to put pressure onoperating costs in theeconomy.

In a parley with pressmenin Lagos, the President ofLCCI, Alhaji Remi Bello, saidMPC at the end of its lastmeeting decided to sustainthe tight monetary policyregime and retainedMonetary Policy Rate (MPR)at 13per cent; CRR on PrivateSector deposits at 20 per cent;CRR on Public Sector depositsat 75 per cent; and liquidityratio at 30 per cent.

“The implication is thatinterest rate would continueto remain high and continueto put pressure on operatingcosts in the economy. Fornow, lending rate ofcommercial banks includingfees and charges rangebetween 22 and 34 per centdepending on the customerprofile, tenor and collateralquality. High interest rate isa concern we have expressedat every turn in our advocacyactivities engagements” hesaid.

According to him, with theapparent floating of the nairaexchange rate, it has becomenecessary for the CBN tocommence the gradualeasing of monetary conditionsto stimulate growth in thereal economy throughcheaper credit. Fiscaloperations of governmentneed to be better managed toreduce money supplypressures on macro-economicconditions to create room fora growth oriented monetarypolicy.

“High interest rate regimeis good for the attraction ofportfolio investments, but itpenalizes the real economyand impedes the capacity tocreate jobs. We call on theCBN to reduce charges onbank deposits, especially the0.5 per cent fee to NDIC, andanother 0.5 per cent forAMCON.


Banking & Finance

Citibankannounceswinner of the2015journalisticawards

Citibank Nigeriac o n c l u d e dthe 7th

edition of its prestigious CitiJournalistic ExcellenceAwards on May 6th 2015. Theprogram culminated with anawards ceremony to honourthis year ’s finalists. Thecompetition was open tobusiness journalists in allforms of media including theinternet, print, radio,television and wire services. Mr. Peter Dele Olowa ofBusinessDay has been namedwinner of the 2015competition in Nigeria. Mr.Olowa was selected as awinner for his article titled“The òmò-onilephenomenon” which waspublished in Business Day onDecember 12th 2014.Likewise, Mr. Francis Ezemof the National Mirror andMrs. Omobola Tolu-Kusimoof the Nation emerged as thefirst and second runner upsof the competitionrespectively. This year,Citibank Nigeria receivedtwenty-eight (28) entries frombusiness reporters acrossvarious media outlets,including Business Day, DailyIndependent, Global MediaMirror, Guardian,Leadership, Nation, NewTelegraph, Punch, Thisday,TVC and Vanguard.

In Nigeria, the threefinalists were selected by adistinguished panel of judgeswhich included Mrs. BettyIrabor, Chief ExecutiveOfficer of GenevieveMagazine, Mr. JamesPlasman, Economic Officer ofthe US Consulate General inLagos and Mr. RichardIkiebe, Director and SeniorFellow of the Pan-AtlanticUniversity’s School of Mediaand Communications.

The Citi JournalisticExcellence Awardscompetition sends winningjournalists to an elite seminarat Columbia University inNew York. The internationaljournalist’s conference is aspecial program sponsored byCiti and administered byColumbia’s Graduate Schoolof Journalism. For over thirtyyears, the program has servedto improve the quality ofbusiness journalism in thedeveloping world byexposing leading localjournalists to the issues andpeople that drive the globaleconomy.

AWARD - (L) Managing Director and CEO, Citibank Nigeria Limited, Mr. Omar Hafeez andthe Deputy Editor Business Day ,Mr. Agomuo Zebulon (R) presenting a plaque to the winner ofthe 2015 Citi Journalistic Excellence Awards Competition, Mr. Peter Dele Olowa of BusinessDay at the recently concluded competition in Lagos.

STORIES BY BABAJIDEKOMOLAFE

A study on the impactof exchangerate on

domestic prices hasrecommended a floatingexchange rate for the naira.

This, according to the studyis because the impact ofexchange rate on domesticprices is low, incomplete, andit takes about two years. “.In other words, the fear offloating that the authoritiesexhibit in Nigeria may beunfounded”, the studyasserted.

Published by the CentralBank of Nigeria (CBN) inEconomic and FinancialReview, the study titled,“Exchange Rate Pass-Throughto Domestic Prices in Nigeria:An Empirical Investigation”,was conducted by threeeconomic experts Abdulrasheed Zubair, GeorgeOkorie and Aliyu R. Sanusi.

The study stated, “The majorfinding is that, in line withAliyu et al., (2009), exchangerate pass-through in Nigeriais incomplete and low. This isin contrast with the findingsof Essien (2005) who foundthat the pass- through iscomplete in the long run.Secondly, the total impact isattained after eight quarters,suggesting that it is quietslow.

“This is consistent with theliterature on African countries,for example Ghana as found

Study recommends floatingexchange rate for Naira

in Sanusi (2010). Oneinterpretation of this low andslow exchange rate pass-through is that exporters toNigeria practice a substantialdegree of pricing-to-marketstrategy. Instead of allowingthe naira price of theirproducts to vary wheneverthere are changes in theexchange rate, these firms

allow their mark-ups to varyas they change their localcurrency prices in theopposite direction of thechange in exchange rate.

“We argue that this isplausible in Nigeria being alarge market for fairly all itsimported commodities. Firmswould therefore strive to keeptheir competitive advantage

in the domestic market asexchange rate changes. Thisexplains the low pass-through observed.

“One implication of thisfinding is that the cost of truefloat may not be as large as itwould under complete pass-through. There is therefore agood potential for de factofloat, since only a smallfraction of the excessivevariations in the exchangerate that such a regime wouldentail will be passed ontoinflation. In other words, thefear of floating that theauthorities exhibit in Nigeriamay be unfounded.”

MSME: Heritage Bank building network ofentrepreneurial leadership

Heritage Bank Limited is committed to building anetwork of Entrepreneurial Leaders necessaryto drive the growth of Micro Small and

Medium Enterprises (MSMEs) in Nigeria Managing Director/Chief Executive of Heritage Bank, Mr.

Ifie Sekibo stated this adding that the bank has developedand introduced wide range of services which address thecapacity and financing needs of MSME businesses.

“The goal of Heritage Bank’s MSME offerings is to build anetwork of entrepreneurial leaders that will drive the growthof the sector. This would enhance the ability of the MSMEsector to effectively play its role as the engine growth of theeconomy”, he said.

Heritage Bank’s commitment to leadership building in theMSME sector is reflected in the bank’s SME Clinic. “TheHeritage Bank SME Clinic is designed to enhance theentrepreneurial capacity of our SME customers. Through theClinic, Heritage Bank understands the different aspects of thecustomer’s business in order to identify areas where it canadd value. As a result we are able to develop customisedproducts and services based on the identified needs of eachSME customer,” Sekibo added

This is complemented with Heritage Governance Model,through which the Bank introduces Corporate Governance

Framework to its MSME customers. The Phase one of theScheme focuses on issues around statutory and regulatoryobligations and incorporates the following four services: Company Secretary Services; Auditing & Assurance;Accounting Services; And Tax Consultancy. These servicesare rendered to SME customers of the bank at subsidisedfees by network of consultants.

To further demonstrate its commitment to the growth of theMSMEs, the Heritage Bank developed the Paris Club Schemein partnership with RSL Derivatives Limited. This is a creditenhancement scheme specially designed for SME’s tocollectively help each other create a platform that willaccelerate growth and give SME’s easy access to funding.The solution provides a platform for SMEs to adopt bestpractices in managing their businesses and also enable themto access loans from Heritage Bank without any hard corecollateral.

In addition to these, Heritage Bank is using the mass mediato help MSME businesses across the country. This is donethrough the Enterprise Stories, a radio programme inpartnership with Enterprise Development Centre of Pan AfricanUniversity. The Enterprise Stories is aired on Classic 97.3FMevery Sunday at 7pm and on Inspiration 92.3FM at 3:00pm every Tuesday.


Banking & Finance

Chief Financial Officer( C F O ) /E x e c u t i v e

Director , Sterling Bank, Mr.Abubakar Suleiman saidthat it the bank’s expansionplans unveiled in 2013 is oncourse and it would soonproceed with the next phaseof its growth strategy.

Suleiman disclosed this at aninteractive session withBusiness Editors in Lagosrecently.

According to him, the bankcurrently has 1.5 millioncustomers and has been ableto achieve over three per centmarket share from 1 per centa few years ago. He revealedthat from 84 branches in 2006,the lender’s branch networkshould hit the 200 mark by theend of the year adding that itwould increase the number ofits Automated Teller Machines(ATMs) to 1000 by the end ofthis year. He also stated

AGM - From left: Oluwole Ajimisinmi, Company Secretary, Wema Bank PLC; AdeyinkaAsekun, Chairman and Segun Oloketuyi, Managing Director during the Wema Bank 2014Annual General Meeting held in Lagos. Photo Lamidi Bamidele.

Fidelity Bank raises N30bn toboost lending to SME

BY BABAJIDE KOMOLAFE

Fidelity Bank Plc hascommenced measuresto raise N30 billion for

the purpose of increasinglending to small and mediumenterprises (SMEs).

This week the bank will offerto the investing public a N30billion, seven years bond atinterest rate of 16.48 percent.The application for the bond, which would mature in2022, will open and close onThursday May 13th 2015.

Speaking at the completionboard meeting for the bondoffer, Chairman of FidelityBank, Chief Christopher Ezehsaid that the purpose of thebond is to fund the long termand financial activities of thebank, especially in the Smalland Medium (SME) sectorof the economy. He addedthat the bond is fully and firmlyunderwritten, and it qualifiesfor investment by pensionassets.

The prospectus for the bond show that 80 percent of the net

proceeds of the offer, whichamounts to N23 billion woulddevoted to SME lending,while 15 percent or N4.3billion would be devoted toretail lending. The balance offive (5) percent which amountsto N1.43 billion would bedevoted to enhancing theretail infrastructure.

Eze said that in terms ofSME lending, the bank wouldprovide loans to the SMEs inmanufacturing, educationalinstitutions, agriculture, healthand general commerce.

The N4.3 billion devoted toretail lending would be use toprovide loans to retails andindividual customers in theform of automobile loans,home loans, cash advanceloans and general loans.

He said that the N1.43billion devoted to retailinfrastructure would be usedto purchase retail lendinginfrastructure technology. Theretail lending infrastructuretechnology are processingplatforms that will be used forloan application, loan scoring,loan approval, loanmonitoring, loan collections,and consumer analytics.

Fidelity Bank Plc recorded 72percent increase in its profitbefore tax for the year endingDecember 31st 2014. Thefinancial statement showedthat the bank recorded 21percent increase in Interestincome to N104.3bn fromN86.3bn in 2013, whileOperating Income increasedby 15 percent to N72.6 billionfrom N63.3 billion in 2013. Total expenses increased byfive percent to N57.1 billion from N54.3 billion, while Profitafter Tax increased by 79percent to N13.8 billion fromN7.7 billion in 2013.

During the year, CustomerDeposits increased by twopercent to N820.0 billion from N806.3 billion while Net Loans and Advancesincreased by 27 percent toN541.7 billion from N426.1billion. The Bank’s TotalEquity increased by sixpercent to N173.1 billion from N163.5 billion while Total Assets increased by 10percent to N1.187 trillionfrom N1.081 trillion in 2013.

FBN Capitalwins ‘AfricanDeal of theYear’

FBN Capital Limitedhas been awarded theAfrica Deal of the Year

at this year’s edition of theM&A Atlas Awards for its rolein the Acquisition of OasisInsurance by FBN Insurance.The awards were organizedby the Global M&A Network in London , UK on the 30thof April 2015.

FBN Capital’s Head ofEnergy and NaturalResources, Ms. RolakeAkinkugbe has also beenrecognized by Energy &Corporate Africa as the BestAfrican Oil & Gas Analyst ofthe Year, as well as the MostValuable Player on the OilPatch for her commitment tothe oil & gas industry throughher display of knowledge, theprovision of industry insightsand analysis which hashelped governments andorganizations maximizeinvestment opportunities andmanage risk. The awardswere presented at the eighthedition of the Annual Sub-Saharan Africa Oil and GasConference 2015 which tookplace in Houston, Texas.

Receiving the M&A Atlasaward, the Head of FinancialAdvisory at FBN Capital, Mr.Afolabi Olorode stated, “Thisrecognition is a reflection ofthe dedication and hard workthe team, the client, and allparties to the transaction putinto making this deal a reality.We are honored to receive iton behalf of the entire team.”

Speaking on her awards,Rolake said, “It is indeed anhonor to receive thisrecognition from a prestigiousbody such as E&C Africa. Itsimply serves as anencouragement to build onmy current efforts, and I lookforward to seeing my passionand contributions continue toadd value.” She also made apresentation during the evententitled ‘Sub-Saharan Africa’sRe-shaped Oil and GasFuture’ which took a criticallook at the current globaldynamics on the Sub-SaharanAfrican oil and gas industry.

Speaking on the awards, theManaging Director of FBNCapital Limited, Mr. KayodeAkinkugbe, expressed hispleasure saying, “We aredelighted to have beenrecognized for our M&A trackrecord among other playersacross the continent.

Sterling Bank’s expansion plans on track, says CFOthat the bank will soon deploya new core banking applicationwhich would significantlyboost the quality of itsoperations and servicedelivery.

