The Nation Newspaper

Category: CEO

  • Nigeria loses $9.1b yearly to oil thieves, others

    The Society of Petroleum Engineers (SPE) Nigeria Council has said the crude oil stolen by thieves between January 2013 and April this year stood at 39.3 million barrels while an average of 250,000 barrels of oil per day (bopd) is either deferred or partly stolen through activities of pipeline vandals and thieves representing an average loss of $9.1billion per year at $100 per barrel oil price.

    According to the engineers, pipeline vandalism and oil theft have led to a decline in oil production from 2.45 million (bpd) to 2.05 million bpd in the last four years (2010 – 2014).

    The group also noted that the drop in crude oil earnings arising from low oil price presents an annual underfunding of $1.8 – $2.0 billion to the Federal Government. Crude oil market dislocation from the United States destination requires strategic realignment geographically to seek alternative markets in Europe and Asia to address the dip in earnings, it added.

    In a communiqué produced from its 2015 annual conference and exhibition, obtained at the weekend, the group noted that with proven gas reserves of 181 trillion cubic feet (tcf), and having the ninth largest natural gas reserves in the world and largest in Africa with undiscovered potential gas reserves of about 600tcf, Nigeria should be able to comfortably meet its export and domestic requirements.

    It said: “Gas production has been largely export focused with approximately 15 per cent going into domestic market. Out of approximately 4000km of gas pipeline in Nigeria, only a third is dedicated to domestic consumption.

    “Gas is the future of Nigeria, the key to unlocking economic potential of Nigeria and increasing the living standards of the average Nigerian. Therefore, domestic gas development will be driven by indigenous independent companies and not the international oil companies (IOCs). Natural gas is world’s fastest growing fossil fuel with global consumption projected to increase from 118tcf in 2013 to 185tcf in 2040.

    “Renewed efforts need to be made in gas discovery based on projected local gas utilization forecast and sales export to meet growing demand. Gas development with the right strategy could achieve adequate power supply by 2017. The extent of collaboration for the gas industry will determine the success of the industry. Gas to power will generate huge revenue and save money for Nigeria.

    “Therefore, high development cost of gas projects and low oil price is currently unfavourable to the industry. Power distribution pricing to investors must be conducive for investors to improve the power sector and regulatory framework alone is not sufficient to address the gaps in Nigerian Gas Supply.”

  • Banks deny oil marketers cash to import fuel

    Over 70 per cent of oil marketers that are eligible to import fuel into the country are not doing so because banks refused to lend them money, the Chairman, Integrated Oil and Gas Limited, Captain Emmanuel Ihenacho has said.

    He said banks are no longer extending credit facilities to operators because they  are hardly able to repay the loans with interest at agreed date.

    He lamented that the decision of banks deny operators facilities has further compounded the woes of indigenous oil and gas operators as they now operate at below installed capacity.

    He said: “More than 70 per cent of the operators in the oil sector want to import fuel in the wake of lopsided performance of the four national refineries but are unable to do so because banks have shut down credit windows against them. In the face of this, operators now rely on fuel allocations or supplies from the Federal Government.”

    Ihenacho said the country needs to adopt and implement a policy that will make the refineries to refine crude oil in-country in order to solve perennial fuel crisis and its attendant effect on foreign exchange.

    He said: “There is need for a paradigm shift from importing to refining in the country. This shift can only be made possible when more refineries are allowed to operate. Why can’t we encourage companies to establish more refineries to meet the fuel needs of operators in the downstream sector?”

    He blamed the absence of workable operation plan by the Federal Government for the stunted growth of the downstream sector of the oil and gas industry. He therefore urged the government  to properly restructure the sector.

    He said the deregulation of the downstream oil sector cannot be possible if private entrepreneurs do not invest in building refineries.

    Ihenacho said subsidy is a drain on the national treasury, stressing that trillions of naira has been paid as subsidies to fuel importers in the last few years.

    He urged the government to remove subsidies, and at the same provide conducive environment for private refineries to operate, adding that the idea would help in reducing the financial challenges the country is presently facing.

    Federal Government had ordered the payment of over N400billion subsidy debt owed fuel importers in the country.

  • Hackers break into banks, corporations vaults, says NIBSS

    Hackers have become more daring, breaking into banks’ vaults to fleece customers of their money, the Nigerian Interbank Settlement Systems (NIBSS) has said.

    Hackers, it said, gained entry into accounts either through internal collusion, customers’ carelessness or breaking into the security system of financial institutions and companies from outside and stole over N6 billion last year.

    Speaking at an event organised by the Lagos Chamber of Commerce and Industry (LCCI) on  The role of ICT in a Cashless Economy’, its Managing Director,  Mr. Adebisi Shonubi said the challenge financial institutions, organisations and individuals face in a cashless economy is that of security of funds.

    Examining the growth of cashless economy, Shonubi said 95 per cent transaction in 2011 was based on cash with attendant high armed robbery cases where bank bullion vans were attacked almost daily. He said people did almost all their transactions in cash to the extent that in every N100 spent, N65 was on cash transaction.

    He however said between 2013 and 2014, for instance, cashless transactions increased to 53 per cent in volume and 78 per cent in value, growing the economy by cutting down on idle time. He said some of the iadvantages of cashless economyare its ability to cut leakages, reduce cases of cash related crimes and boost government revenue.

    Represented by the agency’s Director of Industrial Services, Mr. Olufemi Fadiro, he encouraged the public to be more circumspect in disclosing their personal data to strangers or paying online. He argued that somebody can be in Nigeria and lose his life savings outside Nigeria because of the heightened interest of people to pay everything online and also disclose the security numbers to unknown sites.

    Speaking on ‘Providing Seamless Connectivity in E-commerce,’ Managing Director, Vodacom Business Africa (Nig.), Mr. Guy Clarke, outlined the importance of e-commerce to the economy, noting for instance, that it makes life easier for people by giving them alternatives and choice of the durability of the products they are buying.

    He said it also ensures seamless transaction between customers and the service companies. Represented by Mr. Abu Eto, Clarke  however, encouraged the e-commerce companies to ensure adequate security, sustainability and connectivity.

    Earlier, Chairman, LCCI, ICT Group, Mr. Zakari Usman, called for a policy drive towards cashless economy that will benefit everybody. He canvassed a position that will holistically resolve issues and challenges associated with cashless economy by making the products user-friendly.

    He said cashless economy has reduced armed robberies at homes and banks as people no longer carry cash, but do their transactions on phones and other mobile devices.

    He said industries and the economy can only grow if cutting edge technologies where people can sit at the comfort of their homes and offices to transact their businesses is embraced.

     

  • ‘Defending naira with foreign reserves is improper’

    ‘Defending naira with foreign reserves is improper’

    The prices of crude oil, the economy’s mainstay, have crashed in the global market, fueling calls for diversification. Mr. Tim Newbold, Managing Director, Africapractice, a strategic communications and advisory firm, urges the country to try mining. Defending naira with foreign reserves, he says, is an artificial measure that will not stand the test of time. The existing income inequality, he tells LUCAS AJANAKU in this interview, is because the wealth created is held by a small group.

    There have been calls on the Federal Government to diversify the nation’s revenue base. Which sector(s) of the economy do you think could displace crude oil as cash cow?

    It depends on what you mean by cash cow. Crude oil is only a cash cow for foreign exchange (forex), but the economy is relatively well diversified in terms of the contribution that other sectors make to the Gross Domestic Product (GDP). The challenge with crude oil is that it delivers such a high percentage of forex, and that Nigeria is so reliant on forex to fund its dollar denominated imports. That any fluctuation in price has structural implications, particularly on the currency, which then has a downstream effect on other industries as well.

    Crude oil itself could become a much more effective contributor to the GDP, and I think we’re beginning to see that happening, with momentum growing behind attempts by the largest business people in the country to build out a mid-stream industry of scale.

    All you have to do is deepen the local market for Nigeria’s upstream products to retain additional value and reduce exposure to external shocks.

    Equally, Nigeria needs to diversify its exports, and one of the key areas that have been under-exploited for too long is mining. Perhaps now, under a new government, it will be prioritised. At the same time, more could be done in traditional areas of strength, which are well known. Nigeria exports a significant amount of leather for example, but largely in its raw form, when the real value on international markets is for the finished goods.

    Nigeria emerged Africa’s biggest economy not too long ago. The growth in the economy has neither translated to improved standard of living for the citizens nor created jobs. Where are the disconnections?

