The Nation Newspaper

Category: Issues

  • Bridging the labour skills gap

    Bridging the labour skills gap

    Why are many graduates unemployed? It is because their qualifications and skills do not match job market needs. To address the imbalance, some stakeholders in the public and private sectors are collaborating to hone job seekers’ skills through trainings. DANIEL ESSIET reports.

    His position resonates with those of resource experts and employers that many Nigerian graduates are unemployable. Lagos State Commissioner for Wealth Creation & Employment Dr. Babatunde Durosinmi-Etti has never hidden his fear that many training institutions are churning out graduates whose skills do not match what the labour market wants.
    His position is in sync with the notion that the country’s youth unemployment scourge could be traced to the obvious mismatch between what employers need and what the nation’s tertiary institutions are pushing out.
    The commissioner was emphatic that tackling rising unemployment required a comprehensive reform of the education system in a manner that will produce graduates with qualifications and skills that match the needs of the job market. He said if the job market is incapable of offering sufficient opportunities for the country’s unemployed youths because of skills mismatch, “then it’s time to turn to alternative solution by horning the skills of youths, through deliberate training, to suit market or employers’ needs.”
    According to Durosinmi-Etti, the ministry is working with development partners to offer courses on employability and entrepreneurial skills. He said last week the state’s employability skills programme was targeted 400 people get jobs after acquiring new skills.
    The programme, he said, focuses on soft skills, preparing Curriculum Vitae (CVs), interviewing for jobs, and learning how to design or look at the feasibility of a business project.
    The commissioner did not stop there. He said alongside offering skills courses, the ministry has gone a notch higher by setting up a state-wide network of job registration and counselling centres to help youths consider career options, adjust to the realities of the job market as well as find local employment and training opportunities. He said the purpose of the project was to make sure youths get access to the information they need to make carefully and consciously planned choices for their future.
    The ministry’s programmes, Durosinmi-Etti added, also aimed at helping to create level playing field for unemployed graduates who do not have personal connections through friends and family members to secure their dream jobs or rise to top positions when they get one. The project involves a broad package of supportive measures including career guidance, trainings, active job search support and work experience programmes.
    The commissioner, however, stressed the need for training and mindset shifts not only among youths, but also among government officials in business management. This, he said, entails strengthening the skills of young entrepreneurs through training and mentorship as well as providing financial support. He said Lagos State was ready to work with employers in managing and strengthening the education and training system to adapt curricula quickly to meet changing skill demands.
    Such cooperation, he added, should develop at all levels, including tertiary institutions, and cover short-term training to address swiftly skill deficits. It is also to support high-quality career guidance to help people make well-informed choices about their learning and careers, with digital entrepreneurship as an important part of this effort.
    Durosinmi-Etti said the state government was dedicated to enhancing digital entrepreneurship by bringing together large corporations, Small and Medium Enterprises (SMEs), trade unions, civil society, academia, as well as digital entrepreneurs in partnership. The strategy, he said, was to digitalise existing traditional businesses.
    The commissioner further explained that his ministry was working with development partners to launch ‘e-skills for jobs’ campaign aimed at helping jobless people find the necessary tools to get access to the labour market.
    While noting the growing integration of Information and Communications Technology (ICT) across various sectors, he said the lack of skilled professionals remained a major concern to Nigeria’s competitiveness, not only in the ICT sector itself, but for the economy as a whole.
    The Nation learnt that one of the programmes sponsored by the ministry to tackle the employability challenge is a three-month ICT programme tagged ‘Lagos Study Programme.’ The project seeks to equip youths with skills to fill the manpower gap for programmers locally.
    The initiative was done in collaboration with Andela Consulting, Google, Microsoft, Sterling Bank and Etisalat. It was implemented by Audax Solutions Ltd, which carried out the training at its Lekki office for the first batch of 100 trainees selected from the Lagos Island division of the state.
    The participants, who had reduced to about 78 in the six weeks of the programme, were exposed to design, Hyper Mark-up Language (HTML), which is used in developing web pages; Cascading Style Sheets (CSS), digital marketing, coding, basic algorithm, scripting, word press, and dynamic web application projects, among others.
    Private sector operators
    wade in
    Interestingly, the efforts at tackling the unemployment scourge through skills training enjoy the buy in of the private sector. For instance, the 11-week Lagos Study Programme was launched with many private sector operators, such as Etisalat, Sterling Bank, Google, Andela, Microsoft and Audax Solutions.
    It was aimed at producing software developers and digital marketers.
    Under the programme, 500 graduates are targeted to be trained across the five divisions of the state. Durosinmi-Etti said young people would be offered entrepreneurship training to give them self-reliant skills in business planning and management, as well as hands-on experience.
    He said there are vacancies in the field of digital technology in Lagos hence, the partnership with Andela, for instance, to help youths tackle the lack of digital skills and fill the ICT-related vacancies. He noted that the deal with Andela has set an example of how public-private partnerships could set the right incentives to boost digital skills and create opportunities for youths, while helping Nigeria reap the benefits of the booming digital economy.
    Wofai Ibiang, a Supply Chain Management graduate from East Anglia University, United Kingdom, said she applied for the Lagos Study Programme to learn to build apps to solve problems she has already identified.
    Expressing satisfaction with what she got from the training, she said: “I’ve always wanted to build my own website and apps.I have learnt quite a lot coming here. I’ll say I have been very impressed; my expectations have been met. I think the skills I have gained will help me know how to go about my dreams.”
    Audax Solutions Limited, another private sector operator, is also not left out. Its Managing Director, Mr. Emeka Onyenwe, explained that the trainees were a mixture of those without prior knowledge of programming and those with a level of awareness of the concept.
    He said the training was carried out using world-class curriculum that allowed students learn at their own pace and make progress as they completed assigned projects. He praised the tenacity and dedication of the participants, who he said, exceeded his expectations.
    The Head of Branding, Sterling Bank, Mrs Peju Ibekwe, said the bank was excited to be part of the historic project. According to her, the Lagos Study Programme was highly laudable as it was one of the novel initiatives to stamp the nation’s evolution and growth in the ICT space.
    She said the programme empowered the youth to run their own businesses and be gainfully employed wherever they chose to be. She said education and empowerment are major focus of Sterling Bank’s Corporate Social Responsibility (CSR) strategy.
    She listed some of the projects executed in the empowerment space to include ‘Meet the Executive’, a business plan competition, which availed participants grants of about N12 million to grow or establish their businesses.
    The participants with viable business ideas and plans, Ibekwe added, got the opportunity to pitch these ideas before the bank’s executives to stand a chance of getting significant financial support for their businesses.

    West Africa Vocational
    Education (WAVE)
    to the rescue
    One of the ministry’s training partners is West Africa Vocational Education (WAVE).The organisation tackles youth unemployment by teaching young people the skills they need to get the first job, start a successful career and build a brighter future.
    Its Chief Executive, Misan Rewane, stressed that young people would be the key driver of the country’s future growth and that “imparting these skills is crucial to getting them involved in the job market.’’
    Although stakeholders in various sectors say that the current economic downturn in the country has led to alarmingly high unemployment and underemployment rates, many of them argue that the problems arose because many graduates and other job seekers are ill-prepared.
    Rewane noted, for instance, that employers were having difficulties filling vacancies with the right talents, despite offering mouth-watering wages. She said some employers could not fill vacancies because even highly-qualified candidates have the wrong skills.
    She noted that applicants lack ‘soft skills’, such as interpersonal communication and problem-solving abilities.

    Co-creation Hub also
    The Nation learnt that much of the progress in generating job opportunities for young people interested in technology is coming from private sector entity Co-creation Hub, which nurtures young talents and innovative ideas.
    For instance, Co-creation hub has been educating young people about the challenges of sustainable development and creating opportunities for them to use their creativity and knowledge to pioneer innovative solutions.
    In addition, it creates platforms for young people to connect, collaborate and integrate their ideas and perspectives into national and regional pathways for implementation of social development.
    Interestingly, current efforts at bridging the skills gap appear to have carried women along. Already, organisations looking to fill gender unemployment gaps have started to establish platforms that would educate, mentor and support young African women to grow and sustain viable business ventures in various fields.
    One such company is She Leads Africa, a female-led pan-African start-up based in Nigeria. Founded by two young West African women, Yasmin Belo-Osagie (Nigerian) and Afua Osei (Ghanaian), the organisation provides training and mentorship opportunities to help young women build successful careers and businesses.
    She Leads Africa provides intensive business training boot camps.

    NDE also involved
    The National Directorate of Employment (NDE), a government agency, is involved. It was established to fund companies that enable them to offer their employees re-skilling and training opportunities.
    Participating organisations made their workplaces available for unemployed persons to strengthen their practical experience and their connections to the labour market.
    In collaboration with the World Bank, NDE has begun the training of 227 unemployed youths in Cross River State under the Youth Employment and Social Support Operation (YESSO). NDE Director-General Mr. Kunle Obayan said in Calabar that the programme was designed to empower youths with skills that would help them compete favourably in the labour market.
    Represented by an official from the Directorate, Mr. Mfam Eyahanjom, Obayan said youths would undergo training on ‘Life skills training and entrepreneurial skills training’.
    He explained that after the three-month training, the NDE would deploy the beneficiaries to competent private sector operators for six-month internship/apprenticeship training.
    Obayan said 6,878 youths were selected from the seven participating states of Bauchi, Niger, Cross River, Kwara, Oyo, Ekiti and Kogi. He said the directorate had verified 4,721 beneficiaries, while 227 youths were selected for the training in Cross River.
    “Throughout the nine-month training, the Federal Government, through the World Bank support, would ensure prompt payment of monthly stipends to beneficiaries who will receive skills training of their choice at no cost,” he said.
    Also, the NDE Coordinator in Cross River, Mr. Edem Duke, said the collaboration with the World Bank was in line with the Directorate’s commitment to poverty reduction.
    Duke said the training programme would help unemployed youths to access opportunities to become entrepreneurs and job creators.
    “This training is designed to enable trainees to find sustainable jobs, boost institutional capacity building and public private sector partnership,” he said.
    He charged the beneficiaries to be committed and make proper use of the rare opportunity to chart a new direction for a better future.
    The World Bank Representative, Prof. Ngozi Onyekwe, said it was a major milestone for the bank to partner NDE in unemployment reduction in Nigeria.
    Some experts told The Nation that tackling Nigeria’s declining productivity caused partly by mismatch between what the education system provides and what employers require must be a national priority.
    They argued that skills training are a long-term exercise that requires a high level of customisation, localisation, investment and commitment.
    Head of Administration, Apapa Local Government Council, Prince Adebola Olujobi, said one of the most effective ways to increase productivity is to boost the skill level of young applicants.
    According to him, employability training is not just to provide jobs, but also engage youths in the variety of personal and social development activities that it offers, while also helping them develop the knowledge, skills, and attitudes needed in the labour market.
    These, he said, include teamwork, communication, leadership, flexibility and responsiveness.
    Indeed, stakeholders involved in the scheme are all convinced that it offers good chances for up skilling the workforce and supporting the unemployed.
    For employers, the scheme provides the benefit of developing the skills of their workforce for a relatively small investment without productivity loss.

  • #IstandwithTope: Temitope needs N5m to survive

    #IstandwithTope: Temitope needs N5m to survive

    A lady born with sickle cell anaemia, Popoola Temitope, who is presently struggling to walk and living in pains needs urgent assistance from well-meaning Nigerians, government and the corporate society to help raise the sum of N5 million so that she could undergo a re-corrective surgery in India.

    [quote]Temitope, who has been house-ridden due to the severe complications, presently relies on drugs from her doctors at the Lagos University Teaching Hospital (LUTH) to cope with pains and discomfort.[/quote]

    Already, some of her friends have taken it upon themselves to kick-start a campaign to raise the money needed for the surgery.

    As at Monday, the coordinator of #IstandwithTope, Pastor Adedayo Babalola, said the ongoing campaign has generated about N1.9m.