The Executive Director saidthat the bank’s goal was to beamong the top five lenders inthe industry not in terms ofbalance sheet size but in theareas of quality servicedelivery and compliance toregulations.

He pointed out that therewere banks with much biggerbalance sheets which were notmeeting customers’expectations in key areas,stressing that as Sterling Bankexpands and becomes a biggerfinancial institution, it willcontinue to outperform its peergroup.

As he put it, “We haveconsistently outperformed ourpeer group and we will

outperform the next group. Wewant to be there when it comesto service delivery, in terms ofcompliance to regulations andhow we are perceived as goodcorporate citizens.”

He disclosed that the lenderwould raise between$100million (N20billion) and$150millon (N30bilion) in Tier2 capital this year to fund itsexpansion plans.

The CFO noted thatregulatory headwinds,especially the hike in CashReserve Requirements (CRR)on public sector deposits hadimpacted banks’ profitabilityand restricted their lendingcapacity to finance economicgrowth.

He argued that the amountof bank deposits that the CBNhad sterilized as a result of the75 per cent CRR on publicsector deposits and 20percent CRR on private sectordeposit was “unprecedented”

and had constrained banks’capacity to lend.

He pointed out that thedeposit with the CBN werenon-earning adding that notonly does this impact banks’bottom line but it also preventslenders from fundingbusinesses.

He however emphasizedthat despite the toughoperating environmentSterling Bank was stillcommitted to meeting itsexpansion targets.

Abubakar Suleimandismissed suggestions byanalysts in some quarters thatthe Bank would not be able toachieve its capital raisingtargets this year due toregulatory headwinds,recalling that such skepticismswere similarly expressed in2013 when the bankannounced that it plans toraise additional capital viaequity issues.


Corporate Finance

FBN Capital Limited hassaid that strong

corporate governancestructures are critical toattracting funding for Oil andGas development in theprevailing low-priceenvironment.

Rolake Akinkugbe, Head ofEnergy and NaturalResources at FBN Capital,disclosed this at the eighthedition of the annual sub-Saharan African Oil and GasConference 2015 themed,‘Optimising innovation andinvestment opportunities inthe upstream, downstreamand service sectors’organizedby Energy and CorporateAfrica which took place inHouston Texas.

Speaking on the topic ‘Sub-Saharan Africa’s Re-shapedOil and Gas Future,’ took acritical look at the currentglobal dynamics on the Sub-Saharan African oil and gasindustry, and said: “In thecurrent low-priceenvironment, it will even bemore critical for firms to focuson implementing strongcorporate governancestructures, and be flexibleand willing to explorefunding options that may bemore dilutive from an equityperspective, than would havebeen preferred”.

The presentation alsohighlighted the inherentchallenges in the currentscenario stating that “Localcompanies in SSA, could beparticularly vulnerablewithout the right technicaland financial capacity toquickly monetise reserves. Itis at this juncture, that thesearch for valuablepartnerships withexperienced E&P firms andIOCs should quickly yieldfruit.” She further noted thatthough oil prices wouldeventually recover, it wasunlikely that the regionwould see the triple digithighs recorded prior to June2014.

“From a macro-perspective,there’s been a structural shiftfor many of SSA’s crude oilexporting economies, as theycope with the significant fallin export revenues from oil –in some cases revenues havefallen by as much as 40%.

Access Bank shareholders okay N5.7bndividend, laud cost reductionSTORIESBY PETER EGWUATU

Access Bank Plcshareholders haveu n a n i m o u s l y

approved the N5.7billiondividend proposed by itsBoard of Directors for thefinancial year endedDecember 31, 2014, just asthey commended themanagement of the bank forits prudent management ofcost of operations.

The shareholders at thebank’s Annual GeneralMeeting, AGM held in Lagosappreciated the Board ofDirectors for the proposeddividend which translates to60 kobo per share, includingthe 25 kobo interim dividend.

According to theshareholders “It is better thatyou gave us this dividendknowing the tight businessenvironment you operatedupon during the periodunder review. But we stillhope you will pay us higherdividend come next year.”

In his comment, theChairman of Access Bank Plc,Mr. Gbenga Oyebode said “In

2014, there was a significantchange in the bank’soperating climateprecipitated by changes inkey economic variables-the

oil price shock, currencydepreciation and anincreasingly bearish market.Our bank remained resilientas it improved its business

performance whilst managingthese macroeconomicchallenges.”

In his own remark, GroupManaging Director, AccessBank Plc, Mr. Herbert Wigwecommended the shareholdersfor their loyalty to the bank,saying “In 2015, we remainfocus on lifting our customerexperience in line with ourmantra of speed, service andsecurity. This effort, part of aninitiative called TakeTomorrow, represents ourcommitment to our customersto join hands with them tohelp build their successfultomorrow.

In looking ahead of thefuture, Wigwe said “We willcontinue to ensure that ourbusiness ethos is focused onenhanced customersatisfaction across allbusiness lines, maximizingshareholder returns as aresult. While, we approach2015, with great optimism,there are macro economicrealities that we cannotignore. We are aware of thechallenges ahead and aredetermined to face thesechallenges from a position ofstrength and stability.”

The financial position for2014 shows that the bankincreased its revenuegeneration as gross earningsrose to N245 billion, up 18.5per cent from the previousyear 2013. Similarly, ProfitBefore Tax grew by 21 per centform N43 billion in 2013 toN52 billion in 2014. The costto income improved more than10 percentage points to 62 percent from 73 per cent in 2013.

Diamond Bank to leverage technologyfor growth, profitability

Diamond Bank Plc hasdisclosed its readiness

to leverage on technology toboost its services to customersand make higher returns toits shareholders.

Addressing Journalists at apress briefing in Lagosrecently, the GroupManaging Director of theBank, Mr. Pascal Dozie, whoexpressed optimism that thebank would emerge the bestretail bank in Nigeria in anear future, said the bank hasrolled out new technologysolutions that would sustainit in its new market.

According to him “There isoptimism that Diamond Bankwould emerge the best retailbank in Nigeria in a nearfuture. We have rolled outnew technology solutions thatwould sustain the newmarket.

He pledged the bank’scommitment to continuallyoffer value-added solutionsthat conveniently fit into thelifestyle of its customers as aninnovative andtechnologically drivenfinancial institution, addingthat the bank has introducedseveral novel solutions thathave transformed the

Nigerian banking space.Speaking on the Diamond

Mobile App solution, Dozieexplained that the solutionwas recently upgraded with a‘Touch ID’ feature whichallows users seamless log onto their accounts by simplyidentifying their fingerprintsas an alternative to enteringa User ID and password.

The feature, available on thedevice, according to him,marked the introduction of theservice in Nigeria and alsopositioned Diamond Bank asan innovative institution thatis progressively changing theface of banking in Nigeriawith best-in-class customer-focused solutions.

“It is safe, easy to use andspecifically developed for thesuccess minded individualwho are focused onmaximizing all life’s momentswhenever or wherever theyare.”

Other features of theDiamond Mobile App includefunds transfer, bills payment,events ticket purchase, movietickets purchase, onlineshopping, wallet top-up aswell as searching, bookingand making payment for both

local and international flights. “We have one of the lowest

cost of fund in the industry.We are rated number 37 interms of credit card issuing inAfrica and Middle East. Whenyou create an enablingenvironment, more peoplewill be financially includedinto the system and that iswhat we are doing” heexplained .

It is safe, easyto use andspecificallydeveloped forthe successmindedindividual whoare focused onmaximizing alllife’s momentswhenever orwherever theyare

BY PRINCEWILLEKWUJURU

Strong corporategovernancecritical to currentlow-priceenvironment– FBN capital

CEREMONY - From left: Executive Director, Business Development, Nigerian Stock Exchange, NSE, Mr.Haruna Jalo-Waziri; Managing Director/CEO, Wema Bank Plc, Mr. Segun Oloketuyi and ExecutiveDirector, Market Operations and Technology, NSE, Mr. Ade Bajomo at the Closing Gong Ceremony incommemoration of Wema Bank’s 70th anniversary at the exchange, in Lagos.


CMYK

Corporate Finance

FBN Holdingsdismisses planto raise Tier 1Capital in2015

FBN Holdings Plc hasexplained that it hasno plan to raise Tier I

capital this year, 2015 due tosome unfavourable marketconditions.

The Chief Executive Officer,FBN Holdings, Mallam BelloMaccido told capital marketcommunity during thecompany’s 2015 facts behindthe figures presentation on theLagos floor of the NigerianStock Exchange, NSE that “FBN Holdings has noimmediate plans to raise Tier1capital within the next 12months given the low marketliquidity, depressed valuationlevels, and significant dilutionrisk for existing shareholders.”

He explained that thecompany’s capital position isbeing enhanced throughincreased profit retention,interim capitalisation ofprofits, more efficient balancesheet management and moreconservative loan growth.

On its efficiency drive, hesaid “We are rationalizingunprofitable branches andminimal branch expansion. Weare also restructuring theprocurement processes andstreamlining operations aswell as cutting back on cost.We are centralizing processesacross the Group to reducetransaction const andprocessing cycles. Thecompany is leveragingtransaction banking toincrease the share of walletthereby optimizing revenue.”

On its financial position,Maccido said “FBN Holdingsremains resilient across keyfinancial metrics despite theongoing challenges faced. Ourbalance sheet remains strongas we are still the largest bankin Nigeria in terms of assetsand deposits. We recorded 21.3per cent year on year growthin gross earnings toN480.6billion in 2014 asagainst N396.2 billion in 2013.This was largely attributable togrowth in interest income fromloans and advances tocustomers which grew by 14.2per cent and for banks 10.3 percent, with a strong NonInterest Revenue, NIR growthof 66.1 per cent. Also ouroperating income grew by 19.8per cent year on year to N355.1billion in 2014. It was drivenby an increase in non interestrevenue growth of 66.1 percent.

BY PETER EGWUATU

Standard CharteredBank has forecast thatNigeria is likely to

raise capital from theinternational debt market bythe second half of the year,2015 to meet some of itsobligations.

It also stated that Nigeria’sweakening fiscal buffers as aresult of the sustained low oilprice may result to a currentaccount deficit in thecountry ’s balance ofpayments this year.

The Managing Director/Head, Africa Research,Standard Chartered Bank,Razia Khan made theprediction during aninteractive session with selectjournalists in Lagos recently.

The economic analystsstressed that policy makers inthe country failed to effectivelyutilise the opportunity createdby the high crude oil pricesin the past years, saying thatit would be difficult for thecountry to rebuild fiscalbuffers in a low oil priceenvironment.

Khan, however, predictedthat crude oil price wouldaverage at $76 per barrel bythe second half of the year.

“We are going to see oilprices moving higher andthere is going to be someovershooting in the secondhalf of the year. We see oilprices averaging $76 perbarrel over the course of thisyear and we think that thismeans that by the second halfof the year, there is a likelyhold that oil prices would be$80 to $90 per barrel.

‘Nigeria'll borrow by mid-yearto meet obligations’

“But that would be onlyshort-lived. We shouldn’tdiscount the fact that thesevery deliberate strategy onthe part of Saudi Arabia inparticular, to move away fromthe price targeting. So, forcountries like Nigeria, theimportant take away is that ithas moved away from thatworld of triple digit oil prices

and what we would see goingforward, is more like a doubledigits oil prices scenario. “Weknow about the extent towhich Nigeria failed tocapitalise properly in theboom years in terms of oilproduction when the oil priceswere high. So, it is not goingto be that easy necessarilygiven the demands from the

fiscal side, to rebuild fiscalbuffers in a low oil priceenvironment,” she explained.

According to Khan, giventhe willingness by the federalgovernment not to crowd outthe domestic market so muchwith excessive domesticborrowing, the country mightborrow from the internationaldebt market before the end ofthe year.

BY PETER EGWUATU

Shareholders ofN i g e r i a nB r e w e r i e s ,

NB Plc are expected toapprove N27.7 billiondividend that would beproposed by the Board ofDirectors of the company atthe forth coming 69th AnnualGeneral Meeting, AGM of thecompany.

The Managing Director/CEO, Nigerian Breweries Plc,Mr. Nicolaas Vervelde at apre AGM Press briefing inLagos disclosed that the Boardof Directors of the companywould propose N27 billiondividend ( (translating toN3.50 per share ) to theshareholder at the company’s69th AGM that would holdnext week Wednesday inLagos.

According to him “ Havingearlier paid an interimdividend of approximatelyN9.5 billion that is N1.25 pershare which was declared in

NB shareholders to approve N27.7 bn dividendOctober 2014, the totaldividend will now be N37.2billion, representing N4.75per share.”

Speaking, Verveldeexplained that the operatingenvironment witnessed in2014 was very challenging asthe country witnessedinsurgency in the North East,lower revenue arising fromdrop in oil revenue anddevaluation of naira. Allthese factors and moreaffected the activities of ourcustomers as the purchasingpower of the people dropped

which affected our operations.However, our cost leadershipagenda enabled us to becomemore efficient in all area ofour operations Also, our 2015innovation agenda has kickedoff with Ace Roots .

While explaining thecompany’s merged positionwith Consolidated BreweriesPlc, he said “During the yearunder review, we commencedand concluded the mergerprocess resulting in ourenlarged company. At the endof 2014 and arising from thebusiness combination, we had

eleven brewery locations aswell as nineteen products inour portfolio of brands. We arealso the second mostcapitalised company on theNigerian Stock Exchange,NSE. Our enlarged companyexecuted the biggestinnovation agenda ever inone year.”