    It’s simply a function of income inequality. Much of the wealth that has been created is held within a small percentage of the population, while the federal and state governments have not delivered when it comes to wealth re-distribution and enabling policies that drive employment creation and so, a level of systemic growth. If Nigeria has a high population growth rate, and a high level of inflation, if GDP growth is narrow and below the rate of inflation, it is inevitable that large segments of society will not get richer.

    In general terms, what advice would you give President Muhammadu Buhari to move the economy forward?

    It is clear that there is work to do if Nigeria’s long held economic potential is to be realised. We think he will start by simply trying to make the system work more efficiently. Existing structural impediments within the oil and gas sector and other key sectors can be addressed quickly, and without necessarily requiring legislation. Reducing the leakages should have a relatively significant effect on the government’s finances, and so create greater stability. Beyond that though, it is clear that an enabling environment needs to be improved, and that includes looking at everything from basic infrastructure, from roads to power supply that have always created a ‘drag’ on Nigeria’s economic growth. The reality is that anything less than five per cent at a bare minimum is needed for any form of real growth to take place. This year will probably witness significantly below that, so how the government structures the 2016 budget, and intervenes in priority sectors, and its macro-economic management capabilities will be particularly important. At the moment, it seems like the economy is in a holding pattern to ‘protect’ what is already in place. We now need to understand what the economic future looks like under the new administration.

    The value of naira is going down. Attempts by CBN to defend it with foreign reserves have not yielded fruits. Some people are even calling for further devaluation of the naira. Do you subscribe to this?

    The reality is that currencies should trade at their true value, which is a function of the strength of their underlying economy to compete internationally. The ultimate solution must be to restructure the economy, and while the short term intervention is in place now it may hold the naira at a desired rate, it will not solve the underlying problem.

    There is significant offshore capital lined up and interested in Nigeria today, but investors are unsure what the naira’s future is. A $1 investment today gives you circa N199, but if invested following a devaluation, might worth N230 or even more, so investors are looking for the discount that inevitably comes with a potential near term devaluation, and are equally nervous of making the wrong decision, and seeing value deteriorate immediately post investment by 15 per cent or more.  They need some level of clarity, that’s the key point. There is too much uncertainty in the market at the moment and the general belief is that the current naira defence can only be short term.

    Ultimately, Nigeria needs to structurally evolve in a way that reduces its exposure to external shocks and that means internal markets, capacity and production, all of which are driven by infrastructural development and improved efficiency.

    The IT sector, especially business process outsourcing (BPO), is said to hold so much promises for job creation and economic prosperity. What steps would you recommend for policy makers to be able to tap into this?

    Business process outsourcing is a function of cheap, skilled labour and good infrastructure. You have to be able to compete on cost, and capability. Nigeria clearly could play a role here, but input costs remain high when compared with other markets (power and connectivity in particular), so Nigeria is becoming a logical place for this to happen because of inflating costs in other markets, not improving conditions in Nigeria itself necessarily.

    The IT sector as a whole is one of the most exciting sectors. There is, at the moment, and I think the combination of ICT and telecoms have been growing at over 20 per cent per annum for some time. That’s real growth. But regulators are going to have to think about the future, and quickly. This sector is fast moving, and driving change and evolution in other sectors that the regulatory environment needs to be a few steps ahead, and today it’s probably too far behind. We’re already seeing this around the convergence between e-commerce, telecoms, internet service providers (ISPs). Banking and payments will happen equally quickly elsewhere. Nigeria has a relatively unique opportunity to get ahead of the game here, and it is something that should be the first thing on the desk of the next ComTech Minister, presuming that position remains.

    Concerning the choice of a minister to lead the ComTech Ministry, what do you think should be taken into consideration?

    Technical capability and understanding are certainly critical. This is such a fast moving and broad space that practical experience is essential, but equally important is the ability to translate technical knowledge into regulatory and legislative structures. Those are the two skill sets that I think would secure the respect of the industry, and create a strong base for structural improvements.

    Aside infrastructure, what peculiar challenge(s) do you face in the sector of the economy you operate?

    The prioritisation of soft risk into business models is one. Many emerging businesses in Nigeria face many challenges, and often prioritise the hard, immediate risks, over the softer, longer term risks that we focus on. There’s also very much a relationship based belief that individual relationships can ensure stability, whereas we take a much more structured approach. Evolving thinking towards the clear commercial value in structuring stakeholder relationships and engagements more strategically is our core business challenge, but it’s one we are winning.

    What is your assessment of the telecoms sector?

    Telecoms, like much of Nigeria’s challenge, is about infrastructure. We’re approaching voice saturation from a commercial perspective, so the telcos’ margins are probably deteriorating. That’s why there’s a major focus on mobile data, where margins remain high, but the more data you push through existing infrastructure, the higher the potential for poor quality voice systems. At the moment, it’s a balancing act, and all the telco’s are going to need considerably greater infrastructure over the coming years to continue the current pace of growth in data.

    Telecoms companies are also diversifying from their core business, which is another sign of revenue saturation in voice. If you look at telecoms companies’ attempts to get involved in mobile money, insurance, and e-commerce where MTN is heavily involved with Jumia. It is an attempt to shore up dwindling revenue.

    Don’t you think the telcos ought to have overcome the teething problems they met on the ground more than 12 years after liberalisation?

    Of course, the telecoms sector needs to maintain the pace of infrastructure growth with the pace of consumer adoption, and I think many people underestimated the pace of adoption that would take place in Nigeria. Now, as new technology evolves extremely quickly, smartphones become more and more prevalent and demand for bandwidth increases exponen-tially, infrastructure investment is essential once again. The industry needs to begin to prioritise long term infrastructure development to be positioned to deliver in five years over and above short term profitability. Someone, who takes that longer term view, which is probably easier for a privately held company more than a publicly listed one, will win the race, in our view.

    Who are africapractice and what do they do?

    We are a strategy and risk advisory firm. We provide full cycle advisory support for international companies looking to invest on the continent, expand their operations, or mitigate existing risk. We also provide the same support for emerging African businesses keen to expand and grow domestically, re-position themselves, invest in new markets or engage internationally. Our services range from political risk and business intelligence, to strategy and positioning, market entry support and ultimately support with communications and stakeholder engagement, which makes us relatively unique. Most risk advisory firms won’t support implementation, while most engagement focused firms won’t have the strategy, or risk and intelligence capabilities.

    What does risk and reputation consulting mean?

    Traditional risk advisors focus on the harder elements of risk, from security to financial and operational. We take a different approach. We believe you have to consider the softer issues that can have a fundamental impact on the success of your project, or company. What people think about you, and the objectives you have can be the difference between securing a licence, closing a transaction or achieving a product sale. We assess reputational risk, using our proprietary tools to identify areas of risk as well as opportunity, and build positioning and engagement strategies to mitigate the more significant risks, and achieve core project, or corporate objectives.

    How does it differ from management consultancy, risk consultancy or PR?

    It incorporates elements of risk consultancy and corporate communications, but draws most of its origins from management, and strategy consultancy. We apply similar processes to the big management consultancies, and our consulting models are similar, but we apply them specifically around our core focus area of risk and reputation. We also believe in knowing our clients, and their issues. That’s why intelligence is a core capability. By integrating the ability to gather and analyse intelligence, we ensure the in house capability to advise at the highest level.

    How long have you been in the advisory business in Nigeria?

    Africapractice has been operating in Nigeria since early 2006. So, we’re fast approaching our 10th anniversary. We started working largely with the big multinationals with investments here, but over the years have established a far more indigenous client base as entrepreneurs and businesses from multiple sectors have established themselves.

    During the election, we saw regular commentary from your consultants on the process. Why was that?

    We believe that understanding the political economy of a market is one of the key soft issues to consider when looking at risk and reputation. Relationships, power balances and political allegiances play a major role in policy direction, regulation and the general macro-economic environment. So, we always pay particular attention when elections are approaching. Not just in Nigeria, but in other African countries as well. We had a similar structure in place for the South African elections and will do so for elections in Guinea and Ghana next year.

    How do you approach client mandates? What makes Africa-practice different?

    Every client mandate starts in the same place. What’s the challenge and so what are the objectives? Generally, we want to know about an organisation’s strategy, not just for communications, but as a whole. We need to understand where you are going in order to help you get there.

    How have the economic condition, post-election and falling oil prices affected you?