    One of the popular posts on the already trending #IstandwithTope reads, “She needs #5MILLION Naira to walk again. She has been ‘bent over’ for more than 20years.

    [quote]After a successful surgery in India 6 years ago, Temitope could walk straight, drive and do all the things she thought was impossible[/quote].

    Unfortunately, one of the metal plates in her leg got broken during ‘another Crisis”.

    To view updates on the campaign, kindly go to Facebook and search for #Istandwithtope.

    A sympathiser, Mr Lekan Oluokun took to Facebook to lament the sorry state of Temitope, stressing that she is now immobile as a result of the recurring pains.

    Oluokun said: “I was with Tope last week Sunday (19th of February, 2017) and she was describing the pains she feels from her head to her toe whenever the sun is up. She practically lives on pain killers.

    This, however, has not affected her view about life.

    She still shared some of her dreams with me but the obvious fact is that she is in pain.

    Today, the only option Temitope has to walk again and escape the daily pains is the surgery scheduled for her in India.

    If you are touched by Tope’s story kindly make donations into the account: Popoola Temitope, Zenith Bank, 1004384095.

  • States’ pension liabilities to retirees soar

    States’ pension liabilities to retirees soar

    For about 10 years, pension liabilities of state governments have grown into billions of naira under the Pay As You Go Scheme. The magnitude of the debts is raising concerns; will they ever be settled? Omobola Tolu-kusimo, assesses some states to see their compliant status.

    Pension liabilities of state governments to retirees have continued to soar, hitting billions of naira. This, consequently, has put many of them, who are senior citizens – some as old as 120 years- in hardship. They are dying. Those of them, who are ill, could no longer access medication for lack of funds.
    Mostly affected are primary school teachers and local government retirees. Many of them are owed pension entitlements dating back to 2008.
    Thirty-one states out of the 36 in the Federation are owing over nine years of gratuities and pensions under the ‘Pay As You Go’, also known as the Defined Benefit Scheme. Only five states are paying pensions regularly and they are the ones that have fully transited from the old scheme to the Contributory Pension Scheme (CPS).
    According to the National Pension Commission (PenCom’s) report for the first quarter of 2016, 31 states, such as Abia, Adamawa, Akwa Ibom, Anambra, Bauchi, Bayelsa, Benue, Borno, Cross River, Delta, Ebonyi, Ekiti, Enugu, Gombe, Imo, Jigawa, Kano, Katsina, Kebbi, Kogi, Kwara, Nasarawa, Ogun, Ondo, Osun, Oyo, Plateau, Sokoto, Taraba, Yobe and Zamfara, are yet to fully implement the CPS.
    While only Lagos, Rivers and Niger have fully implemented the CPS, with Kaduna and Edo just joining the league of pension compliant states that have migrated their pension liabilities to the CPS. The consequence of the non migration into the CPS by these states is that they have refused to comply with the Pension Reform Act (PRA) 2004, repealed by the PRA 2014.
    Oyo State, for instance, has over N30 billion pension liabilities owed to about 10,000 pensioners, comprising primary school teachers and local government (LG) retirees.
    One of the embattled pensioners, Ojo Bamidele, who retired as a primary school teacher, said he has not been paid his pension and gratuity since he retired in 2008. Bamidele, who is down with kidney failure, said he needs dialysis every week to stay alive. He appealed to Oyo governor, Senator Abiola Ajimobi to pay his pension and gratuity.
    Another pensioner, Dauda Adekunle, said he retired as a local government worker. He said he has been suffering since he left the service, wondering whether it was wrong to have retired from active service.
    He also said his landlord has threatened to eject him because he is owing three years rent, noting that he barely eats a meal daily.
    The Nation’s visits to the Oyo State pensioners office revealed that the state has over 6000 primary school teachers and over 3000 local government retirees. The total pension liability and gratuity of retired primary school teachers is over N20 billion, while those of local government is over N10 billion, bringing the state’s total liability to over N30 billion. This is at variance with President Muhammadu Buhari’s instruction that retired primary school teachers should be paid like other pensioners in the state.
    Their payment should be on first line charge like their counterpart who are still in service.
    Oyo State Head of Service, Soji Eniade, affirmed that the state has the challenge of payment of gratuity and pensions.
    According to him, despite the huge pension liability arising from the Pay as You Go system, they state did not believe that joining the CPS was the way out of the current pension problems. He said the state has over 40, 000 pensioners in the state
    “When you look at the history of Oyo State in terms of pension administration, you will find out that our challenge with pension and gratuity payment is a built-up challenge that has been there for ages. It started with the creation of states in 1991 when Osun State was carved from Oyo. The largest chunk of personnel split then was in Oyo and many people voluntarily retired to enable them receive their pensions and gratuity from Oyo State.
    “The implication is that Oyo inherited a large number of retirees even back from the old days of western states when it was created and then later when Osun was carved out. Osun is a small state that moved away from Oyo, but when you talk of retirees before 1991, before the creation of states who were indigenes of Oyo, they still collect their pensions and gratuity from Oyo.
    “At present, we have about 100,000 workforce. We are aware that as salaries are reviewed pension should also be reviewed, but all these things can’t work in a situation where there is no proficiency of funds to manage the system. Government has the intention of clearing the backlog. At the state level on monthly basis, government dedicates a minimum of N120 million to address the issue of gratuity at the state level but the N20 million above the hundred is dedicated to payment of pensions of retired permanent secretaries. An average retired permanent secretary goes home with a minimum of N15 million as gratuity. It means that N20 million can only pay one permanent secretary at a time.
    “At the local government level, government recently released N830 million to address the issue of pensions and another N250 million to address the issue of gratuity. Note that the pensions we are talking about was last paid in 2008 and Ajimobi administration came in in 2011. But the issue of source of funding into the pool especially at the local government where the problem came from became enormous,”he said.

    Status of Kwara State Pension
    In Kwara, 4000 LG retirees according to the Secretary of the Nigeria Union of Pensioners (Kwara State branch), Chief Samuel Ibidoja, are owed pension and gratuities running into billions of naira.
    Ibidoja, who made this known in an interview, said the state owes the local government pensioners 30 months pension and gratuities since November 2008.
    He also said pensioners, who have federal pension share and retired primary school teachers are being owed pension since November 2012.
    But Senior Special Assistant on Media and Communication to Governor Abdulfatai Ahmed, Dr Muyideen Oluwakorede, said the state has been paying pensioners in bits as a result of the drop in the monthly allocation.
    Oluwakorede said Governor Ahmed was deeply concerned not only by the hardship workers and pensioners are going through on account of the drop in allocation which has affected the payment of pension, but by the difficulties the state pensioners are going through on account of delays in payment on their gratuity.
    He said the state was doing everything, especially through increasing its Internally Generated Revenue (IGR) reforms and the on-going workers verification, which the state thinks will reduce its wage bill by 30 per cent and increase savings there from, would ensure that arrears with old state government pensioner are cleared.
    He said plans were in place by the state to sort out its pension liabilities with the CPS.
    “Civil servants employed after 1987 will soon be migrated into the CPS with about N145 million remitted monthly, while workers employed before 1987 will continue in the DBS. The state pays pensioners under the old scheme monthly pension of about N443 million. The government has tentatively estimated about N1.6 billion to be paid as contribution into the CPS for all pension arrears. The Governor believes that allowing workers from 1987 to migrate to the CPS will ensure they have enough pension contribution remitted into their RSA.
    “The state would have joined the CPS before now, but it encountered a lot of resistance from the Nigeria Labour Congress (NLC). At present, our monthly pension under the DBS is about N443 million, which will continue on the side and then the monthly commitment that we will have to now do when we go into the CPS will be about N145 million. The state government is looking at all the figures that we have to pay altogether and be sure that the state can afford it, Oluwakorede said.
    He added: “We are looking at the cost implications on our finances, not forgetting that the state allocations dropped considerably in the past. Although the state allocation is starting to rise, it has not risen to what it used to be. Migrating the pensioners needs a lot of planning because they have already retired. We have calculated it and the state is trying to correct some paper works, but it is certain that we will join the new scheme.
    “We couldn’t compel workers to join the scheme, but we gradually made them understand the reasons why the workers should join the new scheme. We made them understand that there are benefits for workers and the state as a whole to enjoy under the scheme like the pension fund, which the Federal Government has pulled resources from for infrastructure. We explained to them that states that are not under the scheme are not eligible to pull resources or borrow from the fund for infrastructure development. We have also started sensitising workers to let them know why we have to take this step now.”

    Ebonyi State
    While some state government are making moves to comply with the CPS, Ebonyi State governor, David Umahi, has said set up its own contributory system. However, this has pitched the leadership of the Nigerian Labour Congress (NLC), Trade Union Congress (TUC) and Joint Public Service Negotiating Council (JPSNC) in the state against the government. The workers have rejected the new pension law, noting that the procedure did not conform to that of the CPS in the PRA 2014.
    The state Chairman of the NLC, Comrade IkechukwuNwafor, its TUC counterpart, Comrade Michael Nwaonu and that of the JPSNC, Comrade Patrick Ekwe, said the bill did not meet the provisions of the PRA 2014 as amended.
    The organised labour regretted that workers’ salaries were being deducted before signing the bill into law and without creating Retirement Savings Accounts for the workers where the funds deducted from their salaries would be paid.
    Consequently, they accused the state of violating the provisions of the pension reform act by contributing five per cent for the workers and the workers contributing eight per cent. The then called on the government to go back to its drawing board.
    “The government has decided to go straight to deducting workers’ salaries without following the due process which is also against the financial rules of this country. We are calling on the state government to immediately hold on while the whole processes is completed and the bill be amended for government to contribute 10 per cent while workers contribute eight per cent as mandated by thePRA 2014. This is the position of workers of Ebonyi State.
    “But we have discovered that the following steps that are supposed to be taken were not taken. Ordinarily, signing the law is just the first step, but then the contents of the law have to be made known to those whom the law is made for because we seriously observed that the law contains that the state government is going to contribute five per cent while workers of Ebonyi State will be contributing eight per cent which is against the Pension Reform Act and we say no to it and we can never agree to that and we request that the state government goes back and amend that law to be in line with the Pension Reform Act of 2014,” they maintained.
    Nwaonu while calling on the state to follow due process before signing the bill into law, decried that the processes of implementing CPS were not followed at all.
    He contended that the steps for generating code of MDAs to PENCOM are such that the state would need to appoint Pension Fund Administrators (PFAs).
    “The issue of deduction of workers’ salaries in respect to the pension scheme which they first started before passing the law, is even the 8th step. There are so many other steps that should be followed before deducting workers’ salaries.
    “The steps of generating code of MDAs to PENCOM are such that the state would need to appoint Pension Fund Administrators (PFAs). The PFAs will go further to register workers and give them their account numbers before deductions are made. These accounts must be ready before the deductions so that immediately you deduct, you pay in the money into the Retirement Savings Accounts(RSA) of the workers. But in this case, all these things were not done,” he said.

    Kaduna State
    Kaduna State last week commenced full implementation of CPS with payment of retirement benefits retirees.
    Executive Secretary of Kaduna State Pension Bureau, Dan Ndackson, during the launch of the scheme in the state, said the CPS Law was introduced in 2007, but the contributions commenced in March, 2008.
    He, however, noted that implementation was not totally in conformity with the provisions of the law before now.
    Ndackson said to deliver on its mandate, the Bureau successfully completed the administrative procedures that resulted in the merger of the defunct state Bureaux of Pension in 2016.
    He disclosed that as at February, 2017, there were 9,655 pensioners on the payroll of the state pensioners and 6,728 on that of local government areas compared to 11,531 and 6,734 respectively on the payrolls as at July, 2015.
    He also said the February 2017 figures were inclusive of additional new retirees on the payroll between August 2015 and January, 2016, who were not part of the July 2015 figures and whose retirement processes had been verified and cleared by the Offices of the State and Local Government Auditors-General.
    “We, however, expect a surge on the payroll for pensioners on the Defined Benefits Scheme in subsequent months due to the large number of people, who retired towards the end of 2016 to avoid falling into the Contributory Pension Scheme, whose files are yet to reach the Bureau for processing and inclusion on the payroll. Unless MDAs and LGAs forward the files of all retirees under the Defined Benefits Scheme to the Bureau for processing in good time, our pension payroll may continue to rise throughout 2017. Conversely, we were not able to find many retirees under the CPS in the first quarter of 2017 due to the rush to take early retirement in 2016, especially by such people,” he said.