On the financial position ofthe company, he said “Revenue declined by 0.8 percent for the 2014 financialyear from N266.8 billion in2013 to N266.4 billion.;Revenue resulting fromoperating activities declinedby 3.3 per cent to N66.861billion from N69.2 billion,while net profit dropped by1.3 per cent to N42.5 billionfrom N43.1 billion in 2013.

Looking at the future, hesaid “We are confident aboutthe future and we will be ableto return good results even inthe face of the expectedchallenging operatingenvironment in 2015.”

VISIT - From left : Mrs. TelemaObi, Head of Admin NIWA, CSP Austine Gbaraba, Commander,Niwa PoliceCommand Lagos Area Office, Mr. Richard Nta, Mr Tarzan Balogun, Mr.MuazuSambo (GM NIWA), Engr. Sarat Sulaimon, Head of Marine, NIWA and Mr. JaphetMaisaje – Accountant NIWA during a fact finding visit by the management of Lagos areaoffice of National Inlandwaterways Authorityn NIWA, to Tarzan boats jetty in Badore, Lagosrecently.

We are confident aboutthe future and we will beable to return goodresults even in the face ofthe expected challengingoperating environment in2015

— Khan, Standard Chartered's Africa research head


CMYK

Homes & Housing

Stories by YINKAKOLAWOLE

In line with its mandateof bringing liquidity intothe mortgage market, the

Nigeria Mortgage RefinanceCompany (NMRC) hasconcluded plans to refinanceN10 billion mortgages in themarket this month.

Prof. Charles Inyangete,CEO, NMRC, disclosed thisat a Public Awareness andCapacity Building Workshoporganised by the company inLagos. Participants at theworkshop includedrepresentatives ofInternational DevelopmentFinance agencies, primarymortgage banks (PMBs), localand international capitalmarket operators, industryregulators, and policyexperts. According to him, acritical objective of theworkshop was to prepare,educate, and positionmortgage operators andstakeholders for theconstructive boom inmortgage refinances, andinvestment vista from themuch anticipated successfulissuance of the NMRC Bondin the Capital Market.

Inyangete remarked that thefirst refinancing of existingmortgages in the market, alsoknown as legacy loans, byNMRC involves about 600loans that are already in themarket, adding that 8mortgage firms areparticipating in thetransaction. “We are startingthis month with the firstrefinancing of existingmortgages in the market,which we call the legacyloans. That is N10 billiontransaction and we are aboutto conclude that. And itinvolves close to 600 loansthat are already in the market,and that’s the first of the kick-off of our refinancing. Thereare 8 mortgage firms that arepart of this first transaction,but we have 20 primarymortgage lenders as part ofthe NMRC market as wespeak, and there are manymore waiting to join themarket,” he stated.

The NMRC boss assertedthat the company has madesignificant impact in the lastone year. “NMRC has broughtin uniform underwritingstandards into the market.And so for the first time inNigeria, we now haveunderwriting standards thatreally determine how loansare originated and evaluatedfor the purpose of being givena facility. So that levels theplaying field for everybody,”he declared. Inyangete notedthat NMRC is a private

NMRC set to refinance N10bn mortgagescompany with a publicmission which has themandate to facilitate theavailability of affordablehousing, through theprovision of long termmortgage refinance to primarymortgage lenders. “Thesuccessful delivery by NMRCon its mandate will unlockquantum opportunities indeepening and expandingNigeria’s mortgage industry,the capital market, andpivoting Nigeria’s GDP tonew heights,” he stated.

NMRC’s mode of operation(refinancing cycle) involvesan initial step by a borrowerto take out a mortgage loanfrom a participating mortgagelender based on the uniformunderwriting criteria set by

NMRC; in return the borrowerwill provide regularrepayments of the loanprincipal plus interest. Theborrower will also providecollateral in the form of amortgage over the property tobe purchased. Secondly, theparticipating mortgagelenders will refinance theloans with NMRC, which will

We now have underwritingstandards that really determinehow loans are originated andevaluated for the purpose of beinggiven a facility

refinance the mortgage loansof banks with recourse to thefinancial institutions. Theparticipating mortgage lenderwill in turn, provide securityover its mortgage portfolio infavour of NMRC. The thirdstep is for NMRC to raise itsown funding by accessing thecapital markets and issuingbonds.

All over the world, theability to own a homewithout financial

assistance is beyond theability of most people.Mortgage schemes haveevolved with the purpose ofproviding financial support toprospective home owners,providing a loan facility tosecure a property and pay theoutstanding amount (theprincipal) back over time,typically with interest on theloan.

In Nigeria, mortgageschemes are still very muchat an infancy stage in theiradoption. Prospectivehomeowners around thecountry typically save up topurchase property in cash orbuy land with the intention ofbuilding a home in phasesaccording to the availability offunds. Typical mortgages bydeposit money banks are

Owning a house under Lagosmortgage scheme

available for up to 20 years at20 percent to 25 percentinterest.

The Lagos Home OwnershipMortgage Scheme (LagosHOMS) is unique in beingone of the few existingmortgage schemes able toprovide interest rates belowdouble digits. The stategovernment has deliveredhousing units across the statespecifically for this purpose.

Lagos HOMS was establishedto provide first time propertybuyers in Lagos with theopportunity to becomehomeowners. Specifically, thegovernment is providingsubsidized mortgages forordinary citizens of Lagos, anda pool of houses in whichwinners can set up their newresidence. Winners of thesubsidized mortgages aredrawn out of a lottery on amonthly basis. In order to be

eligible you must fulfill thefollowing criteria: an applicantmust reside in Lagos State;must be able to provide proofof a job and regular income.He/she must be over 21 yearsold; must have a clean credithistory; and must have beenworking for your currentemployer for a minimum of 6months.

In order for the applicationto be processed, the followingmust be provided by theapplicant: Two passport-sizedphotographs with applicant’sname and signature on theback; Evidence of tax paymentcovering the last 5 years;Personal Bank Statement forthe previous 6 months; Payslips covering the previous 6months; and Letter ofreference from your currentemployer, which shouldcontain affirmation of your jobtitle, annual salary,obligations and status withinthe company.

Typical mass housing estate

GoldmanSachs to face$120mmortgage suit

New York Court ofAppeals has revived a

bond insurer’s $120 millionlawsuit claiming GoldmanSachs Group Inc lied about apool of securities backed bysubprime mortgages duringthe period leading up thefinancial crisis.

The court in a 5-2 decisionsaid the suit by ACA FinancialGuaranty Corp should moveforward because the insurerhad raised issues about therole of billionaire JohnPaulson’s hedge fund in acollateralized debt obligationcalled Abacus. ACA Financialsaid Goldman had deceived itinto believing hedge fundPaulson & Co was a longinvestor in Abacus when itknew Paulson was betting theunderlying mortgages wouldfail. ACA said it lostapproximately $900 million onthe deal when the subprimemortgage market collapsed.

Under state law, a fraud casemay only proceed if theplaintiff can show it “justifiablyrelied” on representationsmade by the defendant.

Lagos builds10,000 houses

The Lagos StateGovernment said it had

built over 10,000 housingunits as parts of efforts totackle housing deficit in thestate.

Commissioner for Housing,Mr. Bosun Jeje, who disclosedthis, said the numberrepresented the houses thatthe state government hadconstructed since theinception of the GovernorBabatunde Fashola-ledadministration in 2007. Hesaid the administration hadbeen determined to reducehousing deficit in the state,adding that the houses arebeing handed over to theresidents of the state throughseveral strategies. “One of thestrategies is the Lagos HomeOwnership MortgageScheme, popularly calledLagos HOMS. By this month,we will start the Rent-To-Ownhome ownership scheme,” hesaid.

Jeje explained that the LagosHOMS draw by thegovernment had producedover 603 winners.


CMYK

Insurance

Kenyaregulatoropenstakafulmarket toconventionalinsurers

Kenya’s regulatorh a s

introduced new takaful(Islamic insurance) ruleswhich will allow the entryof conventional playersinto the sector, part ofefforts to boost capitalmarkets in East Africa’sbiggest economy.

Takaful is seen as abellwether of consumerappetite for Islamicfinance products. It isbased on the concept ofmutuality; the takafulcompany oversees a poolof funds contributed by allpolicy holders.

Islamic finance, whichfollows religiousprinciples such as bans oninterest payments,accounts for roughly 2percent of total bankingbusiness in Kenya, whereMuslims make up about15 percent of thepopulation of 40 million.

The rules will come intoeffect in June with firmsrequired to adhere to therequirements byDecember, according to adocument from Kenya’sInsurance RegulatoryAuthority. This would seeKenya join the countriessuch as Pakistan andIndonesia in allowingtakaful windows, whichenable firms to offersharia-compliant andconventional productsside by side.

The rules requireseparate financialreporting requirements fortakaful windows from theirparent firm, and theiroperating model must beapproved by a board ofreligious scholars.

Operators must alsomaintain separate takafulfunds for their general andlife businesses.

Kenya’s first full-fledgedtakaful firm was launchedin 2011, Takaful Insuranceof Africa. Islamic lenderFirst Community Bankalso operates a takafulscheme while KenyaReinsurance Corp hasdeveloped a sharia-compliant reinsuranceproduct of its own.

Royal ExchangePrudentialL i f e

Assurance (REPLA) has beenurged to focus on customerservice excellence, amongother major initiatives, todrive its quest for marketleadership and enhance thecompany ’s status as adominant player in the lifeinsurance industry in thenext three years.

Speaking at a nationalretreat for management staffof the company, GroupManaging Director of RoyalExchange Plc, Mr. ChikeMokwunye, encouraged staffof Royal ExchangePrudential Life, especiallythose in customer-facingdepartments, to make serviceexcellence their guidingprinciple and watchword intheir interactions anddealings with clients of thecompany.

Mokwunye said, “Thecustomer is at the heart andsoul of every organisation’sgrowth and success and it isvery important to keep themsatisfied if one wants toremain in operation. If thecustomer is treated well, he/she stays with you, but if theyreceive shabby andunsatisfactory treatment, they(customers) will take theirbusiness elsewhere.

“The future of insurance inNigeria is the life business,which has not been fullytapped into, and for RoyalExchange Prudential to seekmarket leadership, aneffective and efficient policyof customer service, loyalty

Royal Exchange Prudential Lifetargets market leadership

and retention must be in placein the organisation”,Mokwunye added.

In his remarks, Mr. WaleBanmore, Managing Directorof the company said inaddition to service excellence,his company’s focus is also onthe deployment of a robustretail marketing strategy totake insurance to thegrassroots, as well as training/upgrading of its marketingpersonnel, in line with currentrealities.

“The attainment of thesegoals, amongst others in the

current financial year, willimpact positively on thefortunes of the company,(profitability), improve servicedelivery to our clientele andboost our premium income”,Banmore added.

He further added,“Management believesstrongly in the RoyalExchange brand and itspeople, it’s most importantresource, are more thancapable of deliveringoutstanding service to existingand potential clients,nationwide”.

Banmore furthercommended all staff of RoyalExchange Prudential, for theirdrive and resourcefulness,which has resulted in‘ winning ways’ for thecompany. He furtherchallenged them to “ workeven harder in the yearsahead, in order to achieve ourobjective of becoming a worldclass company by 2016”.

Royal Exchange PrudentialLife Assurance Company is awholly owned subsidiary ofRoyal Exchange Plc, licensedby the National InsuranceCommission to offer the fullrange of life and endowmentinsurance products. Withyears of experience in theNigerian insurance market,Royal Exchange PrudentialLife Assurance has an enviablereputation for reliability,integrity, professionalism,technical competence andfinancial strength.

Stories by ROSEMARYONUOHA

NEM Insurance Plc has emergedthe 2014 BusinesstodayOnline insurance company

of the year.NEM was named winner at the second

edition of Businesstoday Online Insuranceand Pension Industry award 2014.

The award which is in nine categories had20 nominees of which nine emergedwinners.

This year’s award also recognised theGovernor of Lagos State, Mr. BabatundeRaji Fashola, (SAN), being the firstgovernor in Nigeria to enforce theContributory Pension Scheme (CPS).

Other winners are Stanbic IBTC PensionManagers Limited, pension company of theyear; Group Managing Director of MutualBenefits Insurance Plc, Mr Akin Ogunbiyiwon insurance man of the year; ManagingDirector Premium Pension Limited, Mr.

NEM, Stanbic IBTC, othersemerge winners in onlineaward

Wilson Ideva was named pension man ofthe year; Prestige Insurance Brokers,broker of the year and Mutual BenefitsInsurance Plc, micro insurance companyof the year.

Guinea Insurance Plc emerged CSRinsurance company of the year andGoldlink Insurance Plc won the mostinnovative insurance company of the year.

With over N56billion in its joint pensioncontribution fund the Lagos State PensionCommission (LASPEC) clinched the mostpension compliant state of the year award.

The event also featured the unveiling ofBusinesstoday Online weekly programmetitled: “Insurance & Pension Today” whichis expected to commence on one of thetelevision stations in the country soon.

The programme will focus on educatingNigerians on the need for insurance andplan for their retirement.