    Election cycles are interesting times for us. While the economy has slowed down, and key sectors are under pressure, we also see significant demand for our analysis services to understand the emerging opportunities that are a by-product of political transition. Equally, many of our clients have taken the opportunity to reflect and stategise, which is a natural entry point for our services. We expect the next year to be interesting as well. Once there is some clarity on the stability of the currency and foreign direct investment (FDI) investors can price opportunities accordingly. We think there will be a significant amount of market entry activity, as well as M&A and a potential return to market listings in 2016. All of these things create opportunity for us.

    Who are your competitors?

    There aren’t many firms that do everything we do. So our competition is more vertical than horizontal. In the risk and intelligence space, we do things that the core risk consultancies like Control Risks, Kroll, Aegis and others do. In the strategy space there are cross overs with Mckinsey, Bain and the big four (KPMG, Accenture, Deloitte and E&Y), while in the engagement, or communications space, the big global agencies like Hill and Knowlton, Portland, Weber Shandwick, Brunswick and Bell Pottinger are competing alongside established local communication agencies.

    In terms of services, what are your core offerings? 

    We start with risk and opportunity identification, political risk analysis and market and business intelligence. This makes up the intelligence and analysis pillar of our business. We then move into the strategy pillar, which encompasses strategy development, positioning strategy and risk mitigation planning, before we move into the engagement pillar, which is where we activate. We have the capacity to deliver social media, media relations, internal communications, public affairs and government relations, investor relations and financial communications.

    Underpinning these core services are proprietary tools that we’ve developed in house over the last five years, from our monitor + intelligence service, to our in-gauge interactive database and analysis tool and our bespoke consulting model.

     

  • Why electricity tariff must be hiked

    Why electricity tariff must be hiked

    The issue of hiking electricity tariff in the country has elicited mixed reactions. While power firms say it is necessary for them to recover cost, consumers say the industry must attain a level of stability before tariff hike. The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, says Nigerians must be prepared to pay more for electricity. Emefiele who was head, Nigerian delegation to the International Monetary Fund/the World Bank Group meetings in Lima, Peru, says the country is not sliding to into recession. He says Nigeria came out of the meetings with a road map on the way forward, including adopting economic diversification and stricter foreign exchange controls, Group Business Editor, SIMEON EBULU, was there.

    How would you describe proceedings at this International Monetary Fund (IMF)/World Bank meetings

    Aside from the World Bank and IMF meetings that we had, we also held several side meetings with some potential foreign investors who have shown tremendous interest in Nigeria; we held meetings with some international banks, who are seeking to develop their relationship with Nigeria, the Central Bank of Nigeria (CBN) as well as the Federal Ministry of Finance. We also held meetings with some rating agencies  to provide insight into the economy and what we are doing to support and grow the economy.

    Basically, what we can say as the main issue is that the world finance leaders as well as the governors of central banks, came to the conclusion, to the point where the global growth was further revised downward.

    When the Spring meetings were held in April, global growth was projected at 3.8 per cent, but at this meeting, the growth was revised downward to 3.1 per cent. For African economies in April when we held the meeting, global growth was projected at over five per cent, but at this meeting, global growth for 2015 has been revised downward at 3.75 per cent, and in fact for next year,  growth for Africa  has been projected at about 4.25 per cent.

    What is the implication of this downward trend?

    What this tells us is that the slowdown, as a result of the drop in commodity prices, or the end of the quantitative easing (to the extent that the United States (U.S) is already contemplating raising rates through sale of assets), as well as the geo-political tensions, have affected very many economies to the extent that they are slowing down, and in some cases, some of the economies have also gone into recession.

    What is the way forward?

    The meetings concentrated on what can be done to reverse the trend and what kind of specific options and solutions that can be provided for the different economies in order to turn their situations around. Basically, for those economies that are really affected by drop in commodities prices, and in this case Nigeria, the basic solutions and suggestions that came up were that first, there is a need for us to diversify our economy away from oil and commodity prices.

    We are already doing that, and we use this opportunity to thank Mr. President for the various interventions he has made in support of our various efforts to diversify the economy away from oil, or away from commodities’ prices. That gives credence to what we are doing in our various attempts to catalyse the economy, by making intervention funds available to support agriculture, Micro Small and Medium Enterprises, and other various interventions that we have put in place to support the growth of the economy.

    Another solution that came up, was that countries that are affected by commodity prices and other external shocks should adopt country-specific options that they think would help in addressing their problems. That gives credence to the specific options that we have taken regarding our decision, not to continue to adopt an indeterminate depreciation of the naira. So, we will continue to monitor the situation (as I have always said), and to ensure that we refocus our mind, and everything we do, to the extent that we see what we can do to continue to conserve our reserves  and achieve some level of stability in the exchange rate.

    What are the high points of the African caucus meetings with the  IMF/WBG?

    There were some specific meetings in the African caucus,  which is the Group of Finance Ministers and Central Bank Governors  from Africa, which was held specifically with the Managing Director of the IMF, Mrs. Christine Lagarde and President of the World Bank, Dr. Jim Kim.

    At that meeting, the African caucus used the opportunity to raise five key issues; one, we discussed how the World Bank and IMF can assist African countries  in enhancing financing for sustainable development.  These should help the African countries on how they can raise finance and how they can receive support from the IMF and the World Bank to ensure that by 2030, extreme poverty would have been eradicated.

    The African governors and the IMF also discussed how the world financial bodies could assist African countries in stemming illicit financial flows so as to reduce, or eliminate the incidence of loss of revenues and taxes from African countries.

    The African caucus also discussed how the World Bank and IMF could assist African countries in achieving their economic transformation and diversification project,   so as to reduce the adverse impact of the drop in commodity prices on their economy.

    The caucus also discussed how the World Bank and IMF, could assist in financing regional transformative infrastructure projects. And indeed even on this, we even held our side meetings with the World Bank Team (which was headed by Nigeria’s Ms. Arunma Oteh). We had very constructive engagements with her, and the IMF have made a commitment that they will assist Nigeria in whatever form, in raising or sourcing finance for some of our infrastructure projects.

    Fifth, the governors and finance ministers, also discussed how the IMF will assist African countries in reducing diversity, quotas and other problems that may appear. Here, we’re talking about increased representation of Africans, both in the World Bank and IMF. At the specific meetings that we held with the World Bank, the President, Dr. Jim Kim, specifically mentioned the fact that three notable Africans, one of which included our own Ms. Oteh, were appointed as Executive Vice Presidents, to support the attempt by the World Bank to ensure that Africans have representation in the World Bank. But of course at the IMF, we also canvassed the need for and to press further, that more Africans are represented at the senior and board levels of the IMF, and we received commitment at the IMF that this will be done.

    What level of success has been recorded in the nation’s reform efforts so far?

    Yes, in Nigeria, we have been adopting reforms and this started about two years ago, or much earlier. The prime issue from the fiscal side, has been the fact that we have tried to expand our tax-base so as to improve on revenue. You will all recall that last year, the Federal Ministry of Finance engaged with McKinsey, and within the period, McKinsey raised almost N75billion as incremental revenue. And this year, they have been given the target to raise it to a minimum of N150 billion, as a way of raising our revenue base so as to begin to see how we can shore up our revenue and rely less on oil.

    CBN’s denial of access of foreign exchange to some items has been construed as a ban?

    Let me repeat that we did not ban the importation of any item; what we just did was to exclude (them) from accessing foreign exchange. These are items we think can be produced in this country. In fact, in the past, these items have been produced in the country in large quantity, and we think that because of the challenges we have, following the drop in commodity prices and the drop in revenue accruing to the nation, we felt there is a need for us to begin to produce those items in the country. That position still stands.

    I must have been quoted out of context if anybody said I am reconsidering that position. What I only said is, the exclusion stands, and I have even mentioned in different fora, list of different items which should even be excluded, which some manufacturing companies think can be produced within the country, but we have said no, that we need to properly digest these 41 items that have been excluded from foreign exchange.

    The basic issue is this; there is a slowdown. It is a fact that revenue has dropped as a result of the fall in commodity prices. If that has happened, we need to prioritise, just like Mr. President has said. We need to prioritise to make sure that foreign exchange is made available only to those who are importing essential raw materials and products we know cannot be produced within the country. That is the only way we can conserve our foreign exchange and reduce the demand for foreign exchange for the importation of some of these products we are saying can be produced in the country.  And we will continue to plead and crave everybody’s indulgence,  give us the support, as we are convinced that these items can be produced here in this country.