    Lagos State
    The Lagos State Pension Commission (LASPEC) Director-General, Mrs Folashade Onanuga, said the state has been remained at the top in pension administration and this has made it a model state.
    She said the state’s past pension liabilities is about N200 billion and on yearly basis, its obligation is about N15 billion, which has been budgeted.
    “In terms of contributions into the CPS, we have paid nothing less than about N70 billion as at December 2016 and N24. 4 billion as accrued pension rights to 5,668 retirees since August, 2015. We implemented the CPS in 2007 and since then it has not stopped paying accrued right from the DBS. We are able to take a futuristic look into what we are going into it.
    “Any state government that puts the Pay As You Go and the CPS together and understands the nitty-gritty, will not take the Pay As You Go as an option for its pension administration. This is because under the old system, all the liabilities fall on the government and that is why the majority of them still have pensioners as far back as 2010 that are yet to be paid. The states keep on loading the liabilities of the government without making provisions for it and at the end, the government is tied to the employees for life,” she said.
    She continued: “All over the world, the DBS has been acknowledged as a very expensive way of funding retirement liabilities and a lot of countries are going out of it. So, for you to stay in the old system, it shows you lack understanding of what is going on globally, you are not thinking of a solution and you are compounding your pension problem. If the people that introduced us to it are moving away to something that is more affordable, why should you stay and be stocked.
    “So, I think there is need for more education of major stakeholders because with all due respect, they are just creating a mess for themselves. In Lagos State today we can sleep with our eyes closed. Yes, we may have funding challenges because the liabilities of the CPS are huge. Apart from the contributions to Retirement Saving Account holders, the accrued rights obligations are huge.”

    PenCom perspective on DBS and CPS
    Pencom Director-General, Mrs. Chinelo Anohu-Amazu, while speaking at the launch of Kaduna State CPS implementation and payment of pension under the scheme said there were myriad of challenges bedeviling the DBS in Nigeria which the Commission was trying to solve.
    She disclosed that the revised PRA 2014 sought to deepen the pension reform in recognition of the modest gains recorded within the first decade of implementation.
    “It, therefore, extended coverage of the CPS to states and local governments. The Commission has enhanced support to the states in facilitating their implementation of the CPS by providing a bespoke technical assistance of guided implementation, through our restructured state Operations Department.
    “I am pleased to note that the Kaduna State Government has taken full advantage of this support with outstanding results achieved in a short span of time. The current economic challenges also provide an opportunity to implement strategies for effective financial management by the States. The huge liabilities, which usually build up in the old Defined Benefits Scheme, can be mitigated by the adoption and implementation of the CPS by states in the Federation. The CPS provides a mechanism for eliminating these liabilities while the regular contributions into the scheme are undoubtedly less burdensome.
    “The economic challenges also provide an opportunity to implement strategies for effective financial management by the states. The huge liabilities, which usually build up in the old Defined Benefits Scheme can be mitigated by the adoption and implementation of the CPS by states in the Federation. The CPS provides a mechanism for eliminating these liabilities while the regular contributions into the scheme are undoubtedly less burdensome,”she explained.

  • Still windy days for investors

    With average year-to-date decline of more than 5.7 per cent, equivalent to a net capital loss of N477 billion in six weeks, rising inflation rate, high interest rate and uncertain foreign exchange, investors in the stock market are caught between incongruous fiscal and monetary policies. But many analysts are hopeful that the turnaround may be around the corner. Capital Market Editor Taofik Salako reports on the dynamics behind the market forces.

    Nigerian equities have, for most part of this year, traded in the negative. By the sixth week, average year-to-date return had built up to -5.7 per cent, implying that an average investor had lost nearly six per cent of his portfolio so far this year. With a full-year net capital loss of N604 billion, a net capital depreciation of N477 billion within six-week trading period, apprehensions about the outlook for the stock market are further heightened.
    Nigerian equities had lost N3.98 trillion in the past three years, with most equities crashing to their lows. The stock market has been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed in 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the NSE closed in 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.
    The All Share Index (ASI), the common value-based index that tracks prices at the Nigerian Stock Exchange (NSE), closed last year at 26,874.62 points as against its year’s opening index of 28,642.25 points. Aggregate market value of all quoted equities also dropped from 2016’s opening value of N9.851 trillion to close the year at N9.247 trillion. Aggregate market value of all quoted equities on the NSE closed in 2015 at N9.851 trillion as against its opening value of N11.478 trillion for the year, representing a loss of N1.627 trillion. The ASI, which serves as sovereign equities index for Nigeria, indicated a negative full-year average return of -17.36 per cent. The ASI closed in 2015 at 28,642.25 points as against its opening index of 34,657.15 points. The losses in 2015 worsened the downtrend that had in 2014 marked out Nigerian equities among the worst-performing stocks globally with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities had closed in 2014 at N11.478 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year.
    Transactions so far this year have continued under the shadows of the previous year. Aggregate market value of all quoted equities opened this week at N8.770 trillion as against N9.247 trillion recorded at the beginning of this year. The ASI also opened down at 25,340.02 points compared with its 2016’s opening index of 26,874.62 points. Most analysts expected the National Bureau of Statistics (NBS), which is scheduled to release the January 2017 inflation rate, to announce an increase in the headline inflation rate from 18.6 per cent to some 18.7 per cent. At its first meeting this year, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had maintained its monetary stance, retaining the Monetary Policy Rate (MPR) at 14 per cent and the regulated “floating” foreign exchange rate to N305/$.
    For the Nigerian investors, 2017 appears to be a make or mar year. With the stock market already against its traditional cycle with three consecutive years of losses, running deficit in the fourth year could further weaken the investors’ appetite.

    Decisive factors
    The market pundits are out with the prognoses of the market in the year. In all, there is almost a consensus that the performance of the stock market will be determined, to a large extent, by effective resolution of Nigeria’s foreign exchange (forex) impasse. “The exchange rate of N305/$ is neither a realistic nor an effective price of the currency at this time. This is because you cannot get dollars at this price unconditionally,” Chief Executive Officer, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, said in reference to one of the major disruptions to the stock market.
    “The currency furore formed the central narrative of 2016 and will determine how macro-economic outcomes play out in 2017. Improved liquidity in the forex market – either by moving to a properly managed float system or through larger Federal Government forex receipts – is one key step towards an economic recovery,” Cardinal Stone Partners, a broker-dealer at the stock market, stated in its outlook for the year.
    According to analysts at Cardinal Stone Partners, despite attractive valuations, the reversal of fortunes for the equities market in the year will depend on a decisive policy response to the country’s fiscal and currency crisis.
    Nigerian Stock Exchange (NSE) Chief Executive Officer, Mr. Oscar Onyema, noted the strong link between the forex situation and the economic performance, including the stock market. The bottoming out of crude oil prices and a drastic decline in domestic oil output curtailed crude oil export proceeds, which accounts for roughly 90 per cent and 70 per cent of Nigeria’s forex earnings and government revenue. This resulted in forex liquidity challenges during the year, as the supply side of forex into the CBN dropped by over 70 per cent, despite heavy domestic demand.
    Onyema said it was the oil price shocks and the prolonged forex dilemma coupled with challenges to policy implementation, that drove the economy into its first recession in over 20 years by second quarter of last yaers.
    Analysts at Afrinvest Securities said the low foreign exchange liquidity that plagued the economy throughout the year contributed to the decline at the stock market as investors, especially foreign portfolio investors, were wary of being trapped within the forex illiquidity.
    Foreign portfolio investors, who see exchange rate risk as a major determinant, traditionally account for nearly half of transactions at the Nigerian stock market. Most analysts shared this view on the forex-meddling influence on share pricing trend. The CBN had in June 2016 introduced a new flexible foreign exchange policy, freeing the Naira from its long-held peg of N197/$. Under the new flexible foreign exchange system, the apex bank merged all existing segments of foreign exchange market into a single “window”, where pricing is determined by market forces with limited intervention from the apex bank. However, foreign investors and several market pundits saw the interventions by the apex bank, often below demand, as incongruous and this saw the onset of the forex illiquidity and exodus of foreign investors. The premium between the interbank and parallel markets widened because of the forex scarcity. The Naira depreciated by 34.73 per cent at the interbank market to N305/$ and by 45.01 per cent N491/$ at parallel markets in 2016, indicating a premium of N186.
    The stock market felt the forex impasse more. The benchmark ASI, which peaked at 31,071.25 points in June 2016 with a positive year-to-date return of 8.48 per cent, started to retreat into sustained decline as total foreign portfolio inflow dropped by 45 per cent from N42.46 billion in June 2016 to N23.43 billion in July 2016. A full-year foreign portfolio investment (FPI) report by the NSE showed that total foreign transactions decreased by 49.51 per cent from N1.03 trillion in 2015 to N517.55 billion in 2016. It was the lowest in six years and it was the first time that domestic transactions would outpace foreign transactions since 2011. The drag-on effect also saw domestic transactions decreasing by 28.02 per cent from N880.56 billion in 2015 to N633.82 in 2016. Altogether, total transactions at the stock market declined by 39.58 per cent from N1.91 trillion in 2015 to N1.15 trillion last year.
    The market intelligence analysis of a comparative Dollar-Naira data provided by the NSE, which factored forex risk into market transactions, showed that contrary to Naira-based valuation, which confirmed that the Nigerian equities lost N604 billion or 6.17 per cent in 2016, forex-adjusted simple nominal return for equities was -38.6 per cent, equivalent to a net capital loss of N5.83 trillion at current exchange rate. Total loss at the stock market, including equities and other securities, stood at about N10 trillion in 2016. The comparative Dollar-Naira data indicated that total market value of the Nigerian stock market dropped by about 37.8 per cent, equivalent to N9.83 trillion in 2016, when adjustments were made for the steep decline in foreign exchange (forex) during the year, providing the full glimpse of the losses suffered by investors during the year. A nominal Naira-based valuation had indicated that total market value of the stock market dropped by N817 billion or 4.81 per cent last year. Total market capitalisation of the NSE, including equities, bonds and exchange traded funds (ETFs), which opened 2016 at $85.295 billion, dropped to $53.068 billion by the end of the year, indicating a loss of $32.23 billion or N9.83 trillion at the current exchange rate of N305 to a Dollar. Segmental analysis showed that aggregate market value of all quoted equities, which opened last year at $49.56 billion, closed the year at $30.35 billion, representing a loss of $19.11 billion or N5.83 trillion at current exchange rate.
    Market value of bonds dropped from the year’s opening value of $35.82 billion to close at $22.71 billion, a decline of 36.6 per cent or $13.1 billion, equivalent to a loss of about N4 trillion. The market value of ETFs also depreciated by 21.95 per cent from the year’s opening value of $20.16 million to $15.73 million, a decline of $4.43 million or N1.35 billion.
    A full-year report on capital importation by the National Bureau of Statistics also underlined the tepid interest of foreign investors in Nigerian securities during the period. Capital importation declined by 46.9 per cent $5.12 billion last year as against $9.6 billion in 2015, the lowest value since the NBS started tracking the inflow in 2007. Foreign Portfolio Investment (FPI), which directly relates to the stock market, recorded the highest decline of 69.8 per cent while foreign direct investment (FDI) dropped by 27.8 per cent. FSDH Merchant Bank, which handles a great deal of foreign investments, said the uncertainty around the forex was unnerving investors. “Under a managed float foreign exchange system, it is difficult to forecast the foreign exchange rate,” FSDH Merchant Bank said.
    “We expect investors to continue to keep a close eye on the divergence between the interbank forex rate and other exchange rates in the country. Accordingly, a convergence of forex rates in the country and the performance of listed corporates will determine the level of market activity in the short term,” Onyema said.
    Many also see the implementation of the this year’s national budget and the expected recovery of the economy, denoted by positive growth in Gross Domestic Products (GDP), as linchpins for the capital market recovery. Most pundits, including the International Monetary Fund (IMF), said they expected Nigeria to quit the recession and return to the growth path by the third quarter of this year. The Federal Government is proposing a budget of N7.3 trillion for the year. The aggregate revenue is estimated at N4.9 trillion, leaving a deficit of N2.4 trillion, which is expected to be financed mainly by local and international borrowings. The government plans to source N1.07 trillion of the net deficit from external borrowings and N1.25 trillion from the domestic market. The increase in budget spending, especially with the increased focus on infrastructural spending, could stimulate the economy and the capital market. Financial experts agreed that the national budget has both direct and indirect impacts on the capital market, and it has been shown historically to influence the performance of the stock market.
    While financial experts noted with concerns that deficit financing could exacerbate the crowding out of private sector and increase costs of fund, they agreed that channeling deficit funding to critical infrastructure and a further restructuring of the budget with emphasis on capital projects would stimulate national growth and help to whittle down negative side effects. Head, Economic Research and Policy Management Division, Securities and Exchange Commission (SEC), Dr. Afolabi Olowookere, said the expansionary budget is necessary to return the economy to the path of growth and recovery. Citing historical trends, Olowookere said the increase in government spending this year would have positive impacts on the economy and the capital market. According to him, in financing the budget deficit, the debt segment of the capital market would derive some immediate benefits while the performance of companies that produce and supply goods to government priority sectors will likely improve.
    B. Adedipe & Associates Chief Consultant, Dr. Biodun Adedipe noted that the expansionary budget may serve as enabler for the economy because of its focus on infrastructure spending, which should facilitate the growth of the productive base of the economy.
    But many analysts also underscored the importance of harmonious fiscal and monetary policies if the objective of the national budget would be achieved. “We believe that an expansionary budget would not necessarily generate the fiscal impulse to boost economic growth if other structural factors inhibiting households and firms from spending are not removed,” Afrinvest Securities stated.
    Cowry Asset Management Limited Managing Director, Mr. Johnson Chukwu, called for urgent review of the monetary policy stance of the CBN by reducing the high interest rate, which he described as a major distortion in the government’s quest to drive economic activities.
    According to him, the apex bank is unwittingly working for the collapse of the national private lending system with its policy stance that encourages capital flight from banks and lending activities to the safety of high interest-yielding government securities. Chukwu said the apex bank should reduce the cash reserve ratio and monetary policy rate (MPR) to support the growth agenda of the government.
    “The key thing is how to channel savings and investments to stimulate domestic productive capacity. People will not have appetite to invest in risky businesses, or equities, when returns on sovereign and other fixed income securities are higher, in double digits. At lower interest rate, we will be able to stimulate the economic capacity by mobilising savings into the productive sector,” Chukwu said.
    Adedipe also agreed on the need for the apex bank to abandon its inflation-targeting approach for a lower interest rate, describing the school of thought that saw negative real rate of interest as a major factor as “old school” economic mindset as demonstrated by more pragmatic approaches by policy makers.
    “Significant market rebounds in the past were underpinned by serious economic reforms, and we think this would be the case going forward,” Cardinal Stone Partners stated in reference to the need for a broad-based approach that links monetary policies to fiscal objectives.
    Most analysts also agreed that the huge undervaluation of Nigerian equities could attract sufficient bargain-hunting to push the market to its first positive close in four years in the year. Group head, financial advisory, GTI Capital Group, Mr. Hassan Kehinde, said the sustained price depreciation in recent years has primed the market for a recovery this year, no matter how modest that will be. Analysts at Cardinal Stone Partners noted that while quoted companies may not deliver hugely impressive results for last year’s business year, there could be more relatively attractive dividend yields because of depressed valuations.
    “Most of the quoted companies are trading at huge discounts to their intrinsic values while some are even trading below book value. We believe that the market may rally in the year. If the Federal Government can communicate economic policies that inspire investors’ confidence in sectors of the economy,” FSDH Merchant Bank stated.