DRAW - From left: Odili Ogwu, Customer Experience Executive, Diamond Bank PLC; DavidOtukpe, Product Manager, DiamondXtra; Ikechukwu Monye, Winner, FiftyThousand Nairaprize reward; Echezona Okelue, Brand Executive, Diamond Bank PLC during the DiamondXtraMonth-end Draw held at the Ladipo Spare Parts Market in Lagos


CMYK

Interview

BY FRANKLIN ALLIBY FRANKLIN ALLIBY FRANKLIN ALLIBY FRANKLIN ALLIBY FRANKLIN ALLI

Mrs. KatyenJackden,

Nigeria’sAmbassador to

Senegal and Mauritania,spoke recently withVanguardVanguardVanguardVanguardVanguard at the Embassyin Dakar. In this interview,she disclosed that there arelots of businessopportunities Nigerians cantap into in Senegal,especially in agriculture,tourism and housing sector.Excerpts:

Tell us about Nigeria andTell us about Nigeria andTell us about Nigeria andTell us about Nigeria andTell us about Nigeria and

Senegal relationship since theSenegal relationship since theSenegal relationship since theSenegal relationship since theSenegal relationship since thetime you have been here; whattime you have been here; whattime you have been here; whattime you have been here; whattime you have been here; whatbusiness opportunities exist forbusiness opportunities exist forbusiness opportunities exist forbusiness opportunities exist forbusiness opportunities exist forNigerian industries?Nigerian industries?Nigerian industries?Nigerian industries?Nigerian industries?

Thank you very much and let mesay good afternoon and welcome toNigeria House, your House in Dakar,Senegal. By way of introduction, I amKatyen Jackden. I am Nigeria’s

Nigerians have not discoveredthe Senegalese market–Ambassador Jackden

Ambassador to Senegal andMauritania. I cover Mauritania fromhere. You asked about the relationship

between Nigeria andSenegal. I want to believethose relationships arevery strong. It has been verycordial, very brotherly and it iswaxing very stronger. I served hereas an officer in the Embassy before Iwas appointed Ambassador, so therelationship has been waxing verystrong.

Our bilateral relationship is verygood at political level, and it is alsovery good at economic level.

What is the percentage ofWhat is the percentage ofWhat is the percentage ofWhat is the percentage ofWhat is the percentage ofNigerians living in the 14 millionNigerians living in the 14 millionNigerians living in the 14 millionNigerians living in the 14 millionNigerians living in the 14 millionpopulation and the attitudes ofpopulation and the attitudes ofpopulation and the attitudes ofpopulation and the attitudes ofpopulation and the attitudes ofSenegalese toward Nigerians?Senegalese toward Nigerians?Senegalese toward Nigerians?Senegalese toward Nigerians?Senegalese toward Nigerians?

We are a little bit more than ten

thousand Nigerians but we have onlyfive thousand registered in theEmbassy. The Senegalese are veryhospitable to foreigners. You know inevery community, there are bad eggs,but generally, I would say theSenegalese are very hospitabletoward Nigerians. There are mixedmarriages between Nigerians andSenegalese; so I think the relationshipis good.

WhatWhatWhatWhatWhat is the trade volumeis the trade volumeis the trade volumeis the trade volumeis the trade volume

between Nigeria and Senegal?between Nigeria and Senegal?between Nigeria and Senegal?between Nigeria and Senegal?between Nigeria and Senegal?

When I was herein the Embassy asan officer,Nigerian textilesand plasticproducts used tosell here a lot.When I came backin 2012, I foundout that otherpeople have takenthat market fromus

•Amb. Katyen Jackden


Interview

favour of Senegal becauseNigerians come here to buySenegalese products,especially textile and fashionproducts. A lot of Nigeriansevery week come here to buy

items and take them homeand apart from that, the

main thing that wesell to Senegal is oil

but now thatSenegal hasdiscovered itsown oil, I wonder

what is going toh a p p e n

n e x t .Therefore,I cansay thattrade ismostlya t

informallevel. We

are tryingto see how the

business community cancome together and formNigeria-Senegal Chambers ofCommerce to furtherimprove trade ties.

Do you think the

discovery of oil bySenegal will affect therelationships?

In fact, the discovery

of oil is a welcomedevelopment; what wewant is for our regionto grow. The oil theyhave discovered willbe used to the benefitof their people; it isgoing to be a healthy

competition. Don’tforget that we also

import refinedcrude oilfrom someof these

neigbouringcountries. So

I don’tthink it is

going toa f f e c tt h e

relationship,negatively.

What are the challenges

you face in marketingNigerian products to theSenegalese?

I believe Nigerians have

not discovered theSenegalese market. That waswhy last year, because of ourengagement with Senegalgovernment, Nigeria wasdesignated special honor atthe Dakar InternationalTrade fair. The aim of thatwas to come here andshowcase made –in-Nigeriaproducts to the Senegalesemarket. When I was here inthe Embassy as an officer,Nigerian textiles and plasticproducts used to sell here alot. When I came back in2012, I found out that otherpeople have taken thatmarket from us. So, it is forNigerians to be veryaggressive in marketing their

The currentgovernment ofPresidentMacky Sall hasdevelopmentagenda whichNigerians cankey into. Thereareopportunitiesfor investmentin agriculturesector, tourismand housingsector

products to this market. Weare trying to see how we canwork with the traders andindustries to come andshowcase their products to theSenegalese. That is part ofthe plans we are putting inplace, to promote trade andinvestment forum; we are alsogoing to organize road showsto make sure that Nigerianproducts come to the Senegalmarket. Senegal is importeconomy and there are lots ofthings Nigerians can bringinto Senegal.

What is your take on the

attitude of Nigerianshere?

We estimate there areabout 10,000 Nigerians here.Generally, Nigerians are verytolerant and are going abouttheir businesses. That is notto say there are no bad eggsamong them. Some Nigeriansthat come here findthemselves in detentionbecause they default inimmigration laws. The reasonis because Nigerians believeECOWAS is free movement, sopeople come here to stay; theydon’t bother to regularize theirstay after three months. It isgood to know that right fromhome, when you come here,you are allowed to stay forthree months and after thethree months, you areexpected to regularize yourresidence in terms of showingthat you have a means oflivelihood and not to live onthe society. Those are someof the challenges we have,otherwise, Nigerians aregenerally well-behaved.

What do you think

government can do to makeyour job easier?

Let me say that my work can

be made easier if I amassisted to make Nigeria muchvisible in Senegal. Before, weused to have publications toshare with people who comehere to enquire about this andthat in Nigeria. This day, wedon’t have publications toshare. We do write to theMinistry of Tourism andNigeria Export PromotionCouncil, NEPC, but we don’tget feedback. There is limit towhat you can do once you areoutside the country. Again,our own media is too criticalof our country, and we forgetthat these things are actuallyread outside the country. If wepaint ourselves as goodpeople, people will see us asgood people; if we paintourselves bad, people will seeus as bad people.

What is your take on

Dangote’s investment in thiscountry?

In terms of single foreign

direct investment, I thinkDangote is the biggest Africanforeign direct investor inSenegal. All the Africancountries put together,Danagote is the biggestinvestor from Africa. I thinkwhat Dangote is doing interms of cement is helping topromote regional integration.Of course, there are a lot ofopportunities for Nigerianindustries. The currentgovernment of PresidentMacky Sall has developmentagenda which Nigerians cankey into. There areopportunities for investment inagriculture sector, tourism andhousing sector.

LAPO bossearnsdoctorate inMicrofinanceBY PROVIDENCE OBUH

M a n a g i n gDirector ofL A P O

Microfinance Bank, Mr.Godwin Ehigiamusoe, hasearned a Doctor ofPhilosophy degree fromAmbrose Alli University,Ekpoma.

His thesis with the topic:Policy Instruments andFinancial Inclusion: AComparative Study of theEthiopian and NigerianMicrofinance Policy andRegulatory Frameworksearned a distinction and isconsidered as relevant tothe improvement ofmicrofinance policyenvironment in Africa.

Ehigiamusoe is one of theleading lights formicrofinance in Africa. Inthe late 1980s, he foundedLAPO (Lift Above PovertyOrganization) a successfulpro-poor developmentorganization withmicrofinance operations inNigeria and Sierra Leone.

He had earlier earned aBachelor of Science degreein Sociology andAnthropology and Master’sdegree in DevelopmentStudies from the Universityof Benin, Benin City. Hehas attended severalcapacity enhancing coursesat local and internationalinstitutions, includingHarvard Kennedy School;Lagos Business School;IESE Business School,Barcelona, and INSEADBusiness School (SingaporeCampus).

Dr Ehigiamusoe won theFATE Foundation’s ModelEntrepreneur Award –Nigeria in 2008; the SchwabFoundation’s OutstandingSocial Entrepreneur inAfrica Award in 2010; andLagos Business School’sDistinguished AlumniAward in 2014.

He has authoredUnderstanding NGOs(1998); Poverty andMicrofinance in Nigeria(2000); Issues inMicrofinance: EnhancingFinancial Inclusion (2011).

He is currently theManaging Director, LAPOMfB, a regulated nationalmicrofinance bank.

Katyen Jackden

CMYK

34 —Vanguard, MONDAY, MAY 11, 2015

Since it’s all about reducing therisks, it is quintessential we allknow the facts pension entails

whether as a business person or anindividual. These facts can and willserve as a guideline for everyone tounderstand their place and row. In thisanalytical insight by OLUBUSOLAMAKINDE, Relationship Manager,Leadway Assurance CompanyLimited, we present these as factsabout the pension reform act 2014.

First, effective July 01, 2014, the Actgoverns and regulates theadministration of the contributorypension scheme for both the publicand private sectors in Nigeria.

The Act encourages participation inthe contributory pension schemewhich applies to two categories ofemployees. These categories compriseof all employees in the public sectorand those in private Organizationswith employees numbering 15 andabove.

There is a provision for PrivateOrganizations with less than threeemployees based on guidelines issuedby the National Pension Commission(PenCom).

Under the Act, both employer andemployee are required to make aminimum of 10% and 8% respectivelyof the employees monthlyemoluments.

There is a review of the definition of

‘monthly emoluments” to mean thetotal emolument defined in theemployees’ contract of employmentprovided it is not less than the total ofthe employee’s basic salary, housingand transport allowance.

Pension funds can be invested andthis includes specialist investmentfunds and other financial instrumentsas approved by the Commission.

There are penalties for offences ofmisappropriation of funds,reimbursement or payment by aPension Fund Administrator (PFA) orPension Fund Custodian (PFC) to astaff, officer or director.

In situations where the PFC fails tohold funds to the exclusive preserveof the PFA and PenCom or where itapplies the funds to meet its ownfinancial obligations, the Act willsanction such appropriately.

Jurisdiction resides in the HighCourts of the Federal, State ,FederalCapital Territory and NationalIndustrial courts respectively.

A fund known as the pensionprotection fund is created to protectthe benefit of contributors. Proceedsfrom this fund are paid to contributorsin the form of minimum guaranteedpension. The National PensionCommission (PenCom) determineshow compensations will be madewhere shortfall in payments arise.

Key facts about the PensionReform Act 2014

Economy



CMYK

Economy

Stories byEMEKA ANAETO,Economy Editor

Emerging economies ofNigeria, Indonesia andMexico could push the

UK and France out of the topten economies of the world by2050 provided they are able tobuild their institutions to globalstandards, diversify theireconomies and sustain growthfriendly policies.

This is one of the key findingsof the global report fromPricewaterhouseCoopers’(PwC) economists titled ‘‘TheWorld in 2050: Will the shift inglobal economic powercontinue?’’ This presents long-term projections of potentialGDP growth up to 2050 for 32of the largest economies in theworld, covering 84 per cent oftotal global GDP.

According to the report, thecurrent global economic powershift away from the establishedadvanced economies in NorthAmerica, Western Europe andJapan will continue over thenext 35 years, despite aprojected slowdown in Chinesegrowth after around 2020.

The world economy isprojected to grow at an averageof just over 3 per cent perannum from 2014-50, doublingin size by 2037 and nearlytripling by 2050.

But there’s likely to be aslowdown in global growth after2020, as the rate of expansionin China and some other majoremerging economies moderatesto a more sustainable long-termrate, and as working agepopulation growth slows inmany large economies.

Nigeria, Vietnam and thePhilippines are notable risers inthe global GDP rankings in thelong term, reflecting relativelyhigh projected average growthrates of around 4.5-5.5 per centper annum over the period to2050.

According to Mr Andrew S.Nevin, PwC Nigeria’s ChiefEconomist and co-author of thereport, “Over the past decade,Nigeria has boasted superioreconomic growth and, with theright reforms and investments,Nigeria could become one ofthe world’s leading economiesby 2030, with further progressby 2050. Nigeria’s potentialadvantages for future growth

Nigeria, Indonesia, Mexico todisplace UK, France out of top10 largest economiesinclude a large consumermarket, a strategic geographiclocation, and a young andhighly entrepreneurialpopulation’’.

He continued, ‘‘however, atthe same time, we are all awareof the significant headwinds(adverse trends) created by therapid drop in the oil price,putting pressure on the fiscaland monetary systems, as wellas reducing economic growthin the short term.To achieve itsl o n g - t e r me c o n o m i cp o t e n t i a l ,Nigeria willneed tomanage theoil priced e c l i n eeffectively atall levels ofgovernmentand create as u s t a i n a b l eplatform fordiversification

into the sectors that we knowwill drive the economy in thefuture – including power,agriculture, manufacturing,telecoms, hospitality and realestate’’.