    I have read and heard from people, saying the Central Bank is preventing people from getting foreign exchange. Let me also say that the Central Bank’s role is to intervene in the foreign exchange market, and we have tried as much as possible the broadening of the foreign exchange base, so that those who earn foreign exchange through export proceeds  can also make their funds available in the market for everybody to share.

    So, from time to time, we will continue to do our best to provide foreign exchange in the market, to meet the import needs of our people, but what is important, is for us to understand that there are challenges facing practically all the countries in the world. There are only just few countries that we can say are insulated for now, but even at that, they, including the US, know that they have to be careful in whatever contagious action they take, otherwise, it will also affect them.

    So, we need everybody’s cooperation to ensure we meet those targets, we need to refocus our minds and think of the best way to diversify our economy, away from excessive reliance on oil.

    How true is it that investors are exiting our markets?

    It is true that investors are pulling out their investments in the country. And I must tell you that in the third quarter of this year alone, I read in a report that almost $48billion were capital outflows that left Emerging and Frontier markets.

    So, what does that mean?

    It means that people are pulling funds and are beginning to look at economies, such as the U. S. and other areas where they think there are opportunities, and there are fears that the drop in commodity prices will ultimately affect economies that depend solely on commodity exports.  And  that is why we are saying, it is time for us to think as nationalistic Nigerians; that we have to carry our cross by ourselves; we have to solve our problems by ourselves; nobody is going to solve our problems for us. That is why we will continue to appeal to all of us, to embrace and support the measures and policies that we are putting in place, because all these are meant to see how we can diversify our economy away from excessive reliance on oil.

    Whatever support that is needed, the Central Bank and the Deposit Money Banks, are willing to give those support, and I can assure you that in the course of time, even interest rate will begin to come down, and our people will begin to enjoy the benefits of the actions that we have put in place to diversify our economy.

    What is your take on the push for electricity tariff hike?

    When you talk about inflation and exchange rate as being the model for pricing tariff and all that, you are very correct. And that is why we are doing our best to see to it that we keep inflation under check, and that is why we have been (I use the word stubborn) in even adjusting the currency further, and you will notice that in the last eight months, we have achieved so relative stability in exchange rate, and that will continue. But I also read in the papers that we are not going to continue to enjoy the tariffs that we have seen so far.

    For you to have good electricity supply, you need to pay a little more, and the truth is that, if we compare the cost of generating our own electricity using our generators, with the cost of using the existing distribution companies’ grid, you will find out that what we spend on generators is significantly higher than the cost/kilowatt hour, using the DISCOS. For example, using your generator costs as much as N80/kilowatt hour, and today, using your DISCOs, you are paying less than N20/kilowatt hour in some of the cases.

    What we are saying, is, even if you have to pay a little more so that you can throw away your generator, pay a little more so that you can have more electricity, and I think it is worth it. These are some of the policies that the NERC is putting in place to support what is called the Cost Reflective Tariff. But I can assure everybody that whatever that cost reflective tariff turns out to be, it will still be substantially lower than the N80/kilowatt hour spent today on our generators.

    To what extent has CBN intervention to DISCOs and GENCOs galvanised the power sector?

    We have seen some improvement in power generation and it is also true that the wheeling capacity in the transmission grid, is limited. I am also aware that we’ve been in discussion with government about efforts being made to encourage investment in the transmission grid, so as to improve the capacity of the transmission to be able to absorb more energy that is generated so that more power can get to our people.

    We will continue to do so and in the course of time, the actions that are being taken by government to improve the transmission capacity, will be unveiled to all of us and will agree that actions are being taken.

    The funds were provided to distribution and generating companies, as well as gas firms, but not all of those funds have been disbursed, because of the issues that we are trying to resolve with the Nigerian Electricity Regulatory Commission, as well as the Nigerian Electricity Bulk Commission. Once those issues are resolved, more of those funds will be disbursed and then we can start to talk about the impact. Yes, those DISCOS are supposed to use the money to buy meters, transformers, and so on so as to improve their capacity, while the GENCOS are required to use the funds to acquire equipment, replace some of their obsolete equipment so that they can also improve on their generation capacity.

    We’ve started to see the impact of this positively, by the time the remaining funds are disbursed, it will help to improve the distribution and generation capacities, that is why I told you earlier that government, realising that the transmission capacity may be hindered, is already taking steps on how to invest in transmission, so as to improve capacity in that area.

    Is Nigeria sliding into recession?

    Let me quickly correct that, Nigeria is not sliding into recession. We have had two quarters of slow growth. Like I told you, even the world economy has revised its growth outlook.  So, what we are saying is that, because we have seen two successive quarters of slow growth, that we should embrace the policies that we are putting in place both at the monetary and fiscal fronts, so that we can see a reversal and increased growth, not slowing growth, so no one has talked about Nigeria going into a recession. It means we need to work hard to reverse the trend  so we can move to positive growth, rather than slowing growth.

     

  • ‘How to prevent capital flight with financial reporting’

    ‘How to prevent capital flight with financial reporting’

    The Financial Reporting Council of Nigeria (FRC) last week organised a public hearing on the Draft National Code of Corporate Governance to promote transparency and accountability in financial reporting. In this interview with Senior Correspondent COLLINS NWEZE, FRC’s Chief Executive Officer Jim Obazee explains steps being taken by the council to ensure that companies follow best practices in their reports.

    Why is the Financial Reporting Council of Nigeria pushing for the National Code on Corporate Governance?

    When the World Bank carried its enquiry in 2004 on Nigeria reports on observers of standards and codes, it said Nigeria was using persuasive code and there are different ones in the country.

    They are actually sectoral and are not backed by law. You have the Central Bank of Nigeria (CBN) running one for the banks. We have the one that the National Insurance Commission is running for the insurance companies. We have the one run by the Securities and Exchange Commission (SEC), which is called SEC Codes.  We have the one that is used by Pencom for pensions, then very recently, the Nigeria Communications Commission issued one, though they said, it is effective in 2017.

    The moment they identified that our codes are persuasive; they also found out that it is imperative for Nigeria to have the Financial Reporting Council Act, where the Council will be in charge of corporate governance since they have been dealing with financial reporting.

    In the wisdom of the sixth National Assembly, they introduced section in the FRC Act which says there should be a Directorate, and inside the Directorate there should be one called corporate governance.

    Then, they introduced Section 50 of the FRC Act, where they gave us the duty to develop principles of corporate governance and promote public awareness about corporate governance principles and practices. They also introduced a section, where the Council shall have power to enforce compliance.  It then means that issuance of National Code on Corporate Governance is statutory, no longer persuasive.

    There is also need for unification of codes, and sectorial guidelines should not be in conflict with the national code. Government also ensured that it must be private-sector led and that other government agencies should also participate.

    Why are some people working against the code?

    I want to believe that working against the code is rather mischievous. The code is not an issue. What is in the issue is a draft that is calling for public comment. So, if you have anything against it, come and say it. If you said three quarters of the code should not be issued at all, come to the public hearing and say so. But to say that Nigerians should not be given an opportunity to speak about the Code is rather unfortunate.

    The persons that are working against it said they are shareholders of entities. But the shareholders association has given us a written comment that is supposed to be discussed.  It is not that the codes have been issued; it is a draft document that has been put on the table.

    The question is partially answered. But I need you to clarify, if there are specific provisions in the proposed code that are frightening some people?

    From what we received so far, some interest groups that have written, especially the big firms, are saying why do you want joint audit? This is because the draft code is saying, if your turnover is not less than N10 billion, or your market capitalisation is not less than N5 billion, you should have joint auditors.

    For the auditors, if one of them is an international firm, where one is an alien, the other one must be a Nigerian firm. And we said, the Nigerian firm must not have a partner that is an alien.

    Our agenda is not only to generate employment for Nigerians, but to also ensure that Nigerians are trained. Every government agency must pursue an agenda that says that Nigerians being trained are gainfully employed. They should have technical support.

    Are there other complaints?

    Some have also complained that no two family members should be on the board of a company. Yes, we have said so, but it could be argued. What if two of them have significant interest? If so, they should be affiliate directors, because if two of them are part of management there are chances they could be working together.

    Remember that corporate governance can be broken down into bank-based or insider system. There is also the outsider system, or wide dispersal system. What the later means is that funds are raised from debts or equity market. In the former, the funds are raised from the banks or insurance companies. The characteristic we see here is that, those who provide the funds will also be part of management.