    Enabling environment
    Many stakeholders also believe that landmark developmental initiatives and self-reforms being championed by capital market regulator, most of which are expected to kick-off this year, would positively impact the market. The National Assembly and capital market stakeholders are expected to round off and possibly enact new laws and amendments that will see remarkable changes in corporate laws and market structures. Drafts undergoing scrutiny already suggest major changes, including the reconstitution of the Nigeria’s apex capital market regulator, SEC, under the headship of an executive chairman. New laws and amendments are expected to provide linchpins for full automation of the capital market and corporate reporting, including initiatives, such as electronic public offering, full dematerialisation, electronic dividend payment and electronic receipts.
    The capital market may finally do away with the issuance of dividend warrants as payments for dividends. A timeline of June 30, this year has already been fixed for the cessation of dividend warrants. As from the second half of the year, shareholders will only receive their dividends through the electronic dividend (e-dividend) directly into their bank accounts. This is expected to reduce the menace of unclaimed dividends and help shareholders to recover previously unclaimed monies.
    Also, the stock market is expected to witness a paradigm shift this year as the market transits to direct cash settlement that links investors’ bank accounts directly to their investment accounts. Under the arrangement, the stock market will transit from the current stockbroker-mediated payment system under which proceeds of shares sales are remitted to the stockbroker for onward remittance to the investor, to a new system under, which payment will be made directly to the investor’s account. The new payment system, known as ‘direct cash settlement’, will become the mandatory payment process for the stock market as against the current stockbroker-mediated payment system. However, any investor may apply for specific or continuing remittance of his net proceeds to his stockbroker.
    Many rules coming into effect at the NSE are also expected to redefine market behaviours and corporate disclosures and enforcements. These include the redefinition of the standards for declaration of interim and final dividends, stronger sanction regime for delay and default in submission of corporate earnings and pilot phase of auto-flow of corporate information. The most expectant listing this year is that of MTN Nigeria, Nigeria’s largest telecommunication company. Many analysts have said the listing of the telecommunication company could positively impact on the overall market perception and performance, citing similar influential listings, such as Dangote Cement and Seplat Petroleum Development Company. MTN Nigeria had already appointed advisory team and set out a roadmap towards listing on the NSE in the year. The listing of MTN Nigeria may trigger a wave of listings in the telecoms sector. Airtel Networks Limited, Nigeria’s second largest telecoms company, has said it may consider listing its shares on the NSE as it considers various options to further upscale its business. The listing of MTN and Airtel is expected to enliven the telecoms sector of the NSE.

    Cautious optimism
    But caution remains the refrain at the capital market. Most analysts are holding on to dual positions – the bull and bear positions. Afrinvest Securities, with its three-point concerns of forex, oil revenue and economic reforms, envisaged a bull position of average return of 15.6 per cent in the equities market in the year or a bearish market with average negative return of between -1.5 per cent and -16.4 per cent. Meristem Securities Limited indicated a possible average full-year return of 3.49 per cent for the equities market. Cardinal Stone Partners stated that the benchmark ASI could deliver an average return of nine per cent.
    Nearly all stakeholders- investors, analysts, operators and regulators, are worried and apprehensive over the direction of the pricing trend in 2017. To many, the deciding factors are still out there, and they are beyond the stock market-foreign exchange crisis denoted by distortive multiple and disparate rates and restricted access, high interest rate, soaring inflation, weak disposable incomes and savings and investments, low corporate earnings outlook and generally weak macroeconomic fundamentals among others – all exogenous macro factors beyond the control of the immediate market stakeholders. But many also believe that the long-running price depreciation and developmental initiatives by market stakeholders have primed the Nigerian stock market for a recovery.
    For investors, it is still a windy season. But whichever way the wind glides, investors will still need to hold on to the fundamentals and keep keen eyes on emerging issues as they unfold.

  • Showdown over ’likely’ fuel price hike looms

    Showdown over ’likely’ fuel price hike looms

    There are speculations that the Federal Government is planning to increase the pump price of petroleum products, particularly, Premium Motor Spirit (PMS), popularly known as petrol. But labour has vowed to resist such move, warning that any increase in the price of petrol will result in dire consequences, reports TOBA AGBOOLA.

    A major confrontation between labour and the Federal Government is imminent.
    The National Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association (PENGASSAN), including the Trade Union Congress (TUC), are set for showdown over alleged plot by the Federal Government to increase the pump price of Premium Motor Spirit (PMS), otherwise called petrol.
    Indications that the two labour unions in the oil and gas industry may soon be on collision course with the Federal Government emerged a few days ago when a wave of panic buying of petrol hit some states across the country. There were reports that major petrol stations, including the retail outlets of the Nigerian National Petroleum Corporation (NNPC) had jerked up their pump prices from the official price of N145 to N149 per litre.
    The Minister of State, Petroleum Reources, Dr. Ibe Kachikwu, promptly dismissed the claim, insisting that the Federal Government never announced any change in pump price. He reportedly said later that the government would undertake a review of the pricing template for petrol to forestall a further increase in its pump price.
    Group General Manager, Public Affairs Division, NNPC, Mr. Ndu Ughamadu, also issued a statement in Abuja, denying the report of any pump price increase. “The price is still within the band of N140 and N145 per litre approved on May 11 (2016) by the Petroleum Products Pricing Regulatory Agency (PPPRA), the statutory body in charge of petroleum products pricing,” the statement read.
    He assured marketers and motorists of the Corporation’s readiness to continue playing its statutory role of being the supplier of last resort and ensure energy security for the nation.
    The NNPC further confirmed the availability of over 1.6 billion litres of petrol in the country that would last for 45 days.
    “There was no time the NNPC management met the President to push for a hike in the pump price of petrol to N150 per litre,” Muhammad insisted.
    The Group Managing Director, NNPC, Dr. Maikanti Kacalla Baru, through the organisation’s Chief Executive Officer, Downstream, Henry Ikem-Obih, also denied any plans to increase the pump price of petrol.
    Baru’s position was also supported by his counterpart at the Nigeria Petroleum Marketing Company (NPMC), Mr. Farouk Ahmed, who said his organisation had no intention to double the travails of Nigerians.
    According to Baru, the landing cost of petrol to marketers is N123 per litre just as Ahmed assured that NPMC would ensure availability of fuel at all its retail outlets across the country.
    He, however, lamented that the organisation could not do much to reduce the price of kerosene and diesel since the prices of the products have been deregulated and affected by the current foreign exchange (forex) palaver.

    Marketers seek N165 per litre
    Despite assurances by the NNPC and NPCM that an increase in the price of petrol was not on the table, petroleum marketers are said to have proposed a new pump price of N165 per litre for petrol.
    According to the oil marketers, the present price of N145 per litre is no longer sustainable because of the scarcity of forex to finance fuel importation.
    The marketers claimed that in May 2016 when the price of petrol was reviewed from N97 to N145 per litre, the exchange rate was based on N285 to a dollar, but from June last year till date, the exchange rate had been fluctuating between N305 and N490 to a dollar.
    The marketers, therefore, proposed N165 per litre to cover the cost of forex required for products importation.
    “The recent appreciation in the price of crude oil at the global oil market is another argument favouring the upward review of petrol in Nigeria. The gradual increase in the global oil price impacts the pump price since most of the local fuel consumed locally is imported. Crude oil is refined and imported into Nigeria from other countries, which made the business to be dollarised,” the markerters argued.
    He said despite this, the PPPRA keeps assuring the public that the existing price band of N135-N145 per litre was still okay, therefore, there is no basis for increase in the pump price of petrol.
    Similarly, the NNPC, the oil markerters said, equally assured that there is no immediate plan to increase the pump price of petrol.
    Meanwhile, the price of petrol had reportedly gone up from N145 to N155 per litre in Kano State. The situation is said to have partially shut-down Kano city, with transporters almost doubling fairs.