Nevin concludes, “accordingto our long term projections,Nigeria could sustain averagegrowth of around 5-6 per centper annum in the long run,following projected growth of

around 6-7per cent inthe rest oft h i sd e c a d e ,assumingb r o a d l ygrowth-friendly

p o l i c i e sare pursued.W h i l ef o r e i g ninvestmenthas ina b s o l u t eterms longbeen focused

on the oil sector, portfolios arebecoming increasinglydiversified, moving towardsthe power, agriculture andmining areas of the economythat have demonstrated acomparative advantage inemerging markets vis-à-vis theWest’’.

Recent experience hashowever underlined thatrelatively rapid growth is notguaranteed for emergingeconomies, as indicated byrecent problems in Russia andBrazil. It requires sustainedand effective investment ininfrastructure and improvingpolitical, economic, legal andsocial institutions.

Overdependence on naturalresources, according to theanalyst, could impede long-term growth in countries suchas Nigeria, Russia, and SaudiArabia unless they candiversify their economies overtime.

Nevin further concludes that‘‘while our analysis confirmsthat emerging markets havehuge potential, they can also

be an institutionalminefield – bothmanagers and investorsneed to tread carefully.Overall, Nigeriacontinues to be anattractive place to invest

not because it is an oilproducer, but because of theimmense size of its domesticmarket and the extraordinarycommercial energy of itspeople, which remains largelyuntapped.”

Beyond Nigeria, the PwCReport projects that China willbe the largest economy by 2030on any measure. However, italso expects its growth rate toslow markedly after around2020 as its population ages, itshigh investment rate runs intodiminishing marginal returnsand it needs to rely more oninnovation than copying toboost productivity. Eventualreversion to the global averagehas been common for past highgrowth economies such asJapan and South Korea and weexpect China to follow suit.”

The report also containsprojections based on GDP atmarket exchange rates, withoutthis relative price adjustment.On that basis, China isprojected to overtake the US inaround 2028, while Indiawould clearly be the thirdlargest economy in the worldin 2050, but still some waybehind the US.

Other highlights from PwC’sprojections are: India has thepotential to sustain its highergrowth rate for longer andbecome a $10 trillion economyby around 2020 in purchasingpower (PPP) terms, or around2035 at market exchange rates.But this relies on India makingsustained progress oninfrastructure investment,institutional reforms andboosting education levelsacross the whole population.

An employee who disengages from employment before theage of 50 and is unable to secure employment within fourmonths of disengagement is allowed to make withdrawalsfrom the account although not exceeding 25% of the totalamount credited to the retirement savings account.

To be appointed to the office of the Director General, thepossession of relevant and professional qualification inpension matters and at least 15years cognate experience isrequired.

Any member of board, employee or agent, officer engagedby a PFA or PFC is expected to maintain confidentiality withrespect to information obtained in the course of their duties.Failure to comply will be sanctioned.

No action can be taken against an officer or employee of theNational Pension Commission (PenCom) for any act done inexecution of the Act or any other law if not commenced withinthree months of the act or in the case of a continuous act,

within 6 months after the act ceases.There is tax exemption on any interests, profits, dividends,

investments and other income accruable to pension funds orassets.

Any Company that is set up by the Nigeria Social InsuranceTrust Fund (NSITF) under the Pension Reform Act No.2 of2004 shall continue to operate as a PFA.

Funds Contributed to PFA’s shall be computed and creditedinto the respective retirement savings account opened underthe Act.

Any individual who has retired before the commencementof the Act shall be entitled to make withdrawals from the accountalthough not exceeding 25% of the total amount credited tothe retirement savings account.

Any employee aggrieved with his employer or PFA isobligated to approach the Commission for a redress beforeexploring arbitration or commencing an action at the NationalIndustrial Court.

Key facts about the Pension Reform Act 2014Continues from page 34

•Okonjo-Iweala


“Forensic audit report preparedwithout Bank Statement, says PwC.”

THE NATION, April 29, 2015, p 4.

The report written by NdukaChiejina revealed thefollowing. “The forensic audit

report on the Nigerian NationalPetroleum Corporation, NNPC,compiled by PricewaterHouse Coopers(Pwc) was done without bankstatements, the report said.

The Central Bank of Nigeria (CBN),according to the report, shunned theauditors’ request for the bankstatements.”

PricewaterHouseCoopers should beashamed of itself that theinternationally highly regardedauditing firm ever got itself into thismess – at any price. No local auditingfirm in any country in the world wouldever conduct what it calls a forensicaudit report without obtaining bankstatements in respect of theorganizations it has been called uponto audit. Even, a freshly minted ICANChartered Accountant anywhere inthe world knows that most everythingin audit ends in the bank accounts.

Certainly, PwC must have assignedthis monumental task to some of itsmost experienced national andinternational auditors – given themagnitude of the amount in dispute.PwC, and the auditors assigned to thisparticular audit have done thecompany’s reputation a great deal ofdamage with this self-made confessionand its implications. To be sure, PwC

PwC’S audit report orcover up?had accomplices in what can only beregarded as deliberate cover up.Among them is the Central Bank ofNigeria, CBN, where the wholepalaver about missing funds startedin the first place.

It was the former Governor of theCBN who raised alarm in late 2013that $47bn had not been remitted tothe Federation Account by NNPC.Later, under interrogation, theamount outstanding to the FederationAccount was reduced to $20bn.Meanwhile, for blowing the whistle,Sanusi Lamido Sanusi was houndedout of office by the Jonathanadministration, which under publicpressure promised a “forensic audit”.What PwC eventually produced lastmonth, again under duress, musthave been the longest delayed auditon a matter of urgent nationalimportance.

Ordinarily, one would haveexpected PwC, with its internationalreputation at stake, and Nigeria’s vitalinterest involved, to conduct andrelease a report on which everybodyfrom the Chief Executive Officer, CEO,would be prepared to stake his life forits veracity. Unfortunately, that was notthe case. PwC, for whatever reasons

known to its managers and theauditors assigned to this project, hasnow become part of the problem andnot the solution. Let me point out someof the problems the staff assigned havecreated for the auditing firm – startingfrom the first.

PwC’s first problem is one ofcredibility – allied with integrity.Unfortunately, for the company,integrity is a 100% issue for anauditing firm. Even 95% is not goodenough. An auditing firm whichissues a “forensic report” withoutcopies of the bank statements hasalready violated one of the primaryprofessional requirements of an audit.Hoe, on earth would the auditors knowthat funds that were supposed to betransferred to bank accounts actuallygot there? Even student of BusinessAdministration, who only obtainedtheoretical lessons in auditing knowthat it was totally unprofessional forPwC to continue with the assignmentonce it was made clear that bankstatements were not forthcoming. So,the report lacks credibility because itwas professionally flawed.

The possibility of deliberate collusionto cover up several frauds by PwC’sstaff arises from what was writtenbefore. If, non-professionals knew thatan audit, forensic or routine, is not

complete without bank statements,how could the well experiencedauditors of PwC, on this assignmentfail to see that they were about to issuea report which, at best, is fit only forthe dust bin? Surely, all those involvedmust be aware that they were issuinga report which fell far short of thehighest professional standards; at atime when only the very best wasrequired of them. That they probablyknew they were being unprofessional,yet going forward and risking theircompany’s reputation, as well as theirown, naturally leads to the next set ofquestions.

The first one is: who engaged them?Was it the Ministry of Petroleum? Orthe NNPC? Or the Ministry ofFinance? Or the Auditor General’sOffice? Or the Secretary to the FederalGovernment of Nigeria? Or thePresidency? Irrespective of who paidthem for this, obviously shoddy job,Nigerians, and, indeed, the entireworld wants to know the Terms ofReference, TOR, for the audit. Werethey specifically forbidden to requestfor and obtain bank statements? And,if not, why was there no demand forthose documents, through theirprincipal for them? And, why did PwCfail to honourably resign when it wasclear that a credible “forensic audit”was not possible under thecircumstances?

Finally, if they were told to back offfrom obtaining bank balances, theyneed to tell the whole world who didit.

Micro-Finance

Most confident women entrepreneurs are from Sub-SaharanAfrica —WEConnect

Stories byPROVIDENCE OBUH

Women in Sub-S a h a r a nAfrica, has been

identified as most confidententrepreneurs in the area ofdoing businesses byWEConnect International.

WEConnect International isa Non -profit Organisationconnecting women-ownedbusinesses with multinationalcorporate purchasingorganisations outside of theUnited States, whileweconnect international inNigeria identifies, educates,register and certifies womenbusiness enterprises that areat least 51 percent ownedmanaged and controlled byone or more women.

In a media chart at the justconcluded WEConnectInternational Exhibition andMatchmaker, held in Nigeria,Executive Director,WEConnect International,Nigeria, Ms. Comfort

Sakoma, said that thenumber of Nigerian womenowned businesses that joinedthe group has grown to over600 from zero at which itstarted.

To join, she said its freeregistration on it website toget sense of the business anda certification process beginswith facilities tour to know thestrength of the business.

Sakoma highlighted thatwomen entrepreneurs facethe of having a mind set thatinnovation is not a priorityand a mind set that theycannot do businesses withmultinational operations.

According to her, “Onebenefit of Wecoonect is thatthe Nigerian womanentrepreneur gets access tomarket. Sub-Saharan Africahas the most confidentwomen entrepreneurs, what

that means is that the womenentrepreneurs in this part ofthe world feels mostconfidence of their ability tobe successful as businessowners.”

In the same vein, CEO/ Co-Founder WEConnectInternational, Mrs. ElizabethVazquez, added that womenentrepreneurs must learn tothink big and about its role inthe society, saying, “mencannot be the only one

creating jobs, we must thinkhow to translate our dreamsinto a business andidentifying the hugeopportunity available to buyand sell.”

However, the exhibition wasCo-Chaired by Ernest andYoung, Accenture andExxonMobile while the Goldspensors include: EtisalatNigeria, Dana Air, NigeriaBottling Company (NBC)among others

ITF challenges trainees on entrepreneurship,skills acquisition

Director General ofIndustrial Training

Fund, ITF, Dr. Mrs JulietChukkas-Onaeko haschallenged Trainees to braceup and live up to highacademic standards expectedof them, in order for them tocontribute their quota towardsnational development.

The ITF said it remainscommitted towards itsobjectives of producingmiddle and high level skilled

manpower that will drive thenation’s economy forward,through the provision ofglobal standards technicaland vocational education thatwill eradicate unemployment,particularly amongst youths.

Highlighting how the fundis initiating proactivemeasures to achieve itsmandate, Chukkas-Onaeko, said students under itstraining programmes arechallenged to impart

knowledge provided by thefund, and take charge ofleading the nation and thecontinent into an era ofsustainable economicdevelopment.

She said the vision ofeconomic leadership on thecontinent by the country canonly be achieved whenadequate attention andcommitment is shown by allstakeholders in the quest toimbibe the nation’s youthswith continuous trainingvocational and technicaltraining knowledge that can

create jobs andentrepreneurial opportunitiesfor them and other citizens.

The ITF DG noted whileNigerian students hasexcelled in various technicaland vocational opportunitiesaround the world, that it wasimportant for those getting thebenefits of the world classtraining that the Fundprovides in Nigeria to makethe most of it, becomeentrepreneurs and contributeto the development of theeconomy.

CMYK


E-Commerce

FORUM - From left: Sales Manager, AFP Furniture Production, Mr. Uche Uzoewulu; SalesOfficer, Abuja, Hope Amadi; Lagos Project Coordinator, Frank Joos and Media Relation Officer,Julius Berger, Susan Obi at the Architects Forum at Eko Hotel, Victoria Island, Lagos

BY JONAH NWOKPOKU

Founder/CEO ofDrinks.ng, LanreAkinlagun has

identified payment ondelivery, prevalent amongonline retailers in Nigeria, asone of the greatest impedimentto the growth of the sector.

He disclosed this at a newsconference to announce theacquisition of a 200Sqr ftwarehouse in Lagos, in astrategic move to integrateoffline platform into the onlinedrinks seller to drive visibilitywhile boosting distribution.

He said, “Payment ondelivery is a bad idea and it isbad for businesses in Nigeria.In a country where you areintroducing new concept, it isvery bad to introduce new badhabit at the same time.”

Akinlagun said payment ondelivery is a bad idea becauseconsumers are as indecisive asthey are choosy thereby raisingbusinesses’ operational costwhen they reject delivereditems.

“Generally as a people, weare very indecisive, but we arealso very choosy. So when adelivery person arrives yourhouse and you don’t like theitem, you send it back at thecost of the company that istrying to deliver. So I just thinkthat because of the indecisionof the consumers, payment ondelivery is not a good idea.Also there is high cost oflogistics. And there is also theissue of inconsistency in fueldelivery, including lack oftime keeping by consumers,”he added.