    That is why you see companies put people on the board after they have brought the money. In this case, major owners are also part of management. The quarrel here is always between the majority and minority shareholders. The market does not serve as disciplinary measure. But there is the dispersal system. Here, the money is brought in by different people and the market is supposed to act as disciplinary measure. They can sack management by voting with their shares.

    But in Nigeria we have a mismatch. Funds are raised from the capital market, but it is manifesting the characteristics of a bank-based model. Corporate governance has to correct this. That means, if you are raising fund from the capital market, then shareholders should be able to discipline. And then, major shareholders should not be part of management.

    In which sector is the practice most rampant? Do you see it in the banking sector?

    It plays out in all sectors of the economy. It’s a mismatch, and needs to be corrected. You have to use corporate governance code to correct it. Investors will not be interested in your environment if they put money in your country and they are not able to discipline management.

    Despite the fight against fraud and internal malpractices, these practices are still prevalent in the sector. Could it be because of poor corporate governance?

    The malpractices that you see are not just resting on one leg, but we want corporate governance code to correct those things. Don’t forget that we are dealing with financial reporting. If a country does not have capability for strong corporate governance practices, capital will flow elsewhere. If investors are not confident in the level of financial disclosures, capital will flow elsewhere. If a country flouts accounting rules, capital will flow elsewhere.

    The important thing is that all enterprises in that country, will suffer the consequence even if there are companies getting it right. It is a multiplicity of issues. We deal with financial reporting issues, and also deal with corporate governance issues. Don’t forget that some people work on corruption economics. We are also fighting that as well.

    You are looking at financial statements of banks to see how they comply with the Banks and Other Financial Institutions Act (BOFIA) and FRC Act. Are you still reviewing those accounts?

    We are looking at their compliance level, but the National Code, took our sail. We never had a National Code for not-for-profit entities. We never had a National Code for public entities like Ministries, Departments and Agencies (MDAs) of government and state-owned enterprises. It was the private sector codes that we had persuasive code.

    Don’t forget that we are also looking at accounts of Federal Government entities. We are looking at accounts of Ministries, Departments and Agencies of government and government accounting is broken down into two. We have what we call Ministerial Funds, which are accounts maintained by Ministries, and they are largely cash accounts. And we have asked them to move in to International Public Sector Accounting Standards Accounts. The second one is proprietor funds, which is government business entities, whose financial reporting and operations are supposed to be similar to private sectors. Those ones are to prepare their accounts using International Financial Reporting Standards (IFRS).

    What of CBN, is it part of MDAs? Have you received CBN’s accounts?

    Well, CBN is not something that is not new to the press. The CBN and FRC issue. You know the 2012 account of the CBN is what has held us in court.

    What are you going to do, if the MDAs do not comply with the IFRS account standard?

    You know the options for penalising government institutions that are to provide accounts are even stiffer because government will take decisions on them. Such decisions include removing the Chief Executive Officers or Chief Finance Officer or Finance Director because government will see it that either they are misreporting, or there is fraudulent financial reporting. But for us, we are helping them to comply. As when they come to us, and tell us areas where they have challenges, we will listen to them and guide them. Our interest is that they should comply.

    Which MDAs’ accounts are you reviewing?

    It is their 2013 accounts. What is really taking people aback is the role of audit committees. You know 2014 is still passing through audit. You know if the audit committees have not cleared your accounts, the external auditors will not work.

    What are you likely to be looking out for in MDAs’ accounts? Are they the same thing you look out for in private companies?

    If you are reporting under IFRS and you are a fiduciary interest of government, or a proprietary interest of government we check the same thing as private entity because proprietary interest of government means that you are running the business of that entity like private sector entity.

    A fiduciary interest means that you are an agent of government holding money in trust. But in a Ministerial form, which is ministries, you definitely will be reviewed using the International Public Sector Accounting Standards, which has slight variations to IFRS.

    If you are a state-owned entity, we will also be looking at it differently. In Lagos State, we met with the Accountant-General, then we held a brief discussion with him, and we said that it was important that the governor would have to register with FRC. We looked at those who signed the account and we discovered that it is the Auditor-General and the Accountant-General. Now that of the Auditor-General is appropriate in the sense that we see the Auditor-General as the external auditor.

    That of the Accountant-General is important because we see him as the CFO. But who is Chief Accounting Officer of the state, it is the governor. He takes responsibility, so he is supposed to sign the accounts as well. But I must commend Lagos State. They were the one that even invited us to discuss the issue of registration and all that. All of these things are because of our activities.

    The CBN has been conducting stress tests on the banking sector, and the result is consistently showing weaknesses. Have you looked at the sector to find out the soundness or otherwise of it?

    The CBN need models to find out what is happening. But as far as we are concerned, we look at financial statements. It is from the financial statements that the weakness or otherwise will be found out. But not until we finish analysing their financial statements, we cannot speak with all sense of finality. And when we finish doing that, we will definitely speak on the subject matter.

    At that time, we will be speaking from our own perspective which is wider. That of the Central Bank is narrower because they are looking at regulatory compliance. We are looking at general purpose financial statements.

    We have also seen banks earnings dropping perhaps because of tougher regulation. What is your view on this?

    I don’t think it is so much regulation. What I think is that the financial reporting is now robust because of IFRS adoption in Nigeria. If there are disclosures, you must state how you arrive at your judgment and estimates. You have to disclose that. All your policies must be such that we must be able to trace them to the financial statements.

    A lot of malpractices have been cut down because of full disclosures. If you are disclosing fully, there will be no room for too many maneuvers. And IFRS closed that gap. If you are building your financial statement using high quality financial stands, there will be a lot of disclosures.

    That is why you see, their financial statements are bigger. So, whatever estimates you make, you must benchmark it, and explain the standard and tell us what would have happened, had it been prepared the other way round.

    With all of these disclosures, and strict financial reporting rules, banks no longer book in profits that never existed. Then, their definition of assets has changed as there must be economic benefits flowing into the company. So, you will not book what you don’t have. So, a number of things are now being done properly, because you have to report correctly.

    So, if that is the position, you cannot book a profit that did not exist. Nobody can be deceived today. Everything has to be put on the table. You can lie about everything, but cannot lie about your cash. That is why the first thing we start, in reviewing your account is the statement of your cash flows. Its cash inflow, and cash outflows, there is no room for accruals.

     

  • ‘Outsourcing will help telcos to cut cost’

    ‘Outsourcing will help telcos to cut cost’

    Last year, infrastructure leasing giant IHS Towers raised $2.5 billion to acquire telecoms towers from Nigeria and other parts of Africa. The sale of this ‘passive’ infrastructure by the telcos has not translated to improved service on their networks. But, IHS Managing Director Mohammed Darwish says taking off the operators the burden of managing the towers will enable them focus on serving subscribers better. In this interview with Assistant Editor LUCAS AJANAKU, Darwish describes broadband as the next frontier in the information communication technology (ICT) world.

    How would you assess the development of the telecoms industry in Nigeria over the last one decade?

    Africa’s population is just over one billion and is set to double over the next 40 years. This rise in population is more affluent, mobile and connected than ever before. Nigeria alone has around 170 million people in it. As one of the world’s fastest growing economies, as well as being the largest African economy, surpassing South Africa, Nigeria is leading this change. The country’s economic fundamentals are very attractive to mobile network operators and infrastructure companies. Nigeria is Africa’s largest mobile market with more than 125 million subscribers and a market penetration of around 75 per cent and it is still growing year-on-year, effective penetration rate could be lower due to the fact that it is common for average Nigerian to carry more than one phone with him.

    Quality of service remains an issue, with operators blaming it on inadequate infrastructure. Do you think the operators are ploughing back substantially what they make in the country into capacity expansion?

    Currently IHS manages around 15,000 towers in Nigeria and over 21,000 towers in Africa. IHS is planning to invest roughly $500 million and we recruited around 400 staff (mostly engineers) in 2014 as we expand network capacity into new territories as well as improving quality and reliability. At IHS, we also invested over $10 million in 2012 and planning to double the amount, into developing the most advanced network operating centre (NOC) in the country – this gives us 24/7 awareness and data capture of tower performance driving constant improvements in uptime and energy consumption.

    IHS has worked hard to exceed 99.9 per cent network uptime across the continent, even in areas where electricity does not exist and sites depend on diesel generators; we will bring the same commitment to the newly acquired towers in Nigeria. IHS raised more than $2.5 billion last year to finance the expansion of its portfolio and upgrade.