    Oil workers kick
    NUPENG and PENGASSAN, both under the umbrella of NUPENGASSAN, have warned against any proposed hike in the price of petroleum products.
    According to the unions, the harsh economic condition caused by recession does not support any price increase.
    In a communiqué signed by PENGASSAN President Comrade Francis Johnson, NUPENGASSAN said: “We believe that this is not the right time to review the pricing template of PMS due to the following reason: the country is currently consuming about 40.32 million litres of petrol daily. Prior to now, marketers used to import 70 per cent of petrol while NNPC imported 30 per cent. The major challenge now is that NNPC is the sole importer of petroleum products.”
    The union argued that recession is biting hard on Nigerians hence, any attempt to further review the template will further impoverish ordinary Nigerians, as the additional price will be transferred to the end users of the product.
    The union , however, advised the Federal Government to give forex concessions to oil marketers to enable them import petroleum products and make their margin. This, according to the union, will resolve recent fuel price crisis.
    The union said forex concession should be given to oil marketers to make it easy for them to import petrol into the country so that they can make profit and keep their workforce.
    “We also call on the government to reduce the sundry charges by government agencies such as Nigeria Ports Authority (NPA), Nigeria Maritime Administration and Safety Agency (NIMASA), including storage charges. This will go a long way to push down the landing cost,” the union added.
    NUPENGASSAN also identified inefficiency as a big challenge. It noted that lightering expenses, which accounts for about N5.08k per litre is an example of such transfer of inefficiency to the consumer. It pointed out that if mother vessels were able to berth on the wharfs that sum would have been saved.
    Johnson said the current margin of N2.00 per litre for storage charge was also inexplicable, adding that there is an urgent need to repair the dilapidated roads scattered across the country, where tankers use for distribution of petroleum products.
    “We suggest that operators of illegal refineries in the Niger Delta should be assembled and trained on better refining. This will create meaningful jobs for them and reduce dependence on imported fuel,” he said.
    The union also suggested that government should block loopholes and abuses in the charges during the collection of petrol imported into the country.
    In addition, the union advised government to set up a Pipelines Protection Agency (PPA) that will guarantee adequate and safe products supplies from the refineries to the various depots in the country.
    “The moribund NNPC depots must be reactivated. The PPA will be saddled with protection of the pipelines throughout the country, with sensors, alarms, well-trained personnel with helicopters and gunships that have night visions to police the right of way,” he added.
    While insisting that the time is not right to review the pricing template of petrol due to the current harsh economic climate, Johnson argued that doing so will further impact negatively on the economy, which the government is trying to pull out of recession.
    “PMS is a stable product in Nigeria and if there is any increase in its price, it will definitely drive up the inflation index. Nigeria depends on the PMS for not only transportation, but to generate power for either home or industrial use, especially the Small and Medium Enterprises (SMEs) which can jumpstart the nation’s economy,” he said.

    TUC warns of consequences
    The TUC has also warned the NNPC not to attempt another hike, saying, doing so will result in dire consequences.
    The TUC, in a statement jointly endorsed by its President and Acting Secretary-General, Bobboi Kaigama and Simeso Amachree, condemned the idea, saying the statement credited to the Group General Manager, Crude Oil Marketing Department of NNPC, Mr. Mele Kyari, that “the nation’s harsh business environment may make it difficult to sustain the current pump price of petrol,” was highly insensitive, describing it as an open invitation to anarchy.
    According to the union, “Congress is surprised that the management of an organisation as important as the NNPC, regularly contradicts itself, with members speaking from both sides of the mouth.
    “The offices of the Minister of State for Petroleum Reosurces and Group Managing Director of the Corporation had earlier said the current price is not sustainable, but assured that there is nothing to worry about.”
    This comment by Kyari, TUC noted, corroborates the general suspicion by members of the public that they were already nursing the idea even at a time Nigerians have been stretched beyond acceptable limits. It warned that the revolution that will follow any further increase will not spare those behind the touted increment.
    “Ours is a country of paradoxes; we export crude and import refined products. Our refineries are still producing far below installed capacity, even with all the reforms said to have been done by this administration. Sadly, all efforts of the organised labour to help by advocating speedy passage of the Petroleum Industry Bill (PIB) have hit the rocks. The only antidote consistently offered by our NNPC big-wigs to the challenges in the oil and gas sector is fuel hike. Very unfortunate,” TUC said.
    The union warned that it would not tolerate inflicting more pains on Nigerians.
    TUC said: “We kick against closure of more factories and we hold the government responsible for insecurity, crime and other vices. They should stop telling us they feel our pains when all they do is to make it worse!.”
    While urging the Federal Government to discard the idea, the TUC said: “We wish to warn and remind all those proposing the ill-advised move that in 2012 the ruling party, then, in the opposition, had told the world that there was no subsidy on oil. We therefore, wonder where this magical “subsidy” that is now being withdrawn by the government came from?
    “We reject the increment because it will translate to unbearable increase in the cost of living in all spheres of life. Failure to adhere to the voice of reason will lead to serious industrial crisis.”

    NLC reacts
    However, the Nigeria Labour Congress (NLC) has urged its members and Nigerians to disregard the speculations that the Federal Government was planning fuel price hike.
    Speaking with The Nation, NLC President, Comrade Ayuba Wabba, said it was not true that the Federal Government was planning anything of such. He said there was a recent meeting between labour leaders and government officials where it was agreed that there would be no fuel price increase.
    “We had a formal meeting in which the marketers, labour union leaders and government officials attended. And government has given us its commitment that there would be no fuel increase. So, I don’t believe in that,” Wabba said.

  • Domestic carriers bogged down by mismanagement, others

    Domestic carriers bogged down by mismanagement, others

    Even before the economic recession, most domestic airlines were unable to evolve a sustainable business model for survival. Many of them hardly operate for one decade without hiccups.  MUYIWA LUCAS reports that over the last two decades, more than 40 airlines have shut down operations, while the existing ones are struggling to stay afloat. Experts, however, point the way forward.

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    He was prepared for the trip to Gombe, where he, along with other members of his team, were to attend a crucial meeting between a subsidiary of his company, the host community and representatives of government. Armed with a confirmed ticket, he walked to the check-in counter of Arik Air inside the departure hall of the General Aviation Terminal (GAT) of the Murtala Muhammed Airport, Lagos, to begin the process that would lead to his flight to Abuja slated for the early morning belt.
    But Mr. Ademola Ojolowo, Head of Media, Lafarge Africa, and his travelling team, were not prepared for what eventually happened. “The morning flight to Abuja has been cancelled and would now depart at 1pm,” an Arik Air official explained to him and his team at the counter. No reason was given for the cancellation.
    Desperate to be in Abuja on time to catch a connecting flight to Gombe scheduled for the same airline, Ojolowo and his team opted to forgo their confirmed ticket and hurriedly bought another airline ticket to Abuja. Again, they met a brickwall- the earliest flight to Abuja on all other airlines checked was 3pm. So, the team had no option but to stick with Arik Air.
    He opted to communicate with his team waiting in Abuja to verify flight availability to Gombe on Arik Air. He was shocked to hear that flights to Gombe had also been cancelled by the airline.
    Determined to get to Gombe by all means, the team opted to fly to Kano on Azman Air where they had hope to endure a-five hour drive to Gombe. That option also meant that he and his team would have to wait till 8pm for the only available flight to the “Ancient City” operated by Azman. Therefore, left with no option, Ojolowo and his team returned home, dejected.
    The experience of Ojolowo is one out of the many domestic air travellers are daily subjected to in the country. So many of them have lost contracts and other opportunities as a result of the sorry state of domestic airlines in the country.
    The state of the economy cannot be divorced from the fate that has befallen domestic carriers. As an oil producing nation, the country has had to depend on importation of fuel to run the economy. It is sad to note that for the greater part of last year, domestic airlines grappled with scarcity of aviation fuel also called Jet A1. Most of the airlines blamed this on their inefficiency last year, leading to frequent flight delays and cancellations by airlines.
    For instance, the Consumer Protection Department, a unit under the Nigerian Civil Aviation Authority (NCAA), lamented that between January and September last year, the eight domestic airlines operating in the country recorded a total of 43,196 flights, had 24,075 delayed flights cases, while 854 flights were cancelled.
    Experts in branding and marketing are convinced that delays and cancellations affect the brand integrity of an airline, including the entire domestic aviation industry.
    But while some have blamed the ailing airline sector on the recession, others insist that running an inefficient business model by airline operators, among other factors, brought the industry to its present precarious state.
    This school of thought argue that the bad business model, rather than the recession, accounts for many airlines’ collapse in the country.
    Checks by The Nation revealed that no domestic carrier has exceeded 40 years of operation at a stretch. The longest was Pan African Airlines which operated for 39 years. It was established in 1961 and collapsed in 2000. The average year spent by Nigerian airlines is usually about 10 years before closing shop. This is in sharp contrast to other African carriers such as Ethiopian Airways and South African Airways, which have spent over 70 years in business. Last year, British Airways celebrated 80 years of flying into the Nigerian market.
    Further investigations by The Nation revealed that so far, about 44 domestic airlines have collapsed or stopped operations in the country. For instance, NICON Airways, owned by Jimoh Ibrahim, Chairman of the NICON Group, hardly operated for one year, after it was bought from Executive Aviation Services (EAS) in 2006. EAS was owned by Captain Idris Wada, former Kogi State governor.
    By April 30, 2007, the only functional aircraft in NICON Airways fleet suffered birdstrike preparatory to take off from Lagos airport. The other aircraft in the fleet had its engine removed for servicing in an Ethiopian MRO hanger. That was the end of the airline.
    Similarly, after showing so much promise, Air Nigeria, also owned by Ibrahim, went out of operation too after barely two years. The management had claimed that it would resume operation by September of 2012 after the business would have been overhauled.
    As of the last quarter of 2012, the situation was so bad that only three airlines – Arik Air, IRS, and Aero Contractors – were left in operations. Overland Airline operates largely into fringe airports. Dana Air, whose suspension was lifted about the same period following its air crash of same year, delayed the commencement of its operations till later.
    Old timer, Aero Contractors also stopped operations last year following the huge debt it owed the Asset Management Company of Nigeria (AMCON). The airline has however recently resumed flight operations.
    The entry of new carriers into the market has not really given much hope to the industry. This is because they are equally struggling to remain afloat barely less than three years after entering.
    The Chief Executive Officer, Belujane Konzult, Chris Aligbe, is sad the airline sub-sector of the aviation industry has remained a toddler in spite of the many years of its existence. He is, however, not surprised at the precarious situation domestic airlines have found themselves.
    The situation got so bad that airlines operating in the country were under threat of being blacklisted over failure to pay their insurance premiums by Lloyd’s of London.
    The airlines were severely affected by acute shortage of foreign exchange, no thanks to the monetary policy of the Central Bank of Nigeria (CBN) which led to acute forex scarcity. This situation still poses the challenge of safety to the society because the airlines now find it hard to obtain aircraft parts which are largely denominated.
    “The challenges of sourcing forex with constantly changing CBN policies and Rate of Exchange (ROE) leaves us sometimes in situations where aircraft parts cannot be obtained when ordered,” the Director of Flight Operations, FirstNation Airways, Captain Chimara Imediegwu, explained.
    One problem that has kept airlines in dire strait is finance. A former President, Airline Operators of Nigeria (AON), Steve Mahonwu, said while airlines may be heavily indebted to the industry’s regulatory agencies, it is only part of the larger financial crisis that is threatening to cripple the industry.
    The recommendations of the Paul Dike task force on aviation reforms of 2006 was expected to breathe new life into the airlines. One of the recommendations of the task force was that domestic airlines needed to shore up their capital base.
    Depending on their choice, airlines interested in only domestic operations were to have a minimum of N500 million; airlines wishing to combine both domestic and regional-N1 billion; and those interested in domestic, regional and international-N2 billion.
    This explains the forced recapitalisation of airlines in 2008. However, nine years after the recapitalisation exercise, the airlines are now moving at an alarming rate back to the old order, as most of them have either stopped operating or are on the verge of doing so.
    Even the N200 billion bailout granted to airlines in the past has turned out to be meaningless. The Chief Executive Officer, Overland Airline, Edward Boyo, was chairman of a presidential sub-committee set up to find lasting solutions to the challenges facing the airline industry in the country.
    While submitting the committee’s report on February 18, 2010 to Mansur Muhktar, the then Finance Minister, he canvassed for a 50 per cent reduction in airport charges for airlines just as the five per cent ticket sales charges should be slashed by 50 percent. The report equally requested that the Nigerian Airspace Management Agency’s (NAMA) terminal navigation charges and third party revenue collections be set aside, while airlines should retain 10 per cent of any charges collected on behalf of the agencies as administrative charges and NCAA statutory fees.
    For retired Captain Dele Ore, re-capitalisation is not the only solution. Operators should emulate the defunct national carrier, Nigeria Airways, which employed the strategy of route development for its growth. “Route development is a major part of an airline’s asset, not just financial re-capitalisation. When they develop routes, then they would make a lot of money from it later; for now, they are only enjoying the routes that have been developed by the defunct Nigeria Airways,” he said.
    An aviation consultant, Olumide Ohunayo, is sad that domestic airline operators have failed to explore the merger option. He explained that though mergers and acquisitions would do the industry a lot of good, no operator was willing to let go of his airline. Business owners in this country, he said, are sentimentally attached to their businesses such that they hold on tenaciously to them even in the face of an imminent collapse.
    Ohunayo’s views may have been dealt a big blow with the collapse of NICON Airways. This is because at the beginning of the aviation reforms in 2006, industry watchers and stakeholders had thought the merger /acquisition of EAS by NICON Airways would breathe a new lease of life into the ailing airline, which was struggling to remain afloat after its air crash of May 4, 2002.
    Today, more than a decade after the merger, the airline is completely grounded.
    Top airline managers are of the opinion that the country’s domestic airline operators need to emulate standard global practice. For instance, they harped on the need for local carriers to interline.
    Interlining is a voluntary commercial agreement between individual airlines to handle passengers travelling on itineraries that require multiple airlines. When a ticket is issued for an interline itinerary, one of the carriers marketing flights in that itinerary will be selected by the ticketing agent as the “plating carrier”. The plating carrier collects the entire fare from the customer and is responsible for distributing the proceeds to other carriers in that itinerary, so long as those carriers carried the passenger. A plating carrier therefore gets the benefit of cash flow. With this system, airlines would have saved cost flying an almost empty aircraft to a destination.
    Aligbe’s prediction about six years ago that four airlines would collapse has come to pass. This, he said, has made it very imperative for airlines to merge or form an alliance. “Airlines Alliance is an agreement formed by two or several airlines to establish cooperation in the global aviation industry. This cooperation helps the airlines better their performance with respect to air transport and customer service. Though the degree of cooperation differs between alliances, airlines alliance is more helpful for small airlines,” Aligbe said.
    Group Captain John Obakpolor (rtd) observes that such unions create a global network that can be used by airlines to benefit air travelers to reach a larger number of destinations with ease and extend their services to passengers worldwide. Benefits that can be enjoyed by travelers include lower airfares, increase in the options of departure times, availability of flights to a greater number of destinations, reduced travel time and various special offers. “Very soon, we might not have more than 20 major airlines globally, because all of them have fused into alliances,” Obakpolor said.
    This view is supported by a past Assistant Secretary of AON, Mohammed Tukur, who explained that such arrangement would augur well for the industry and operators. “Why would I fly eight passengers to Jos in a 120 capacity aircraft, and another airline fly 20 passengers to the same destination, when we could have an arrangement to merge passengers and then have a sharing formula,” he said.
    Indeed, airline managers of repute are said to be very scarce in the country. Therefore, as Ore argued, why should there be bailouts for operators or managers that crippled their airlines. He is convinced that an operator who could not manage his operation effectively with his funds or bank facility may just be unable to do same if given a bailout by government. Consequently, he is canvassing that government should probe how operators ran themselves into their present situation.
    For instance, the case of the now defunct Bellview Airline, founded in 1992, has not ceased to amaze industry watchers. At its peak, the airline flew 11 international destinations – among them Amsterdam, London, India and others. It was the first domestic airline to be certified by the International Air Transport Association (IATA). By June 1997, Bellview was worth $15 million, winning both continental and domestic laurels.
    Also, Afrijet Airline, which staged a comeback with fanfare in 2011 soon ran into turbulent waters as it could no longer finance its operations. It had to withdraw due to inability to pay workers’ entitlements. There was no aircraft to operate, as it could not foot the bill to sustain its operations and lease payments.
    Drawing from these, Ohunayo said consolidating by merges was the best option for domestic airlines. He explained that an airline owner may have done well trying to invest in the business, but if his effort has not yielded much result, then he should think of bringing others in to strengthen the business. “Why own 100 per cent of a loss making investment, instead of owning 10 per cent of a thriving and profit-making investment which mergers can create for you,” he asked.
    One point stakeholders are unanimous on is the need to stop the granting of multiple entry slot to foreign carriers. They warned government to be weary of the type of Open Skies agree and Bilateral Air Services Agreement the country enters into, as it is usually a disservice to domestic airlines. “Multiple entry slots to foreign carriers kill our local airline because it allows them to compete with them. For instance granting a foreign airline entry into Lagos and Port Harcourt muscles out local airlines. Instead, the domestic airline should be made to carry passengers to other cities in the country once they land in Lagos. This leaves a window of revenue for the domestic carriers,” Aligbe reasoned.
    Until this is done, domestic airlines may gradually be heading for extinction.