On the integration of theoffline platform, Akinlaguntold the newsmen that themove was basically to connectwith more consumers through

How payment on delivery threatense-commerce growth in Nigeria

effective offline distributionsystem

He said, “We haveintegrated offline into ourplatform for two reasons. Thefirst is to improve ourdistribution. Nigeria is a veryunique country. A lot of thingshappen differently here. Sodrinks are one of the thingsthat as much you can get them

anywhere, it still relies muchon impulse purchases. Forinstance, people know theywant to drink but they don’tnecessarily plan for it. Thismakes it very difficult forpeople to purchase drinksonline. But there is a trend wenoticed with other onlineventures which we arebuilding on. We have realised

that a lot of people researchonline and purchase offline.So people are able to go to ourwebsite, see our stock and theprices we offer, and then bookit and tell us to keep it at thestore and then come by thestore later and pick it up.

“It is that physical elementthat is prevalent in Nigeria’sbusiness environment that weare trying to key into. Peoplewill not impulsive buy and payfor drinks online, they want tosee it first and that is why Ithink the Iroko style wherepeople research online andbuy offline is what is mostsuitable for products like ours”

He added: “The reason whywe have moved offline is notto become big player in theoffline world but to merge ouronline visibility with ouroffline distribution. And alsoto give people more reason totrust with our physicalpresence. It’s also for anextension of our marketingtool because it is easy for us toget referrals through word ofmouth, if we have offlinepresence. But the main pointis to increase our distribution.There are people who comeinto our stores and makeorders now because withcertain products, there has tobe a physical element.”

Akinlagun said this businessmodel will also help thebusiness reduce operationalcost and improve logistics.

Online real estatemarketplace, Lamudi.com hasreleased an updated versionof its Android app to make iteasier for house-hunters inemerging markets to buy orrent property on the go.

Version 2.0 of the app,Lamudi: Property for Sale &Rent, offers overall betterspeed and performance,making it easier to browsethrough Lamudi’s globalcatalogue of more than900,000 property listingsusing an Android device.

The app has been optimizedfor devices with lower storagespace and the overallapplication size has beenreduced, ensuringdownloading the app is alsomuch faster. Pushnotifications that lead usersdirectly to newly publishedlistings have also beenintroduced.

Contacting agents via emailhas been simplified, withusers’ existing contact detailssaved for future use. The apphas a new product detail pageand a fresh design for savedsearches. It also now supportsthe Android Lollipopoperating system. The app isalso available on iOS.

Lamudi’s Co-founder andManaging Director, Kian

Lamudi releases updated Android AppMoin, said: “Anyone whoworks in the real estatebusiness knows just howimportant mobile has become.This is particularly true of theemerging markets in which weoperate, where the smartphonepenetration rate is soaring anddemand for mobile Internetservices is ever increasing.This is why we are focusingour efforts on mobile - toensure Lamudi is delivering ahigh-quality app that meets

the changing demands ofhouse-hunters in emergingcountries.”

The app has customisedsearch functions, allowingusers to easily filter results bycountry. A key feature is thematch alerts, which notifyusers as soon as a property thatsuits their needs hits themarket. Users can also createa list of favourite properties,which can be accessed at anytime and on any device.

Nigeria’s mobile money operator, eTranzactInternational has given a boostto its financial inclusion drivewith the introduction of theNewPocketMoni, an updatedversion of the PocketMoniapp.The NewPocketMoni appcomes with several featuresincluding the ability for directdeposit of salary through theapp, withdrawal of cash viaany ATMs without the use ofcards and institution of bank-like standing orders. Also,features like money transfer,airtime purchase and billpayments have also beensimplified, thereby giving

eTranzact boosts financial inclusionwith NewPocketMoni

more financial control toconsumers without relying ontraditional banking processes.Speaking at the demo event inLagos, eTranzact’s ExecutiveDircetor, Strategy andCorporate Development, Mr.Ike Eze said the new featuresis part of a strategic move touse mobile money to drive thegrowth of businesses inNigeria.He stated that eTranzact hasdone a retake of what mobilemoney can be with a recreatedgame changing mobileexperience, and that the newfeatures will truly lead the nextgeneration of mobile paymentsplatforms in Nigeria.

Details about howAmazon’s proposed

delivery drones may workhave been published by theUS Patent Office.

According to the patent, thedrones will be able to trackthe location of the person itis delivering to by pullingdata from their smartphone.

The unmanned vehicleswill also be able to talk toeach other about weather andtraffic conditions. Amazonfaces many regulatoryhurdles before its plans canbe turned into reality.

Amazon submitted its dronepatent in September 2014, butthe details are only now beingpublished by the US Patentand Trademark Office, after itapproved the ideas.

For many, Amazon’s idea ofdelivery via drone was seenas pie-in-the-sky, but thedetails it provides in itspatent application suggestthat the firm is taking the ideaseriously and working hardto overcome a variety oftechnical obstacles.

According to the plans,Amazon’s drones will be ableto update their routes in real-time. A mock-up deliveryscreen suggests that peoplewill be able to choose from avariety of delivery options -from “bring it to me” tonominating their home, placeof work or even “my boat” asplaces for packages to bedropped.

Amazon unveilsdrone deliveryplans

EU launchescross-border e-commerceinvestigationEuropean Union

antitrust regulatorsopened an investigation intocross-border e-commerce lastweek in a move aimed atremoving borders to onlinesales as part of a broad strategyto overhaul the bloc’s digitalmarket.

European CompetitionCommissioner, MargretheVestager had announced herintention in March to open thesector inquiry

The European Commissionsaid the probe would focus onbarriers to online sales inelectronics, clothing andshoes, as well as digitalcontent.

While U.S. online retailerssuch as Amazon and e-Baydominate the e-commerceindustry, traditionalcompanies are boosting theirpresence as well.


People in Business

M r. Jude Okpala is the Managing Director/ChiefExecutive Officer of Lagos-based ClichéLimited, a metal component manufacturing

company engaged in precision engineering, metal stampingand finishing. He has a first degree in Civil Engineering fromWest Virginia University, USA and a second degree inManagement and Business Administration from the Universityof Lagos. In this chat with Financial Vanguard, Okpalaspeaks on his business which he describes as unique, thechallenges and hopes the business model has come to stay inNigeria as it will help develop the economy. Excerpts:

Metal component manufacturing is a uniquearea of manufacturing — JUDE OKPALA

BY EBELE ORAKPO

According to Okpala, metalcomponent manufacturing isa unique area ofmanufacturing that issupportive to biggerorganisations “in the sensethat we produce componentsout of metals used by othermanufacturers as inputs. Weare designed to take up anysort of component that comesout of flat sheets, design it,make prototype, send it to thecustomer and once it isapproved, we mass produce.The business is modelledafter what obtains in South-East Asia.”

South-East Asia model:“Manufacturing today, ismostly about assembly. Youdesign a product, tear itapart, out-source theproduction of the componentsto different companies, thenyou gather those componentsand reassemble them. Thistakes place in every aspect ofthe production cycle. Thetrend in the western world isthat when you do suchdesigns, you out-source thecomponents to South-EastAsian companies. That iswhy you see manufacturersof vehicles, aircraft,computers and householdproducts, out-sourcing theproduction of componentsto smaller organisations inChina, Taiwan, Indonesia,Malaysia etc., and when theyproduce the prototype, theygive it to the organisationand when it is approved,they sign a long-termagreement for materialsupply for final production.That is why if you open acomputer made in the US,you will see that thecomponents are made indifferent countries. That isthe trend in manufacturingnow. So Cliché Limited ismodelled after such, wherewe can set up a metalcomponent manufacturingcompany in Nigeria and getbigger organisations to dothe same with us – out-source part of their metal-based production to us andwe can design and producefor them and have a long-term supply agreement.

“We are at the early stagewhere we are developing thebusiness and trying to seehow that model can catch upin Nigeria. Our products arequite extensive depending onwhat the customer brings. Itis what he brings that we aregoing to design andproduce,” he stated.

Scope of operation: “We cutacross almost all the sectorsof the economy – householdproducts, packaging, justname it. It is a matter ofdiscovering what and whatwe can do in a given industry.So our marketing strategy isto look for our type of activityin every productive line. Forexample, we go to Mr. A whomanufactures mosquito coiland say ‘ok, there is this metalyou use in your production,let us go and do a sample andsend to you.’ If he approvesit and signs a delivery order

with us, we produce andsupply to him and he uses itto finish his product. We dothe same with othercompanies. We can makemetal components used tosecure currency by the CBN,Nigerian Security Printingand Minting Company andcompanies that do notesorting. We make seals usedto secure ammunition; metalseal used to secure gradedproduce, uniform accessories

like buttons, ranks etc., for thearmed forces, small containersused for canned foods,accessories used in producing

electrical appliances and somany others. Once weproduce the prototype andsend to them and theyapprove it, then we have anagreement with them to startproducing and supplyingthem. Unfortunately, inNigeria, we have notdeveloped the habit of havinga structured inventorymanagement where you cansign a long-term agreementwith suppliers. Everything is

short-term so we are hopingthat someday, that model willcompletely catch up withNigeria where we can sign a

two, three-year supplyarrangement with biggerorganisations. Abroad, bigorganisations outsourcingcomponents manufacturing tosmaller organisations in Asia,actually invest in building upthe smaller companies inorder to ensure that thesupply chain is not broken,”he said.

Our workflow:“Enquiries come in form of

either samples or designsand sometimes concepts.When we receive enquiries,we first go through thecomputer and do theelectronic design, we thensimulate the mould of thatdesign and transfer thatdesign to some othermachines that produce thedifferent components of themould and when thosemachines produce thedifferent components, we putthem together and simulatethem and if they suit what weneed them for, we do metaltreatment where we hardenthe mould components afterwhich we assemble the parts.We now have a completemetal contraption calledmould. We then put themould into hydraulic press or

mechanical press, feed metalcoils through that mould andthen the press will punch outthe shapes needed,” heexplained.

Raw materials: He said theysource their raw materialsboth locally andinternationally. “The majorcomponent of our activities ismetal sheets and metal coils.We do not have rolling millsin Nigeria to produce metalcoils, especially steel coils. Sowe import them. There areother inputs that we getlocally. For example, we cansource for the metal blockslocally to make moulds. Weactually scavenge to usediscarded materials to be ableto produce our moulds. Otherinputs, especially theconsumables used in the toolsshop such as quenching oiland drill beads, we getlocally.”

Challenges: On thechallenges, Okpalamentioned power as numberone, saying: “The size ofCliché is such that any littleincrease in cost of productiontells a lot on our bottom line.Power is the major channelthrough which our profitmargin is eroded. Second isfunding. It is difficult tosecure long-term funding forSMEs here so a business likethis is hugely funded throughsavings by the owners. It getsto a point where savings canno longer drive growth soyou keep looking for externalfunding which never comesbecause it is difficult to getlong-term funding.Acceptability and policysomersault is anotherchallenge. An organisationlike ours is expected to havesome sort of protectionthrough government policies;that is how it is done inSouth-East Asia and that ishow small businesses grow.They are given long-termprotection in form of policiesthat ensure they are notexposed to unnecessaryexternal competition. Oureconomy is more like adumping ground for foreignproducers so it is difficult forus to compete with similarproducts that come fromabroad because of high costof production. Then also thisidea that nothing produced inNigeria can be better thanwhat comes from abroad. Thatis what I mean byacceptability. It is taking ustime to make our peoplerealise that we can producebetter quality products thanwhat comes from abroad if weare given the conduciveenvironment. So when yougo to governmentestablishments or individualsor even bigger organizationsto offer your services, they willask if yours will be better andcheaper than what they aregetting from China? That is

Jude Okpala

Manufacturing today, is mostlyabout assembly. You design aproduct, tear it apart, out-sourcethe production of the componentsto different companies, then yougather those components andreassemble them


CMYK


CMYK

Aviation

Airlinesoperators lackknowledge,experience tooperate PBN—Experts

Experts in the aviationsector have decried

the inability of most airlinesoperators to effectively usethe Performance BasedNavigation (PBN) due to lackof adequate experiences andknowledge on the part of theoperators.

They however argued thateven though the PBN was anew phase in the aviationindustry, that for it to beeffective and fullyoperational in the aviationindustry, it was expected thatoperators should be wellgrounded in it with a lot ofexperiences.

Speaking on the topic,Presentation on PBNimplementation: ApprovalProcess at the NCAA annex,Murtala MuhammedInternational Airport,(MMIA) Lagos, GeneralManager, Flights OperatorInspector, Nigerian CivilAviation Authority (NCAA),Captain Sunday Arome saidthat the PBN was adequatelyanalysed in the InternationalCivil AviationOrganisation’s, ICAOdocument 9613.

Captain Arome pointed outthat Nigeria had not fullystarted using the PBNbecause of lack of adequateknowledge and experiencesstressing that, that was thekey factors that should beconsidered before the PBNcould be fully operational inthe aviation industry.

According to him, theapproval process of the PBNconsists of five phasesincluding what theoperators need to do, theapplication been submittedto the regulatory agency, theacceptance of the applicationby the regulatory agency,demonstration of flight andthe approval stage.

He emphasised that PBNrequired an approval from theregulatory authority beforeany operator can use it statingthat there were threeconditions to be satisfied bythe airlines operators beforethey can fully use the PBN.

Captain Arome said that theoperator must be cleared forairworthiness element, flightoperator element and all othernecessary process that wouldhelp the operators toeffectively use the PBN.