    Revenue from voice calls will continue to drop as Google, Facebook and other social media platforms not only ‘steal’ revenue from instant messaging (IM) but are also doing voice calls. What does this portend for the industry?

    If we want to simplify the issue, such companies require reliable data networks to perform such services, and broadband is what Africa presently lacks more than voice. IHS has been investing in tower acquisitions across the country.

    You have acquired towers from three of the operators. What is the rationale for this action? How profitable is this?

    At the end of last year, IHS completed the acquisition of 9,151 of MTN Nigeria and 2,136 of Etisalat towers in Nigeria. We also acquired about 1,500 sites from Airtel in Rwanda and Zambia.The transaction will reduce MTN and Etisalat Nigeria’s operating costs, drive network efficiencies and further expand MTN and Etisalat’s voice and data capacity.Opening the largest tower portfolio in Nigeria to all other mobile operators, internet service providers, LTE/WiMax providers, who previously had no chance to provide that much coverage.

    Any savings that mobile network operators (MNOs) generate through the more efficient running of their tower operations by IHS are indirectly passed over to the consumer in the country, through overall reductions in mobile pricing.Our core business is to run an efficient and effective network. Mobile network operators outsource their tower portfolios to IHS creating three significant and almost immediate benefits. These include, for the customer: the network improves; uptime increases to over 99 per cent; and the network expands through sharing towers with other networks.For the mobile network operator: costs are stabilised and capital is released to spend on improving the network and developing products for customers; and for Africa: wider, more reliable and efficient networks, built and maintained by professionals, promoting economic growth and protects the environment.

    In terms of operating expenditure (opex) on running the towers, what does it look like especially during fuel scarcity in the country?

    Most of IHS towers are diesel operated and there hasn’t been a drop in price for the commodity in recent times.  In terms of a drop in the price of oil, we have agreements with our clients where we are hedged against any increase or drop in the price of diesel which protects us.Many of our sites are equipped to last many hours without generators; however to safeguard our operations against the scarcity of diesel, we have many measures in place such as partnering with large importers, having our own depots, and others.

    Renewable energy, such as solar has been proposed as alternative for sourcing power from the national grid. How far can this go in addressing Nigeria’s peculiar power challenge?

    Solar is an important way of producing power, but to address Nigeria’s power challenge, I think is not highly probable. We do use solar energy systems a lot on our sites, but their use depends on many factors.

     As an ICT expert, what would you advise the government to do to promote ICT?

    The government and telecom regulator are doing a lot to improve ICT. As the tower business is environment-friendly (through the reduction in carbon dioxide emissions, or lower use of natural resources), and ultimately serves the end user by providing cheaper infrastructure solutions to the mobile operators.

    The mobile operators will in turn pass some of these savings to subscribers and population. The regulators have not forced the operators to prioritise the use of co-location sites, but they went a long way in encouraging the operators to do so.

    As operators are going more and more into rural areas, regulators are working in bringing the operators together and encouraging them to align expansion plans into rural areas.

    What are your footprints in Nigeria and Africa?

    Currently, IHS manages around 15,000 towers in Nigeria and over 21,000 towers in Africa.

    What are your short, medium and long term plans?

    IHS is committed to developing our people and the communities we serve, and to help people and businesses across the region build a powerful and prosperous future, by Africa and for Africa.

    Do you have plans to diversify into other fields such as mobile phone production?

    IHS is a leader in telecommunications infrastructure sharing and leasing; we still see huge growth in this sector and we are focused to keep growing our business.

    What are the latest technologies available on the stable of IHS Towers?

    The first is our systems integration and optimising our supply chain. We have developed a revolutionary 10-year supply and efficiency contracting model with respective original equipment manufacturers (OEMs) and vendors which has dramatically improved the quality and up time of tower management.

    We work with OEMs to produce improved design solutions based on existing technologies such as solar, DC generators, batteries. OEMs supply equipment and technicians to run the equipment on a 10-year contract (we can break the contract at three-four years if they are not performing). Over 3,000 jobs have been created in this way. The contract includes the replacement of equipment by the OEM or vendor as it wears out.

    Through optimising our supply chain in this way, IHS has refurbished its entire portfolio in 18 months, over the usual three years it would take using legacy models. And, we have reduced our operating costs by 50 per cent. The second is our green energy initiatives aimed at reducing our towers’ dependence on diesel. These initiatives include projects in Nigeria, Zambia and Rwanda.

     

  • ‘Why downstream oil sector must be deregulated’

    ‘Why downstream oil sector must be deregulated’

    At the twilight of former President Goodluck Jonathan’s administration, the economy was virtually grounded by fuel scarcity that held the country down for more than two weeks. Although normalcy may have returned now, the Managing Director and Chief Executive, JKN Limited and Chairman, JAO Investment Company Limited, Dr. John Agboola, in this interview with OKWY IROEGBU-CHIKEZIE, says until the government musters the political will to deregulate the downstream oil sector, Nigerians will continue to experience fuel sacrcity. Odeyemi also speaks on infrastructural deficit in the country, among other issues.

    The recent fuel scarcity and electricity problems in the country caused huge dislocation in the economy. How can such occurrence be prevented in the future?

    My take is that it has not only caused dislocation, but if not checked once for all, it has the potential of collapsing the entire economy. We are at a stage in this country when there are concerns that the economy may collapse. I can confidently tell you that if not managed properly, it is not only the economy that will collapse, but, indeed, the entire system. Today, you cannot put food in your fridge; drive your car as you would wish or power your generator. Fuel sells for N87 per litre, but during the fuel crises, people were buying it for as much as N500 per litre. It was so bad that major players in the economy like telecoms operators, banking sector, all threatened to shut down their operations as a result of the crises because they could no longer operate optimally. To fix this system, we need some realistic visions that can move the nation forward. At the peak of the crisis, I expected the government to make a categorical statement. For instance, to say “this week we are paying the arrears we owe the marketers” or whoever is in the petroleum distribution chain should be discussed with and sorted out in one way or the other.

    There are strong arguments for and against deregulation of the downstream oil sector.  Given reecnt experience, what is the way forward?

    There is no other choice but to do away with this fraud and contraption called fuel subsidy; the sector should be totally deregulated. In fact, I had expected the government to immediately follow up in the spirit of addressing the chaos in the sector with a measured announcement insisting on deregulating the oil sector, so that only those who have the resources should be involved in the importation and the right price fixed. My advice to government is to go back to what it did in the telecommunications sector and apply same in this all-important industry. We should not forget in a hurry that the deregulation of the telecoms sector created competition among the operators, and, subsequently, crashed the price of telephone and also call tariff by different networks. Remember that before the coming of Globacom into the telecoms sector, the early operators, such as MTN and ECONET (as it was known then), had told Nigerians that it was impossible to have per second billing tariff regime. Any right-thinking person will vote for deregulation any day, it makes good economic sense. We should all support deregulation in the petroleum and gas sector, among other things, it would attract genuine investors into the sector. For instance, Dangote Refinery Limited will soon come on stream and we can be sure that a few modular refineries will come up if the sector is open to investors. All these will bring about appropriate pricing of the product.

    What will you say were the consequence(s) of the last fuel crises and the hydra headed problems of electricity in the economy?

    People are already losing their jobs because a lot of people could not go to their offices during that period. If this situation continues to re occur, then many companies will close shop and the workers will stay at home. Companies buy diesel at very exorbitant prices to power their generators; no manufacturer can survive in such situation, made worse with poor electricity supply. There are about two companies that I am involved in and we had between two and three weeks down time; if the scarcity had continued, we would not have had a choice than to lay off staff. The truth is that the cost of petroleum products is not sustainable and there must be a way out. We need to ask ourselves how we got to this point. How is that with all the three refineries in the country, none is working optimally? Economically, it doesn’t make sense to export crude and import finished products at higher rate. Thousands of workers will be out of jobs in no distant time if nothing urgent is done to salvage the situation. This is a test case for the new government and that to me is the best option, that is, removal of subsidy.

    Former Lagos State governor, Mr. Babatunde Fashola once advised that people should think more of development than the debt profile of a state or country. Do you also share this view?