  • Furore over cooking gas, kerosene scarcity

    Furore over cooking gas, kerosene scarcity

    The prices of cooking gas, otherwise known as Liquefied Petroleum Gas (LPG) and Dual Purpose Kerosene (DPK) or kerosene, have gone up, no thanks to scarcity of the products. Though the scarcity and its attendant hike in prices have been blamed on disruption in the supply and distribution chains, AKINOLA AJIBADE writes on the agonies of Nigerians and efforts to remedy the situation.

    Since the New Year, Mrs. Rebecca Alesinloye, a domestic user of cooking gas, otherwise known as Liquefied Petroleum Gas (LPG) and kerosene, has been struggling to come to terms with the sudden hike in the prices of these cooking fuels. “I filled my gas cylinder with N3, 500 in December. By first the week of January, the price has surprisingly gone up to as high as N4,500,” Alesinloye fumed. She added that the skyrocketing prices of the products have brought untold financial and physiological pressure on her household.
    Narrating her ordeal further, an obviously embittered Mrs Alesinloye, a resident of Surulere, Lagos, told The Nation that when she first visited a gas plant located inside a filling station around her neighbourhood, she had hoped that the price of gas would be cheaper since the festive season was almost over. “But to my disappointment, the price was as high as N5,000,” she lamented. She said she had no choice but to go back to the first gas plant to refill her cylinder. She described the price hike as “unfortunate” considering the economic hardship in the country.
    As far as Mrs Alesinloye was concerned, she and other domestic gas users are victims of exploitation by shylock gas sellers. According to her, sellers usually exploit users by increasing the price of the product during festive periods. She accused marketers of being unfair to users, lamenting that this development has compounded the woes of Nigerians battling all odds to survive the economic downturn caused by recession.
    She, therefore, appealed to the Nigerian National Petroleum Corporation (NNPC), marketers under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) and Independent Petroleum Marketers Association of Nigeria (IPMAN), Nigerian Liquefied and Natural Gas (NLNG) and other relevant operators to check what she described as “the excesses of the sellers of the two products’.’
    Mrs Alesinloye is not alone in her agony over the increase in the price of gas and kerosene.
    Mrs. Jennifer Eluko, another consumer, is also furious. She lamented that the price of cooking gas rose since last December in most parts of Lagos. A resident of Abule-Egba, a suburb of Lagos, Ekuko said she usually refills her two gas cylinders ahead of the festive period.
    According to her, this was to get round the challenge of artificial scarcity of the product that forces her and other consumers to pay extra. “I usually fill two cylinders ahead of the festive period because I know that sellers would sometimes create artificial scarcity and inflate the price,” Mrs Eluko said.
    Another housewife Mrs. Oluyemi Alimi lamented that the sudden rise in the price of kerosene and cooking gas has added to her financial woes. Alimi, who is in her 50s, said since most Nigerians use LPG and kerosene as cooking fuels, they have no choice but to contend with the increase in the prices of the two products.
    Even LPG retailers are complaining. For instance, the Chairman, Liquefied Petroleum Gas Retailers (LPGAR), Mr. Chika Michael Umudu, said the scarcity of gas has worsened the problems of low income earners. He said many people have abandoned their cylinders and opted for other sources, such as firewood and saw dust.
    The scarcity of the two household cooking fuels has seen their prices hitting the roof. For instance, the price of refilling a 12.5-kilogramme gas cylinder increased by 30 per cent from N3, 000 to N4,500, while that of kerosene increased from N100 per litre to N400 per litre.

    NLNG reacts
    The Nigeria Liquefied Natural Gas Limited (NLNG) said the high cost LPG was caused by shipping cost, delay of cargo discharges at receiving terminals in Lagos and because the commodity’s price is based on international price index.
    Its General Manager, External Relations, Kudo Eresia-Eke, said Nigeria LNG’s domestic LPG price is based on an international price index plus 50 per cent of the shipping cost of delivering the product to receiving facilities in Apapa-Lagos. That price is invoiced in naira at the prevailing official interbank exchange rates.
    He said the reality of this is that though LPG is produced and consumed locally, the product, like crude oil is an internationally traded commodity with an international price benchmark, open to global demand and supply pressures. NLNG, however, softens the impact of price variations by continuing to subsidise the cost of transporting about 40 per cent of total domestic market share supplied from Bonny Island, he added.
    “Recent delays to vessel discharges at the receiving facilities in Apapa, Lagos, which are multi-use terminals with berthing priority accorded to vessels discharging other oil products such as petrol, kerosene and diesel, have also led to a temporary supply disruption over the last two-three weeks.
    “ For instance, NLNG’s dedicated LPG vessel has been unable to discharge LPG at the Apapa port since December 29, 2016 due to jetty unavailability, resulting in temporary product shortages in the market.
    “Additionally, NLNG continues to work with stakeholders, including offtakers and terminal operators, to eliminate bottlenecks and improve operational efficiencies to ensure product availability and help correct market price distortions. We are also engaged with other public and private stakeholders along the domestic market value chain to stimulate price stability and growth.
    “NLNG remains fully committed to the goals of ensuring LPG supply availability, reliability and affordability, which are key for the development and growth of the domestic LPG market. It is in this regard that the NLNG Board recently approved an increase in the LPG dedicated for supply into the domestic market from 250,000 metric tons to 350,000 metric tons annually,” Eresia-Eke said.
    Operators react
    Sadly, the scarcity may linger for a long time, as firms selling the products at various ends of the market are said to have ran out of stock.
    The Chief Executive Officer, Nigeria Association of Liquefied Petroleum Gas Marketers (NALPGAM), Mr. Bassey Essien, attributed the price increase to shortage. He noted that the situation would improve when more vessels bring the product from NLNG headquarters in Bonny, Rivers State to Lagos.
    He explained that a vessel carrying LPG comes to Lagos from Bonny every two weeks, and that the time lag between each delivery of the product and the others often result in short-supply of the product in the market.
    For Comrade Umudu, the scarcity was caused by some cabals who hijacked the operations of the sub-sector. According to him, the cabals determine its supply and price.
    He also told The Nation that LPGAR, which is an arm of the National Union of Petroleum Employees and Natural Gas (NUPENG), has continued to decry the instability in the supply of gas across the country caused by the cabal. He traced the crisis in the sub-sector to last July when the cabals hijacked the sub-sector.