By LAWANI MIKAIRU

The Federal Government,through the Federal

Airports Authority of Nigeria,FAAN, weekendexplained the recentcontroversy surrounding theappointment of the FederalAirports Authority of Nigeria,FAAN, Director of Finance, Mr. Tochuku Bede Uchendu.It was reported by a section ofthe media that he was

FAAN’s Director of Finance appointmentnot terminated — FG

sacked by the AviationMinister, Chief OsitaChidoka because hegranted an unauthourisedwaivers worth over N1 billion.

Explaining the FederalGovernment's position tonewsmen, General ManagerCorporate Affairs, FAAN, Mr.Yakubu Dati said that Mr.Uchendu was only asked towait for the conclusion of allformalities regarding hisappointment as Director in

FAAN.This misinformation from

the Federal Ministry ofAviation may have resulted tothe recent redeployment of theformer Permanent Secretary ofthe Ministry, Mr MohammedAbbas, to the Federal CivilService Commission and hisreplacement with Hajia BintaBello, who is the currentPermanent Secretary of theAviation Ministry.

Dati said “On hisappointment, Mr. Uchenduwas only asked to wait for theconclusion of all formalities(due process). That process isstill on-going”. He also debunked the story in themedia alleging that the Minister of Aviation hadsacked Mr. Tochuku Uchendu over irregularitiesin his appointment and thegranting of unauthourisedwaivers worth over one billionnaira by him.

According to him “TheAuthority hereby wishes tostate that the story in questionwas not only false but alsomalicious as Mr. Uchendu’sappointment was neitherirregular nor did he evergrant waiver to any FAANcustomer, not to talk of waiveramounting to over one billionnaira” “The Director ofFinance of the Authority doesnot have the power to grantwaiver to any customer. Onhis appointment, Mr.Uchendu was only asked towait for the conclusion of allformalities (due process).That process is still on-going. We therefore urge membersof the public todiscountenance the saidstory” he added.

It would be recalled that

By LAWANI MIKAIRU &By LAWANI MIKAIRU &By LAWANI MIKAIRU &By LAWANI MIKAIRU &By LAWANI MIKAIRU &DANIEL ETEGHEDANIEL ETEGHEDANIEL ETEGHEDANIEL ETEGHEDANIEL ETEGHE

Aviation Minister, ChiefOsita Chidoka has said

that most domestic airlines inthe country lacked effectivepassengers service deliverymechanism as most of themtreat passengers poorly.

Speaking at the Eightanniversary celebration of Bi-Courtney Aviation Services,operators of the MurtalaMuhammed Domestic Terminal2 ,MMA2 , and the launch ofCommon User PassengerProcessing System (CUPPS) and upgrade of facilities at theterminal building of MurtalaMuhammed Domestic Terminal2 (MMA2), Lagos, Chidokanoted that in dealing with issuesin the aviation industry, thepassengers, processes andtechnology were key factors tomake travel seamless for thepassengers.

The Minister who alsocommissioned the Self check-inKiosk, Screening point and

Domestic airlines lack service deliverymechanism, says Chidoka

Babalakin pointed out that thecompany would continue toimprove the terminal withadequate facilities to ensureseamless travel experiences forthe passengers.

Babalakin affirmed that hefeels impressed that the ministeracknowledged the fact that BiCourtney operated terminal wasthe best airport terminal in thecountry. According to him,aviation is global and Nigeria willstrive to compete favourably inthe international scene addingthat the airport terminal wasattaining such height and featbecause of the strategy thecompany put in place andfacilitated with money to makethings work effectively.

“We thanked the minister ofaviation for his sincerity foracknowledging that MMA2 wasthe best airport terminal inNigeria. Aviation is international,we must seek to comply withinternational standard and evenexceed it” he said.

Meanwhile, Chief ExecutiveOfficer (CEO) of Bi Courney, Mr.

Airport passengersgroan as FAANintroduces newshuttle bus rules

Airport passengers havebeen groaning as they

are left stranded at variousbus-stops along the Ikeja-Airport road due to shortageof airport shuttle busesbecause of the new rulesintroduced by Federal AirportAuthority of Nigerian, FAAN.

FAAN had instructed thedrivers to replace their oldbuses with new ones and theoperators have been findingit difficult to purchase newbuses. Vanguardinvestigation revealed thatthe shortage of the airportshuttle buses was as a resultof the phase out of the oldshuttle buses and thereplacement of new oneswhich began on Monday,May 4th 2015.

One of the passengerscontacted, Mr. James Onyikesaid that the new rule byFAAN was the reason why thebuses that ply the road werefew just as he affirmed thatwith the development onground, the drivers havepegged a fix price fortransport at N100 irrespectiveof any bus stop that thepassenger will alight.

Another passenger, Mrs.Juliet Oghene said that thesituation was becomingunbearable and called onFAAN to ensure that the buseswere deployed in due time toalleviate the sufferings of thepassengers.

When contacted on phone,General Manager, Public

INAUGURATION - From left Mr Christophe Pennick, Chief Executive Officer, Bi-CourtneyAviation Services Ltd; Mr Wale Babalakin, Chairman; Chief Osita Chidoka, Minister ofAviation and Mr Kayode Odukoya, MD, First Nation Airways during the Inauguration ofCommon User Passenger Processing System (CUPPS) at the Murtala Muhammed Airport 2(MMA2), Ikeja Lagos . Photo Lamidi Bamidele.

check in counters at the Terminalpointed out that domesticairlines do not have goodpassenger services mechanism,citing an incident where AeroContractors airline had toabandon its passengers at theNnamdi Azikiwe InternationalAirport, Abuja and Lagos Airportinstead of activate theirhospitality partnership with thehotels in Abuja and Lagos.

According to Chidoka, with thedeployment of facilities that aideasy travel experiences by BiCourtney Aviation Limited, MM2terminal was maintaining itsstatus as the best airportterminal in the country.

“MMA2 has offered a templateto the Nigerian government toimprove our airport. Apart frompassengers rating the MMA2 asone of the best airport terminalsin Nigeria, ground handlers,pilots and other operators alsosaid that MMA2 is a befittingairport terminal” he said.

While expressing his gratitude,Chairman of Bi CourtneyAviation Limited, Dr. Wale


Administration of withholdingTax (11)The organizations

making thepayments are

required to withhold taxfrom such payments andpay over the withheldamounts to their respectiverelevant Tax Authoritieswithin 30days of receipt ofpayment or credit by theperson or entity suffering

the Tax.The relevant tax

authorities to receive theWHT tax transactions madeby companies is FIRS andfor individuals andunincorporated bodiessubject to Rules ofResidence is SIRS or FIRS.

Person liable to deductwithholding Tax

The payer of withholdingtax in respect of any of the

activities covered under thewithholding tax regimeshall include company(Corporate or non-corporate), GovernmentMinistries and Department,Parastatals, Statutorybodies, Institutions andother establishedorganization approved for

the operations of Pay As youEarn System.

Who is Taxable*All Persons, Companies

etc. who’s Incomes areliable to income tax, aresubject to Withholding Tax.

*However, exempt entitieslike EducationalInstitutions, GovernmentMinistries, Parastatals andother Agencies ofGovernment, are Agents for

the collection of WHT. Theyare required to deduct WHTon any payment made to ataxable body and remit sameto the relevant tax authority.

Withholding Taximplication on foreigntransactions

Non Resident Companies/Enterprises

The Revenue practice isthat non-resident companiesare not empowered todeduct any type of WHT.These categories ofenterprises are practicallyoutside the regulatorymonitoring and control ofthe FIRS. It will beimpracticable for Revenueoffice to inspect theaccounting books of thesecompanies in order toconfirm due deduction andremittance of WHT.

Double TaxationAgreement (DTA)

Transactions that areordinarily not liable to tax inNigeria are not liable toWHT in Nigeria. Thuscontracts and supplies ofgoods and servicesperformed entirely outsideNigeria by non-residentindividuals are not liable toWHT. Nigeria has treatyagreements with about eight

(8) countries and thesecountries are granted areduced rate of WHTdeduction, usually at 75% ofthe generally applicableWHT rate. 7.5%. Thesecountries include UK,Northern Ireland, Canada,France, Belgium, theNetherlands, Pakistan, andRomania.

Permanent Establishment(PE) principle exists undernigeria taxation

The rules construe a PEwhere:

*The company has a “fixedbase” in Nigeria.

*The company operates inNigeria through adependent agent authorizedto conclude contracts ordeliver goods on its behalf,

*The company is executinga turnkey project in Nigeria,or

*The operation betweenthe company and its Nigeriaaffiliate does not appear tobe at arm’s length.

*“Fixed base” implies somedegree of permanence andwill include:

*Facilities, such as afactory, office, branch, mine,oil or gas well

*Activities, such asbuilding, construction,assembly or installation.

The relevant tax authorities toreceive the WHT taxtransactions made by companiesis FIRS and for individuals andunincorporated bodies subjectto Rules of Residence is SIRS orFIRS

Lagos State Governmenthas assured to use

Medium Term SectorStrategies (MTSS) to deliveron the Lagos StateDevelopment Plan (LSDP) inthe medium term, while theimpact assessment reportingwould be used to review theplan on a regular basis offive years intervals asdocumented.

The LSDP 2012 - 2025 wasformally launched andpresented to the public byGovernor BababtundeFashola, on December 2014,to provide overall directionfor long term growth anddevelopment of the state.

Speaking at aStakeholders’ Sensitisationon the LSDP 2012 – 2025 inLagos, Commissioner,Ministry of EconomicPlanning and budget, Mr.Ben Akabueze, said that theplan will set overarchinglong term framework forgovernment’s planning andbudgeting system, stating:“It is important to note thata plan will however notachieve anything by itselfexcept it is executed.Therefore the planningteams have developed animplementation programmeto identify those actions andresponsibilities which willensure that the plan isimplemented and becomes amechanism for realising thevision for Lagos by the year2025.”

Akabueze who wasrepresented by SpecialAdviser to the Governor onEconomic Planning andBudget, Mrs. IyabowaleAluko, said that thepreparation of the LSDPbegan by looking at the mainissues and challenges facingthe state, drawing uponprevious state reports,current statistics, especiallythose published by the LagosBureau of Statistics andother relevant documents/reports made available byMinistries Departments andAgencies (MDAs), adding “Our vision for LSDP by 2025is to become “Africa’s ModelMega-city and GlobalEconomic and FinancialHub that is Safe, Secure,Functional and Productive”by 2025.

According to him, “Lagosas the fastest growing mega-city state is geographicallywell placed to serve all themajor markets of the world.

LSDP: we’ll usemedium termsectorstrategies todeliver - LASG

BY PROVIDENCE OBUH

Tax Matters

CMYK

Advertising & Promotions


CMYK

Stories byPRINCEWILL EKWUJURU

Is Legend makingreward system apolicy?

All around Nigeria,Legend extrastout is going about

rewarding loyal consumers ina campaign it dubbed“Legend Taste and Tell’contest.

The brand which hastraversed parts of Lagos,Enugu, Owerri, Ibadan andnow Abeokuta, the OgunState capital, precisely atHalmond Entertainment bar,a popular hangout at theMKO Abiola Stadium,rewarded consumers whoengaged in the blind tastegame, ‘Taste and Tell.’ Whilstrewarding winners of thegame who were able todistinguish the brand fromfilled cups marked ‘A’ to ‘C’,eventually carted homeprizes ranging fromgenerating sets to LEDtelevisions and refrigerators.

The star of the night wasIyanu Ogunrinde, a 26 yearold Abeokuta basedbusinessman who emergedwinner of a brand newgenerator in the ‘Taste andTell’ contest. Ogunrinderevealed that it was the firsttime he would ever tasteLegend Extra Stout that night,yet he was able to correctlyidentify the drink from thearray of stout brands duringthe blind taste test.

An elated Ogunrinde alsoadded that he attended theevent after he reluctantlyaccepted a friend’s invitationto hang out at the bar. Hestated: “I am so happy that Iwon this generator. ThankGod that I agreed toaccompany my friend here.Legend is truly a unique stoutbrand and that is why I didnot find it difficult to pick outthe brand from others duringthe blind taste challenge”.

Other winners of the nightwere Adekunle Gafar, astudent and Jamiu Lawal, atechnician, both based inAbeokuta. Gafar, a 25 year-oldHND 1 student of MoshoodAbiola Polytechnic, Abeokuta,won a refrigerator during theblind taste contest, said hecame well prepared to win. Inhis words: “I am not surprisedI won because I came hereprepared to win. I have beendrinking Legend for the pastfive years and today I amexcited about winning thisfridge. To me it shows thatLegend is not just looking foravenues to make money fromconsumers. It is also lookingat ways to reward loyalty. Iam so happy today and I willkeep drinking Legend. To meLegend is the best.”

On his part, Jamiu Lawal,the winner of a brand new 32"flat screen television on thenight expressed his joy atwinning the feat. He stated:

“I am very happy to have wonthis TV. I did not expect to winbut I am happy I won all thesame. My favorite drink isLegend and I feel rewarded,winning this night.”

The event also featured acultural display by the OgunState Performing Troupe with

live music by Lagos-basedPlatinum Blazers.

Speaking, Key AccountExecutive, NigerianBreweries Plc., Abeokuta, Mr.Adeyanju Babatunde statedthat Legend is the leadingstout brand in Abeokuta, thatthe brand owns its risingprofile to its unmatchedquality as well as itswillingness to rewardcustomers through events

such as the ‘Taste and Tell’challenge.