    He is right to a large extent. All over the world, if the development is right and economically viable, if it has social and economic benefits for the advancement of the people, money could be borrowed to make it happen. It is universally true that the most developed countriess are also the largest debtors. We should be concerned more with the viability of projects than the debt incurred in bringing the project into existence. The nation’s debt profile may be bigger than the $60 billion being speculated. There are lending institutions that will lend us over $100 billion if they are convinced of the economic viability and benefits of a particular project. Development is not only about the size of debt a government is owing; the most important thing is for the borrowed money to be put into good use for the benefit of the greater majority and not fritted away into private pockets.The Unites States of America is the most developed economy, the richest and incidentally the largest debtor in the world. This also goes to the richest man in Africa, Alhaji Aliko Dangote, who is indebted to several banks but is making waves in the whole of Africa with his industrialisation policy. My sign-off is that it is acceptable to borrow as long as what you are doing is viable, acceptable and beneficial to the people. The economic benefit must outweigh the cost of borrowing; if development is right, the proceed will bring social and economic benefit to the people.

    The Federation of Construction Industries (FOCI) accused the past government of owing its members N500 billion leading to job loss.  How can this be checked?

    There is hardly any time that huge sums of money are not owed to contractors. You don’t award contract without making the money available; it is simply not right and not done in advanced economies.  Before you award contracts in developed economies, you first of all bring in necessary professionals to guide in the certification and payment of the particular project- it is the international best practice, which was also observed here before this time. Do we wonder why we have incessant collapse of buildings? This is simply because of poor workmanship and the absence of a proper regulatory frame work in the construction sector. We have lived with the haphazard and lopsided system of doing things in Nigeria since independence. Our professional practice is not well regulated. In other countries and even here in the early 1960s when we were practising the British system, no work is given to a contractor until the funding for it is available-saved, borrowed or syndicated. After that you bring in the professionals in engineering, architecture and quantity surveying etc to guide you through certification and payment as and when due. From the 1970s we stopped the practice and in particular that of signing contracts on before they are awarded. Now, contracts are warded and monies collected before the contracts are executed and certificate given. One can confidently say that we have the fastest growing construction market. Precisely in the last eight years, we were talking about massive construction works in Dubai, India and China etc but we have successfully taken over. You will convince yourself when you move round this country and see the volume of construction work going on in almost every part of the country. Unfortunately, today, our system is such that when contracts are awarded, it takes long before it is signed and sometimes when someone bids for contract, it takes long before the contract is awarded and so is certificate delayed after contract job is completed. All these take months to come. They take unnecessarily long for payments to be made. This practice kills the industry and the contractor.

    How can Nigeria shift focus from a mono-economy driven by oil and gas?

    The shock from oil and gas sector has necessitated the nation shifting focus to mining, extractive and agricultural sector. We are blessed with so much solid minerals that exploiting them will open up the economy and de emphasise the oil economy which off recent has brought so much agony  to Nigerian’s due to the glut and back home here, due the argument on removal or otherwise of fuel subsidy which has lingered, creating scarcity of petroleum products.  The extractive sector is not an all-comers affair, look at the number of lives lost to illegal mining and to lead poising even children are dying in some parts of the country due to their engagement in this illegal trade. The agricultural sector is a key sector that should be encouraged; we can discourage massive food import and rather encourage our local farmers to produce food that will feed the nation. Developing the agricultural sector from its  subsistence level to a mechanised one will also help in securing the land. The young people will be engaged and consequently crime level reduced.

    As a major player in the banking and manufacturing sector, I can only pray and hope that the administration will do the needful and focus on the non-oil sector. They should develop the sector in terms of a robust policy, creating an enabling environment, grooming the right skill and equipment. If we get it right from the rudiments then we can be sure the industry will grow to contribute much to the economy than oil and gas in the near future.

    Infrastructure is vital to the economy. What model should the country adopt to develop its infrastructure needs?

    We know what to do and what is required to be done as a country. As a matter of fact, we have never lacked ideas but implementation is an issue here unfortunately. To underscore the apparent seriousness the previous administration had for the development of our infrastructure they came up with a body known as Infrastructure Concession Regulatory Commission (ICRC). Ourroad infrastructure, for instance, is not enough; besides the inadequate road infrastructure, the roads are not up to specification. The roads that are built for cars are used by trucks, trailers and tankers and when the roads finally break down, nobody maintains them. The scenario is like this – when 10 roads are to be built in a given community, they end up building only eight, remaining two and the government does not make any attempt to designate the roads as to the weight they can carry. The sad thing is that roads are not maintained and when they finally break down, it returns the whole thing to square one where we are saddled and riddled with poor roads all over the country.All over Africa and, particularly West Africa, Nigeria has the highest road network.There are other transportation adjuncts,, such as railways and waterways which are largely undeveloped.

    If a country has efficient and effective rail and water transportation that is good, it creates a balance in the transportation system. Having a developed and multiple means of transportation system will preserve our roads and also make transportation cheaper and easier. Lest we forget, road is not the only infrastructure that we need the government to provide; we also need hospitals, schools, etc.

    What is the way out?

    There are policies and blue prints on the right thing to do to grow our infrastructure, but oftentimes they end up on radio and television announcements. Most times, when money is appropriated, not much is disbursed and this does not help the growth we want in this sector. We have to adopt world class approach of infrastructure development by making funds available for projects. The rule in advanced countries is that before a government or an individual gets planning approval, they have to be sure how the project is to be funded, appointed the contractor and determined the construction period. Here what we do is to award contracts for political patronage and other considerations before thinking of where to get the money to fund it and no project is done on ad hoc basis. Projects are executed based on well taught out long terms needs and noticeable gaps devoid of mundane considerations.

    I advise the new administration to do things differently from what was obtained in the past. They should move away from the past; do what is right as it is done in other climes. Road projects or any other infrastructure provision projects for instance, should  be based on felt need and contributions to the overall economy rather than being based on political considerations.

     

  • Jobs coming with NLNG’s six vessels

    Jobs coming with NLNG’s six vessels

    Hundreds of jobs will be coming from the Nigeria Liquefied Natural Gas (NLNG) Limited as it takes delivery of its six vessels and constructs a dry-dock yard in Badagry, Lagos, writes EMEKA UGWUANYI.

    HUNDREDS of jobs are on the way as the Nigeria Liquefied Natural Gas (NLNG) Limited takes delivery of its six new vessels.

    The six vessels were built at a cost of $1.6 billion in South Korea. Two of the ships are being built at the Hyundai Heavy Industries (HHI) while the other four are being built at Samsung Heavy Industries (SHI).

    The Nation learnt that each of the vessels will have at least 50 workers on board, including captains, engineers, seamen and other ancillary workers, such as caterers.

    Besides the workers on board the ships, there are other workers that would be employed at the company’s base in Bonny, Port Harcourt, Rivers State to handle other responsibilities that will arise from the fleet expansion, it was learnt.

    According to the company’s source, contrary to the initial schedule for delivery of the vessels, which would have started next year, the vessel will sail in from the last quarter of the year, indicating that the delivery of the ships will be taken earlier than scheduled in the contract.

    Some Nigerians were also taken to Korea for training on shipbuilding and management as well as other marine activities. Some indirect jobs are still being created as the NLNG in line with the Nigerian Content programme, insisted on use of some made in Nigeria products such as paints, furniture and cables leading to export of these materials to Korea. Some of the beneficiary companies include Berger Paints. With increase in production resulting from export of these made in Nigeria materials, the beneficiary companies will employ more hands to meet rising demand, the NLNG said.

    At least, over 400 jobs will be created by the time NLNG takes full delivery of the six vessels, the source said.

    The Managing Director/Chief Executive Officer of Nigeria LNG Limited, Mr. Babs Omotowa, speaking on the company’s job creation achievements and the ones to be created by procuring six new vessels, noted that each construction year (when a new train is built), more than 2,000 jobs are created.

    He said: “Nigeria LNG Limited provided more than 2,000 jobs each construction year. Overall, the major sub-contractors employed about 18,000 Nigerians in technical jobs in the base project.

    “Through each Nigerian Content plan for its contracts, NLNG has promoted the development and employment of Nigerian manpower. For instance, 600 Nigerians will be trained in Nigeria and at the contractors’ (Hyundai and Samsung) shipyards in Korea as part of the Nigerian Content deliverables tied to the construction of six new LNG vessels by Bonny Gas Transport (BGT), a wholly owned subsidiary of NLNG.