    IPMAN blames forex
    scarcity, partial deregulation
    IPMAN blamed the scarcity of kerosene across the country on the Central Bank of Nigeria (CBN) foreign exchange (forex) policy, and the partial deregulation of the sale of the product.
    Its Vice President, Alhaji Abubakar Dankigari, said many marketers were unable to import kerosene because of forex scarcity. “Besides, kerosene is not fully deregulated; it is not like automotive gas oil (AGO) or diesel. Kerosene and petrol are not fully deregulated,” he added.

    NNPC’s speaks
    The NNPC said kerosene scarcity exists because it is the sole importing the product into the country. “The Corporation has been importing kerosene, supplementing this with local production. It operates in the downstream like other players,” its spokesman, Ndu Ughamadu, said.
    He pointed out that if other marketers that have been authorised to bring in kerosene had lived up to expectation, there would not have been any scarcity of the product. Ughamadu said it was not the responsibility of the NNPC to find out why marketers are not importing the product since it is not the sole regulator of the industry.
    “NNPC is a player in the downstream. We also have our retail outlets for the generic purpose of the nation. We sell to consumers and we have a conglomerate of players. We have IPMAN and others. But the question is: Are they bringing in products like NNPC? If they have all been bringing in products, there wouldn’t have been this kind of problem because the NNPC is also set up as a commercial entity,” Ughamadu said.

    Environmental hazards loom
    Experts have warned that if the scarcity of cooking gas and kerosene continues, there could be environmental hazards in the country.
    An environmentalist, Mr. Ako Amadi, noted that because of the scarcity of gas and kerosene and the attendant price hike, many people have resorted to the use of firewood diregarding its effects on the environment.
    “There would be deforestation, which simply means cutting down of trees in the forest. When this happens, people would be exposed to ecological problems such as depletion of the ozone layers,” Amadi warned
    The environmentalist, who is also a consultant to the Canadian government on environment, warned that further depletion of the ozone layer and its attendant emission of poisonous materials is hazardous to human health.

    Local refineries to the rescue
    The Federal Government said it is making efforts to address the scarcity. The NNPC, in a statement, said the three refineries in Kaduna, Port Harcourt and Warri have resumed production of diesel and kerosene.
    The state-run oil firm said the refining of diesel and kerosene is expected to balance the disequilibrium in demand and supply of the products in order to address the perennial scarcity of the products being experienced in recent times in parts of the country.
    The Managing Director, Warri Refining and Petrochemical Company (WRPC), Solomon Ladenegan, said the plant had been doing well since the Crude Distillation Unit (CDU) was revved up on January 7.
    Despite the assurances, close industry watchers have continued to heap the blame for the crisis in that segment of the oil and gas industry on governments. To them, successive administrations have failed to put the operations of that sector on the path of efficient service delivery.
    Their consensus is that until this is done, the perennial scarcity of the products will continue.
    cause the refinery has started working”, Yahaya stated.

  • What to do with unclaimed dividends

    What to do with unclaimed dividends

    Yearly, billions of naira that should have been paid to shareholders as dividends are not claimed. With more than N50 billion of such funds unclaimed, stakeholders are exploring options for managing the funds, reports Capital Market Editor Taofik Salako.

    Unclaimed dividend’s a thorny issue in the capital market. Nearly every stakeholder is an expert on why there are billions of naira in unclaimed dividends yearly. As at the last count,  the unclaimed dividends stood at over N50 billion.

    The electronic-dividend (e-dividend) payment system being spearheaded by the Securities and Exchange Commission (SEC) has led to investors reclaiming N29.27 billion from outstanding unclaimed dividends between November 2015 and last October. The reclaimed amount represented nearly one-third of the estimated total unclaimed dividends of N90 billion by November 2015.

    The e-dividend platform is structured to automatically credit the bank accounts of the registered investors once the recommended dividend is approved. Registration for e-dividend has enabled investors with backlog of unclaimed dividends to automatically trace and receive such dividends.

    A dividend warrant becomes statute-barred, that is, unclaimed and due for return to the originating company after 12 years. But before this, it only becomes temporarily invalid after six months and this could be solved by simply taking it to the Registrars for revalidation, which can be for as many times as possible. With e-dividend, Registrars automatically revalidate and pay unclaimed dividends to the registered bank account  under the e-dividend platform.

     

    What is at play

    There have been many reasons for the menace of unclaimed dividends. Dividend is used in generic sense as well as specific sense to refer to Return on Investment (RoI). In generic sense, dividend refers to all gains that accrue on an investment including cash payouts, scrip or bonus shares and capital gain. But dividend is usually used in relation to cash dividend-the periodic distribution of net profit from the business to shareholders.

    One of the crucial roles of the Registrar to a company is the distribution of cash dividends to shareholders.The board of the company recommends possible cash payout, closure date for register of members and payment date to shareholders, who usually approve these recommendations at a general meeting and thereafter, the gross value of the dividend is deposited with the Registrar for onward distribution to shareholders. Unfortunately, the problem of unclaimed dividends has made the process of dividend payment not as straight as enunciated.

    There have been accusations and counter-accusations between shareholders on one side and registrars and companies on the other. Shareholders’ poor attitude to dividend generally encourages bad corporate practices, which in many instances have compounded failures of some companies. Companies have been alleged to borrow certain sum to pay dividend with mindset that certain percentage may not be claimed by their owners.

    Shareholders have also alleged that some companies and their registrars collude to delay dividend payment or create unclaimed dividend for them to trade with the money. Unclaimed dividend attracts no interest and it is theoretically assumed that the unclaimed part or the gross dividend is in the account of the registrar “lying fallow”.

    But it could also not be denied that many unclaimed dividends resulted from poor understanding of the intricacies and processes of dividend payment by shareholders. Being a “cheque,” the requirement of a “current account” to convert dividend warrant into raw cash had until recently been a major hurdle to many small investors, who were operating mostly “saving deposit account.”

    Financial services authorities only recently approved payment of dividend into non-current accounts. Besides, several shareholders have been known to dump their dividend warrants at home because of the seeming intangibility of dividend. For instance, a dividend per share of 10 kobo would result into a net sum of N90 on 1000 ordinary shares. With the cheque-like nature of dividend warrant and the intangibility of some dividends, many shareholders who received their warrant merely dump them somewhere.

    Changes in major personal details of the shareholder such as change of address, signature, incorrect entry and death, among others also contributed to the unclaimed dividend problem. Also, inefficient public utility had contributed to the huge bags of unclaimed and undelivered mails. Gone were the days when the post-office officials moved through the nooks and crannies of cities and towns to drop letters.

    Shareholders’ activist and one of the co-founders of Nigeria Shareholders Solidarity Association (NSSA), Alhaji Gbadebo Olatokunbo, said there were credible evidence to believe in the conspiracy theory of registrars and companies. SEC also cited alleged abuse of dividend payment process, including diversion, as one of the reasons why the apex capital market regulators sought to change the custody of unclaimed dividends from registrars.

     

    Multi-faceted approach

    Stakeholders have shown more commitments to resolving the unclaimed dividend problem in recent years. There have been many regulatory initiatives to ease the process of dividend payment and block the loopholes that could lead to sharp practices. The Nigerian Stock Exchange (NSE) will on January 1, 2017 start implementing new rules that impose sanctions on any company that makes spurious interim dividend payment without the fundamental basis to support such interim dividend distribution. According to the rules, any company that declares interim dividend during any financial year, and thereafter records accumulated losses at the end of that financial year shall, if it is discovered that the declaration of dividends was not justified by the availability of profit for distribution, be liable to pay a fine.

    Besides, no company or any other issuer shall declare interim dividends or bonuses without first preparing and filing accounts, which shall form the basis of such declaration or action. Also, no company shall declare final dividends without first preparing and filing audited accounts, which shall form the basis of such declaration or action.

    For any infraction under the new rules, companies shall be liable to pay fines of up to 100 per cent of the nominal value of the dividends or bonuses declared. The new rules seek to protect investors and forestall market manipulation through spurious dividend recommendation and false sense of strong earnings.

    Bogus dividend declaration had been fingered as one of the reasons for the large unclaimed dividends as companies sought to manipulate dividend payment and distribution in the absence of the adequate earnings to meet the payment.

    The implementation of the NSE’s rules will herald the discontinuance of dividend warrant as from June 30, 2017. Capital market stakeholders under the auspices of the Capital Market Committee (CMC) earlier this year reached the decision to stop issuance of dividend warrants as payments for dividends from June 30, 2017. Shareholders will thereafter fully receive their dividends through the e-dividend directly into their bank accounts. This, stakeholders had argued, will block many loopholes.

    SEC had earlier strengthened its rules on payment of dividends. SEC Rule 204 stipulates that a separate interest yielding escrow account shall be opened by a company within 24 hours of the approval of dividends at a general meeting in the case of final dividends or a board meeting in the case of interim dividends, and evidence of such opening must be forwarded to SEC and the company within 24 hours of the account being opened.

    Also, the rule provides that the total dividend declared by the company shall be paid en-bloc into the said escrow account within 24 hours after the opening of the account and evidence of such payment forwarded to SEC and the Registrar within 24 hours. Besides, the Registrar is expected to forward a monthly statement of account certified by the bank to SEC detailing the outflow and inflow into the accounts and the accrued interests on the dividend.

    Failure to open and fully fund the account by the dividend-declaring company within the stipulated timeline shall attract a penalty of N1million per day and a further penalty of five per cent above the Monetary Policy Rate on the amount declared. Also, in the event of failure to effect dividend payment either by electronic transfer or dispatch of dividend warrant to beneficiaries within the stipulated time, the Registrar shall be liable to a penalty of N1 million for every day of default.

    Securities and Exchange Commission (SEC) Director-General, Mr. Mounir Gwarzo, said the full automation of dividend payment will ensure that shareholders receive their dividends without delay. According to him, the e-dividend would stem the menace of unclaimed dividend and also ensure that the registrars can automatically pay the backlog of unclaimed dividends to verified shareholders’ bank accounts.

    Gwarzo, who declared the e-dividend payment process as a game changer, said e-dividend allows investors to reclaim outstanding unclaimed dividends of 12 years while the use of the Bank Verification Number (BVN) to authenticate account owners provides additional assurance against malpractices.

    He noted that while a total of 1.4 million bank accounts have been mandated for the e-dividend payment, SEC will consider further extension of the free registration period for the e-dividend pointing out that registration for the e-dividend can be done at any of the branches of Nigerian banks nationwide.

    Under the extended period, SEC would bear the cost of registration on behalf of any investor who registered. At the expiration of the grace period, subsequent registration of an investor would attract a fee of N100.

    “E-dividend is in the best interest of the retail investors, we are doing all these to encourage retail investors,” Gwarzo said.

    Head, Vertical Markets Group, Nigeria Interbank Settlement System (NIBSS), Mr. Samuel Oluyemi, said banks had reached agreements to ensure seamless registration and operation of the e-dividend. He noted that with BVN, shareholders can submit their e-dividend mandate by proxy. Oluyemi noted that 29 million bank accounts e-dividend in a market with less than five million retail investors should be easier.

    Head, Depository and Customer Care, Central Securities Clearing System (CSCS) PLC, Mr. Lateef Lawal, said the CSCS, the clearing house for the stock market, has the adequate framework to ensure seamless automation of all payments in the stock market. Besides the e-dividend, capital market stakeholders had decided to adopt direct payment system, known as direct cash settlement (DCS), for transactions on the stock market. Under the DCS, payment will be made directly by the CSCS into the investors’ accounts rather than the current practice of payment to the stockbrokers for onward disbursement to their clients.

    Many stakeholders have also called for amendment to provision of the Companies and Allied Matters Act (CAMA) that limits the lifespan of dividend in order to ensure that shareholders or their beneficiaries could claim their dividend at any point in time. Already, a committee of the CMC is working with the National Assembly on the amendment of CAMA and other capital market-related laws. A shareholder, Akeem Adeleke, noted that shareholders or their heirs and beneficiaries should be able to claim their dividends at any time once the ownership of such dividend has been established.