The trip to Ibadan for thetaste and tell contest was notdifferent from what waswitnessed in Abeokuta. InIbadan, Solution Oguniyi,Adekunle Adeyinka, whereall consumers who wenthome with refrigerator andgenerating set respectively,but Moshood. S. Abiola, 39-year, a native of Oyo Statehad decided to end a threeyears self-employed imposedbreak from drinking LegendExtra Stout, that night he waslucky to go home with 32-inchLED flat screen Television.

According to Abiola, he wasa regular consumer ofLegend Extra Stout untilthree years ago when hedecided to quit alcohol.

CSR - From Left: Onilogbo of Ilogbo, Oba Samuel Ojugbele, Managing Director,Intercontinental Distillers Limited, Engr Patrick Anegbe, and a Chief inside one of theclassrooms built by Intercontinental Distillers Limited for Ilogbo Community High School,Ilogbo, Ota, in Ogun State.

Magic Mirror, new OOH ad mediumenters Nigeria

A new vista has beenopened in the

Nigerian out-of-home, OOHadvertising industry with theintroduction of Magic Mirroradvertising option by Soundz& Meknitz Limited.

The product, world’s latestOOH advertisingtechnologies, is the first inentire Sub-Saharan Africa.

Classed under theemerging media and belowthe line/indoor advertisingcategory, works by interfacinga specially designed mirrorwith an in-built LCD videoand audio programme thatalso doubles as a viewingmirror. The televisioncommercial, TVC is seenplaying on the mirror, with aninbuilt sensor that squeezesthe advert message to a corneron approach of a user topresent a full mirror andreturns after use.

Speaking on the newinnovation, ManagingDirector of Soundz & Meknitz

Limited, Mr Felix Ugbechie,said already his company hasbeen granted exclusivepermit to install the newgeneration advertisingtechnology in all the restrooms in all airport loungesin Nigeria, a factor he is surewill give maximum value toNigerian advertisers.

Ugbechie said theadvertising medium is uniquebecause it offers theadvertiser the opportunity tohave something close topersonal conversations withindividuals who come incontact with it.

“The mirror, as simple as itis, is a very important tool formanaging personalrelationships. We mustalways go to the mirror toappreciate ourselves anddetermine if we are lookinggood enough for that allimportant meeting. It is apersonal tool that enables usto have a conversation withourselves before we go out to

meet other people. What weare doing is take thisconversation even further byenabling brands to talk to theirtargets in their most intimateperiods. This is a period whenconversations are bestappreciated and ensure longlasting retention,” he stated.

Ugbechie explained that theMagic Mirror advertising hasthe distinguishing capabilityto pass the messagepersonally and withoutinterruptions and alsoovercomes the challenges ofno tune out, trashing orflipping pages that have beenthe disadvantages ofelectronic and print mediaadvertising in recent time.

“The Magic Mirror is like awelcome companion to theoften disconcerting privacy ofthe rest rooms. That is whywe say it holds personalconversations becauseadvertisers have the privilegeof talking to individuals inthis secluded privacy and beable to arrest their attentionthroughout their stay.

Analysts hailChivita 100%,Man Upartnership

In today’s busy world ofbrand marketing,

utilizing the strength ofpartnership brandmarketing to gainincremental marketingexposure is not only smart,but an essential tool forbrands to remain morecompetitive in today ’sconstantly changingmarketplace. Brandpartnerships such as the onebetween Nigeria’s fruit juiceflagship brand Chivita 100%and English Premiershipside Manchester United FChas continued to generatemassive interest within thesporting community andconsumers of the brand.

According to AdewaleOkoya, a marketingcommunication consultantand former Editor withMarketing Edge Magazinein Lagos, “seven monthsafter the partnership wassigned, the management ofChi Limited seems to bedoing an excellent job ofprojecting the partnershipand the benefits to itsnumerous consumers. Thecommunication tacticsdeployed to create awarenessfor the Chivita 100% fruitjuice and ManchesterUnited partnership has beenso effective that both brandshave become synonymouswith each other in theconsciousness of Nigerianconsumers”

In a renewed bid toreposition Africa’s

image within and outsidethe continent, African PublicRelations Association,APRA is set to hold itsannual conference.

The conference’s 27th

edition which is billed tohold in Cameroon betweenMay 12 through 14, 2015,aims to analyse and projectto the world the true imageof Africa.

Addressing the press inLagos at the Pre-APRAYaounde 2015, theSecretary General of theAssociation, Mr. YomiBadejo-Okusanya said thatthe programme is pertinentconsidering the image crisisplaguing Africa continent onfrequent occasion.

“For instance, theoutbreak of the deadly EbolaVirus Disease and therecent Xenophobic attackon foreigners of Africandescent in South Africa.

APRA set toproject Africato the world

Business & Economy

Email:[email protected], [email protected] page:www.lesleba.com/blog2Website: www.lesleba.comTel:0805 220 1997


CMYK

Omoh Gabriel - Group Business EditorBabajide Komolafe - Deputy Business EditorClara Nwachukwu - Energy EditorPeter Egwuatu - Asst. Business EditorYinka Kolawole - Snr Bus. CorrespondentFavour Nnabugwu - Insurance CorrespondentGodwin Oritse - Maritime CorrespondentGodfrey Bivbere - Maritime CorrespondentMichael Eboh - Energy ReporterFranklin Alli - Industry/Agric. ReporterIfeyinwa Obi - Maritime ReporterRosemary Onuoha - Insurance ReporterNkiruka Nnorom - Capital Market Reporter

CONTRIBUTORSPrincewill Ekwujuru - Media/MarketingJonah Nwokpoku - E-CommerceNaomi Uzor - IndustryProvidence Obuh - Micro FinanceLAYOUT - Graphics Department

The data released on fuelsubsidy outlays fromresponsible Agencies ofgovernment have, overtime,regrettably remaineddivergent, such that, it hasbecome a challenge to obtaindefinitive estimates.Nevertheless, the FinanceMinister, Dr. Ngozi Okonjo-Iweala recently explained thatthe inconsistent figures oftenquoted were unavoidablebecause subsidy payments isa continuous, rolling process,therefore, relevantgovernment agencies couldonly provide specific datarelating to approved claimsthat have passed through eachdepartment at any point intime.

The above notwithstanding,what is clear however, is thatwe are spending adisproportionate amount ofour Federal budget to fundsubsidy payments, which addup to about N500bn, or anaverage of about 10% ofannual Federal budgets since2011. Incidentally, despite theobvious severe socialdeprivations caused by ourdismal infrastructural deficit,critical sectors such asEducation and Health, werenever so favoured.

Well, if you are alreadyconcerned at the apparentmisplacement of priorities,then you may be alarmed, thatactual subsidy values mayhave exceeded 20% of totalFederal budgets in recentyears. This is because, inaddition to the N500bn or soaverage actual subsidypayments annually, the valueof unsettled bills mayapproach or indeed exceedanother N500bn annually.

Infact, according to the Co-ordinating Minister, subsidyvalues, which were never

The oppressive folly of fuel subsidycaptured in annualappropriation bills, havenevertheless been settledultimately by her Ministrywithout recourse toLegislative approval asconstitutionally required.Why the National Assemblycondoned this blatantviolation of annual fiscal Acts,despite the unathourisedmonstrous outflows involved,is not clear.

This tradition of impunity hasobviously been stepped upwith possibly, over N200bnadditional commitment whichwas recklessly incurred thisyear without Legislativeconsent as penalty for bankinterest on delayed paymentsand exchange rate differentialson a ‘core’ subsidy bill ofN40bn according to ThomasOlawore, the ExecutiveSecretary of the MajorPetroleum Marketers (seereport titled: Daily Subsidy onPMS rises to N1.7bn on Pg. 38on Punch newspaper editionof 30th of April, 2015).

Clearly, if this bizarre fiscaltrajectory continues,cumulative fuel subsidy valuesmay ultimately exceed 50% ofannual budgets, particularly ifcrude oil prices remain above$60/barrel and or the Nairaexchange rate depreciatesabove the current N197=$;eventually, the oppressivefolly of government’s subsidystrategy may become soembarrassingly glaring whenwe become constrained toobtain high priced loans tofund our debilitating subsidyhabit.

Conversely, however, ifsubsidy is abolished under theprevailing crude oil price andNaira exchange rate, fuel pricewill rapidly shoot up to aboutN150/litre, and ultimatelypush the average price index

for goods and services closerto 10%. Consequently, unlessall wages and salaries rise by10% annually, income earnersmay lose 50% of thepurchasing value of their Nairaincomes every five years;thus, more Nigerians will needto cut down on their families’standard shopping list, asincomes increasingly losepurchasing power and deepenpoverty, particularly for thosefamilies who depend on theexisting minimum wage ofN18000/month.

CBN may consider easing naira rules this weekThe central Bank of Nigeria

has started talks withbanks and currency dealerson how to loosen foreign-exchange trading restrictionswhile still maintainingstability in the naira. TheFinancial Markets DealersAssociation, a Lagos-basedindustry body, met last weekto put a proposal together thatmay be presented to CBN thisweek.The FMDA will recommendways to increase trading andliquidity in the foreign-exchange market, while at thesame time avoidingspeculative demand thatmight significantly weakenthe naira.

Recall that the CBN hasimplemented severalmeasures since December tobolster the naira, which hasweakened 19 per cent againstthe dollar since the end ofJune, by limiting the buyingof dollars in the interbankmarket. The central bankhasn’t made any decision tochange the trading rulescurrently in place, IbrahimMu’azu, CBN spokesmantold Reuters by e-mail.David Adepoju, the Lagos-based president of the FMDA,said by phone that he was onholiday and referred requestsfor comment to AdebayoAdeyemo, the vice president,who didn’t immediately

respond to an e-mail.The CBN probably won’t makeany changes to the foreignexchange regime until afterthe new government is swornin on May 29, two of thepeople who spoke to Reuterssaid.Head of Africa economicresearch at StandardChartered Plc, Razia Khan hadtold reporters in Lagos lastweek: “The central bank willprobably have to let marketforces have a greater say overthe exchange rate if Nigeriais to preserve its reserves. Itmakes sense to assume thatthere will be some adjustmentin the regime to allow forgreater flexibility.

Furthermore, consumerdemand will contract ifinflation spirals to createadverse consequences formanufacturers and otheremployers of labour who willbecome compelled to scaledown on their workforce;clearly, this will furtherworsen the already sociallydisturbing rate ofunemployment.

Thus, government may seemto be caught between the deviland the blue sea, on this matterof subsidy. Indeed, ifgovernment’s response to thispersistent dilemma remainspedestrian as usual, theincoming administrationwould predictably seek a trucewith Organised Labour to onceagain share the burden of

subsidy, by raising the currentfuel price of N87 to aboutN120/litre instead of a subsidyfree actual market price ofabout N150/litre.

Regrettably, however, thisarrangement will collapse assoon as crude oil prices riseabove the current $60/barreland, or the Naira exchange raterises above N197/$, as suchprice movements will pushderegulated petrol price wellbeyond N150/litre to create awider margin of subsidy thanthe N30/litre earlierprojected.

Furthermore, if CBN’srapidly depleting reservesincrease pressure on dollardemand, Naira exchange ratewould simultaneously spiralcloser to or above the currentblack market rate of N220=$.In such event, fuel prices willrise and related subsidy valueswill again increase toprecipitate the usual train ofinadequate funding, delayedpayments, etc, etc, until abrokered resolution betweengovernment and Labour onceagain sets in motion anothercycle of folly with anagreement for partial subsidyin fuel pricing.

Sadly, it is not generallyknown that almost 50% of ourforex earnings are currentlyrepatriated abroad aspayment for imports for the40m litres of fuel consumeddaily.

Conversely, a hugereduction in externalpayments, may be possible, ifmore refineries are built or ifat least existing government’srefineries become fullyoperational. Nonetheless, thereality is that even at fullcapacity, existing refineriesmay provide barely 20% ofnational requirement; besides,Turn Around Maintenance for

these refineries maycharacteristically still takeforever to complete.However, even if refineriesoperate at optimal capacity,the ex-refinery cost of fuel willnot be significantly differentfrom the f.o.b. prices invoicedby the overseas suppliers;clearly, the price gain fromdeduction of freight and localcharges may not exceed 10%off the domestic pump price ina fully deregulated market,unless crude oil is allocated torefineries at a heavy discount(another subsidy through theback door)!

Consequently, if crude oilprices rise significantly orNaira exchange rate furtherdepreciates, fuel pump pricewill faithfully spiraluncomfortably to make theaccommodation of subsidyinevitable. Besides, until priceimposition is abolished,investors will continue to stayaway from establishing newdomestic refineries because ofthe clear challenges related tothe payments system of thepresent subsidy scheme.However, savvy investors,such as Dangote, who establishnew refineries, would hedgetheir investments by sellingtheir products strictly indollars ex-refinery gate tomarketers who would stillneed to source the requiredforex for their purchases. Insuch event, the forex outlayfor fuel will still remainsubstantial despite the newprivate refineries established.

Conversely, however,owners of domestic refinerieswould readily price their fuelin Naira if the Naira re-establishes a reputation as asafe store of value, rather thana currency that is perenniallybeleaguered and remains onlife support.

Until priceimposition isabolished,investors willcontinue to stayaway fromestablishing newdomesticrefineries

financial vanguard 11052015

Documents