    “Those 600 Nigerians, with enhanced skills in welding, hull assembly, pipe fitting, electrical, mechanical, painting and ship design will join the country’s workforce, providing a support base for technology transfer and industrialisation. Thirty-five of the Nigerian trainees are currently in Korea for participation in the ship construction and six Nigerians are already working as ship managers (two Production Managers, two Quality Assurance/Quality Control Managers and HSE managers) in the ship construction at the shipyards in Korea,”

    Besides, Omotowa the shipbuilding projects created indirect jobs as the company ensured that some made in Nigeria products such as paint, cables, anodes and furniture were exported to be used in the construction of the vessels. “The Nigerian Content commitment in the project, which is defined in a Memorandum of Agreement between NLNG, BGT and the shipyards (Hyundai Heavy Industries and Samsung Heavy Industries), includes major initiatives such as the training and development of Nigerians (both in Nigeria and Korea) in various aspects of ship design and construction, the supply of materials such as paints, cables, anodes and furniture by Nigerian suppliers for the construction of the vessels, and feasibility study on the establishment of the first LNG ship dry-docking and ship repair yard.

    “Consequently, Berger Paints and Paints and Coatings MN have produced and exported over 350,000 litres of paints, Nexans Kabelmetal has shipped over 130,000 metres of low voltage cables and METEC West Africa has exported over 9000 pieces of Aluminium and Zinc sacrificial anodes – all to the ship yards in South Korea for use in newbuild vessels.

    “METEC West Africa and Nexan Kabelmetal through NLNG’s Nigerian Content initiatives have also undergone international class certification and inspection for the manufacture of and supply of sacrificial anodes and low voltage cables respectively to meet the requirements of marine applications.  Berger Paints Plc has increased its portfolio of paints and manufacture to international standards, having installed state-of-the-art laboratory equipment and acquired additional production equipment. Paints and Coatings Manufacturers Nigeria Plc has acquired additional mixers and laboratory equipment and gone ahead to become the first company in Africa to receive the Inter Marine Organisation’s Intershield 300 Ballast Tank Coating certification. Holborn Nigeria Limited developed capacity to manufacture 12 inch (30mm) diameter High Density Polyethylene (HDPE) pipes, which had hitherto not been manufactured in the country.

    “Furthermore, deliberate technology transfer initiative has enabled Waste Pipe and Drainage (WPD) to safely and successfully complete the change out of all nominated compressed air dryer bed desiccants in U-4700 (14 vessels in total). This makes WPD the second Nigerian contractor with this level of proficiency that can compete with the previous sole contractor (CAKASA) in LNG Trains molesieve bed change out activity,” he said.

    The NLNG is also facilitating the construction of dry-dock yard in Lagos. The project expected to cost about $1.8 billion is being sited at Badagry and according to the Nigeria LNG, it is as large as 185 football fields put together. The project will also create over 2000 jobs at the construction stage and over 1000 direct jobs on completion.

    The NLNG is looking for a core investor in the project. The Samsung Heavy Industries (SHI) and Hyundai Heavy Industries (HHI) have stated their preparedness to invest $30 million in the project and will also provide technical support. Discussions for takeoff of the construction are ongoing. Welders, civil and mechanical engineers, ship maintenance and repair technicians and other ancillary workers will be needed from the construction to completion and afterwards, it was learnt.

    On the ship dry-dock and repairs yard, Omotowa said: “Nigeria LNG in partnership with Hyundai Heavy Industries and Samsung Heavy Industries reached out to the investment community on December 9, 2014 in Lagos, to promote the development of a ship repair and maintenance yard in Nigeria – Badagry Ship Repair and Marine Engineering Limited (BSME) – that will be sited at Badagry after feasibility studies were carried out at various sites (Onne, Bonny, Olokola, Badagry, Ogogoro Island, Ladol, among others).  Currently, a Special Purpose Vehicle (SPV) that will manage the development of Badagry Ship Repair and Marine Engineering Limited (BSME) is being put together.

    “BSME will bridge the gap created by the absence of an operational dockyard to cater for the repair and maintenance of Very Large Crude Carriers (VLCC), LNG carriers, large and medium size carriers, drilling rigs and supports vessels. This is one of the Nigerian Content deliverables on the BGT Plus project.”

    The building of the dockyard becomes imperative considering that NLNG has the largest fleet in sub-Saharan Africa. When the project comes on, the NLNG will stop taking its vessels overseas for maintenance and repairs, thereby creating jobs and wealth in-country, the company said.

    The Nigeria LNG has 23 LNG vessels on long-term charter for its six-train operation, and one domestic LPG vessel. All 23 LNG vessels are utilised on an integrated scheduling basis. They load at NLNG’s terminal in Bonny, for ex-ship deliveries to buyers in Middle East, Asia, Europe, South America, and Gulf of Mexico including ports in Mexico and the United States.

    The LPG vessel is used for LPG delivery in the Nigerian market. With the six new vessels being built in South Korea, the fleet will expand to 29 vessels.

     

  • X-raying ‘I belong to everyone and…nobody’

    X-raying ‘I belong to everyone and…nobody’

    On Friday May 29, 2015, President Muhammadu Buhari delivered a masterpiece of an inaugural speech, in which he unveiled his administration’s plan for our great nation Nigeria. He expectedly stressed the resolve of his administration to urgently tackle the multi-pronged challenges of insecurity, corruption, unemployment, infrastructure, etc., amid thunderous applause.

    Even though the different promises he made in the said speech have continued to elicit reactions from different stakeholders, one major aspect of the speech that has generated most reactions is the statement or compound sentence “I belong to everyone and I belong to nobody”. In short, since the president delivered the speech, we have been extremely busy in the Language Department of our Empowerment Clinic as more and more language “patients” are daily admitted for diagnosis, X-ray and medication following the extreme “headache” of interpretation the statement has caused them.

     

    Literal/surface  interpretation

     

    It is noteworthy that this statement has really called the fields of English Studies like Semantics (which is concerned with meaning of words) and Discourse Analysis (which is concerned with interpreting utterances or speeches) to task because it is like a riddle. Many people have argued that the compound sentence radiates two contrasting coordinate clauses. This submission is true at the level of literal, surface or direct meaning. After all, by semantic analogy, “I collected money from everyone” is the opposite of “I collected money from nobody”.

     

    Metaphoric meaning

     

    However, the real meaning is recoverable at the metaphoric level, especially because by mathematics of linguistic interpretation, “Everyone” is Plus-Human and “Nobody” is Minus-Human. The intended meaning of the second independent clause (“I belong to nobody”) of the seemingly antithetical statement is idiomatic and metaphoric as it cannot be recovered from surface interpretation of the constituent words. After all, when we hear expressions like “Kick the bucket”; “Hit the nail on the head”, etc., we know their meanings cannot be recovered from direct interpretation of the constituent words. That is, their meanings are embedded. By restatement, “I belong to everyone” also means “I do not belong to just one person” which by analytical and paradoxical extension implies “I belong to nobody”. It is like the answer “Yes, I was” or “No, I wasn’t” in which the second part of each of them reinforces the “Yes” or “No”.

     

    Context and meaning

     

    It should be noted that context is also very critical to meaning in Discourse Analysis. Did the president utter the statement during a face-off with his party members and political associates, thus claiming not to be owned by them any longer? No! It was during his inauguration and his major concern was to persuade those on the other side of the political divide to come closer for collective participation rather than an attempt to ridicule his political party or political associates that he has disowned them, after all they are also part of the “everybody” accommodated in the ownership of the president. Also on context and accuracy of interpretation, the fact that the president said “I belong to nobody” in a political context does not mean in a context of marriage, he no longer belongs to the first lady, Aisha but all women.

     

    Addition

     

    Most times, utterances taken out of context can be misinterpreted. For instance, if you are asked to give your impression about a boy that said “Daddy, don’t ever try it”, the ready conclusion will be that such a child is very rude especially that the background or context is not provided. But if you are told that the boy uttered the statement when his heavily-drunk father came home in the midnight and wanted to hit the head of his (the boy’s) mother with a hammer, I am sure your negative impression about the boy will definitely change. We will continue with this discourse next week.

     

    PS: For those making inquiries about our Public Speaking, Business Presentation and Professional Writing Skills programme, please visit the website indicated on this page for details.

     

    •GOKE ILESANMI, Managing Consultant/CEO of Gokmar Communication Consulting, is an International Platinum Columnist, Professional Public Speaker/MC, Communication Specialist, Motivational Speaker and Career Management Coach. He is also a Book Reviewer, Biographer and Editorial Consultant.

    Tel: 08055068773; 08187499425

    Email: gokeiles2010@gmail.com

    Website: www.gokeilesanmi.com