  • How sanction on MTN is affecting agencies

    How sanction on MTN is affecting agencies

    These are not the best of times for various agencies in the marketing communications industry. They are grappling with paucity of funds to execute marketing campaigns. Besides, the ongoing regulatory crisis facing telecoms giant MTN Nigeria may have added a scary dimension to agencies’worries, ADEDEJI ADEMIGBUJI reports.

    Sometime last year, two fast-rising Public Relations (PR) agencies, Brooks and Blake and DKK Group, won MTN Nigeria’s PR business. That was after a competitive pitch. Both firms popped champagne to celebrate their hard-won victory after upstaging the incumbents, MarketingMix Ideas Limited and XLR8. While the former handled MTN’s brand management for 11 years, the latter was in charge of the corporate communications part of the account for seven years.
    Brooks and Blake and DKK Group were not the only PR agencies considered lucky to have grabbed the juicy account. Other agencies, such as Media Perspective, DDB Lagos, and TownCriers, handling advertising creative, media buying and planning, and experiential marketing business for the South African telecoms firm also counted themselves lucky. For them, it was the best thing to happen to them in a recession.
    Their joy was understandable. It is common knowledge among industry operators and observers that MTN is the biggest spender on marketing communications in West Africa. The telco has remained in the top spend league for over a decade. For instance, a report produced yearly by mediaReach OMD, which listed the top 10 advertisers in communication and telecoms sector last year, credited MTN with spending N13.5 billion. It was the highest figure for that year.
    However, the excitement that greeted the emergence of the new PR agencies for MTN appears to have been short-lived. This was sequel to the regulatory problem facing the telecoms giant as well as Dino Melaye’s allegation of repatriation of funds without Certificate of Capital Importation (CCI) .
    At first, sources close to the agencies said MTN’s efforts to pay N1.04 trillion fine imposed on it by the Nigerian Communications Commission (NCC) for violating subscriber identity module (SIM) card registration rules had been taking a huge toll on the agencies handling its marketing communications business.
    MTN Nigeria, the largest mobile network operator in the country, had been fined N1.04 trillion ($5.2billion) for failing to disconnect subscribers with unregistered and incomplete SIM cards within the deadline for doing so. It was the heaviest fine ever in the industry.
    According to the NCC, MTN Nigeria was fined for allegedly undermining efforts by the Federal Government to tackle security challenges and the war on terror and allied crimes.
    The snag, however, is that since the regulatory battle between NCC and MTN began, the marketing communications industry has never been the same. It was learnt from reliable industry sources, for instance, that agencies handling MTN PR account had been losing sleep.
    As a result, budget for jobs already approved and implemented are said to have been slashed by as much as 40 per cent. “Some of the jobs have been implemented and sometimes we get bank loan at about 30 per cent interest rate to finance the projects. So, the 40 per cent budget slash is taking a toll on our businesses. Paying salaries is so hard. If you are handling MTN account, you have to set up a unit, employ more experts because the volume of the job is huge,” the source said.
    But the affected firms are not folding their arms. It was learnt that the agencies are exploring a collective approach to dealing with the development to remain in business.
    For instance, the Media Independent Association of Nigeria (MIPAN), which sub-sector of the marketing communications industry accounts for almost 70 per cent of billings, is said to have taken up the matter.
    MIPAN recently organised a session tagged: Business outlook for 2017: Economic recession and business growth.
    During the event, where the executives of Association of Advertising Agencies of Nigeria (AAAN), Outdoor Advertising Agencies of Nigeria (OAAN), among others, were present, experts barred their minds on the far-reaching consequences of the fine on MTN on the industry.
    Financial Derivatives Company Limited, Managing Director/Chief Executive, Mr. Bismarck Rewane, warned against the implication of the continued ‘harassment’ of MTN Nigeria by the government, adding that this could discourage inflow of foreign investments.
    “Since we are harassing MTN, nobody is going to invest. Hounding MTN is not a good thing, because it is sending a negative signal. We need to ensure that we send the right signal to encourage investment rather than discourage investors,” Rewane cautioned.
    Rewane, an economist, noted that considering MTN’s huge contribution to the economy, especially in advertising spends and taxes, the government should look for a soft-landing for the telco.
    He pointed out that the Information and Communications Technology (ICT) industry remained very vibrant, despite the contraction in the economy.
    He said MTN contributed 12.6 per cent to the nation’s Gross Domestic Product (GDP) and recorded a 1.32 per cent growth in the second quarter of the year. The sector also expanded by 4.7 per cent in the first quarter.
    Rewane affirmed that the third quarter report of the economy, which is expected to be out soon, may not hold any good news for the country. He, however, projected that growth would return within the next 18 months.
    Contrary to Rewane’s insinuation about the harrassment of MTN, the NCC has consistently said it was not interested in running down MTN or any teco for that matter, but making them to comply with the rules operating in their host country.
    “MTN had some 52million pre-registered/improperly registered SIM cards active on its network. It was, along with other telos, given an ultimatum to deactivate the SIMs but it refused to comply with the directive while others did. Decision on the SIM deactivation was reached at a meeting that had the representatives of the National Security Adviser (NSA), Group Captain, Ibikunle Daramola, Director, State Security Services (DSS), Mr. Godwin Ometu, the immediate past NCC Executive Vice Chairman, Dr Eugene Juwah, Executive Commissioner, Technical Services, Engr. Ubale Maska and representatives of MTN, Globacom, Etisalat, Visafone , Airtel and others. Such SIM cards were being used to commit crimes such as kidnap for-ransom. So MTN knew about the implications of its actions,,” an NCC source said.
    Also, MediaReachOMD founder, Mr. George Thorpe, warned the government against battling with MTN Nigeria, saying that the economy needed to encourage as many investors as possible.
    However, the heavy fine on MTN is not the only pain in the neck of the telecoms firm, which, unfortunately, is rubbing off on agencies in the marketing communications industry.
    A public analyst, Mr. Tunji Andrews, while speaking on a radio programme on NigerianInfo 99.3 “Cross Fire”, insisted that MTN has not committed any crime in respect of the CCI.
    He said: “The issue that we had or they brought was that this particular telecoms firm did not get the CCI. They didn’t get it within 24 hours. Not getting the CCI doesn’t mean that you steal money and you take money out. It means when you take your money out or bring it in, you have to have that certificate.
    “What most people don’t understand is that CCI doesn’t only track cash, it also tracks assets because it means capital importation. So, whether it is machinery or whatever it is, as long as it is capital brought into the country and you are taking it out, it must be registered. It generally must be 24 hours, but in the case of asset it is always difficult to do in 24hours and we know it still happens till now.”
    Speaking on a popular Television Continental (TVC) Business Morning Show, a Financial Management Consultant, Mr. Bisi Ogunwale, said the furore generated by the alleged regulatory discrepancies involving MTN might send warning signals to potential and willing investors in the economy.
    However, despite facing numerous regulatory challenges in the year, MTN has emerged the best and most-valuable brand in Nigeria. This is in the Top 50 Brands survey released last week in which the telecoms brand came first with a rating of 90.1, beating Coca-Cola Nigeria’s 84.7 and GTBank’s 81.8.
    The model that was used in arriving at this result included consumer’s familiarity with the brand, quality element a brand possesses, market/category leadership, innovation, spread, and Corporate Social Responsibility (CSR) initiatives.
    But, MTN has suspended dividends payout from Nigeria, where it runs the biggest wireless phone network which generates a third of its yearly sales. The company reported a slight fall in third-quarter user numbers due to a weaker showing in South Africa, where it vies for market share with Vodacom and Cell companies.
    MTN is not the only telecoms firm facing NCC’s regulatory scrutiny. Last week, the telco, Airtel, Etisalat and Glo reportedly were seriously warned over unsolicited telemarketing. Specifically, they were warned for failing to comply with the directive on the Do Not Disturb (DND) order issued on April 20, this year.

  • Dairy industry: Local raw milk to the rescue

    Dairy industry: Local raw milk to the rescue

    A Dairy Development Programme (DPP) aimed at cutting the nation’s huge import bill for dairy products and also create jobs is on course. The programme supports local sourcing of raw milk rather than imports by engaging and training Fulani milk producers and potential smallholder dairy farmers. Assistant Editor CHIKODI OKEREOCHA reports that the model could be the wedge for an economy in recession, if more players in the dairy business come on board and supportive infrastructure are provided.

     

    The Research & Development (R&D)/Dairy Development Manager, FrieslandCampina Wamco Nigeria Plc, Mr. Lawrence Inegbenoise, is upbeat. He is expectant that the company’s cooperation talks with academic institutions in The Netherland in knowledge-sharing and exchange programme with Nigerian dairy farmers would boost the transfer of technology know-how on milk production and expand its on-going Dairy Development Programme (DDP).

    At the behest of FrieslandCampina Wamco Nigeria Plc, dairy producer, two dons from The Netherlands, Imke de Boer, a Professor of Animal Science, Wageningen University, and Managing Director, Wageningen Academy, Janine Luten, were in Nigeria recently to explore the possibility of transferring skills to assist local dairy farmers on best practices for improved yield.

    “Fulani cows are local breeds so, we have brought in experts to train them on how to cross-breed with the local cows, which can produce 500 litres of raw milk, while cross-breeds can produce 1,200 litres,” Inegbenoise explained, exuding confidence.

    He spoke while conducting reporters and experts from The Netherland round the company’s dairy development facilities in Oyo State.

    FrieslandCampina Wamco Nigeria Plc, makers of dairy brands such as Peak Milk, Three Crowns, Friso, among others, has been pushing a DPP since August 2010. The Private-Public Partnership (PPP) initiative was aimed at developing the local dairy industry by creating a sustainable raw milk value-chain that contributes to food security through provision of quality dairy nutrition to Nigerians as well as providing jobs.

    The company is the only dairy manufacturer sourcing part of its raw milk requirement locally. It has invested over N4 billion on the project so far. The scheme  draws its strength partly from the Federal Government’s backward integration policy, which encourages building capacity in local manufacturing to significantly reduce imports and create jobs.

    Under the DPP’s sustainable raw milk value-chain, Inegbenoise said that Fulani herdsmen constitute the first leg of the empowerment programme under which they are trained to ensure they get the best quality milk for FrieslandCampina. The herdsmen are supported through consistent trainings and demonstrations to upgrade their milk supply in terms of quantity and more importantly, quality.

    They are also trained in the use of crop residues and fortification as sources of good feed to cattle. Also, feed preservation through silage and hay making are demonstrated, while crossbreeding through artificial insemination was carried out.

    The second leg of the empowerment is the smallholders’ concept, where graduate farmers are engaged and put in clusters of ten and supported to become more productive. They are allowed to share infrastructure such as farming implements, power and feeds, while the third group are the cooperatives, conceived in the mould of the Dutch parent company Royal FrieslandCampina dairy cooperative concept.

    The Nation learnt that the parent company is owned by 19,000 dairy farmers drawn from over 13,000 cooperatives. The cooperatives, Fulani herdsmen and smallholder dairy farmers also benefit through the opening up of markets for them. “We have made good progress in the area of networking of milk suppliers,” Inegbenoise said.

    While the company continues to invest in the maintenance of its facilities: the Milk bulking Centre in Iseyin and four functional Milk Collection Centres (MCCs) in Fashola, Alaga, Maya and Iseyin in Oyo State, it has been able to receive at least 21, 000 litres of raw milk from its local supply chain.

    FrieslandCampinaWamco Nigeria PLC Corporate Affairs Director, Mrs. Ore Famurewa, explained that although, the company started by buying raw milk from Zimbabwean farmers in Shonga, Kwara State, and bringing it to its factory in Lagos for production, it soon realised that this was not enough; that it was better to get Nigerians, the local Fulani farmers to milk cows for it.

    At the last count, over 1, 600 (920 women and 726 men) Fulani milk producers and potential smallholder dairy farmers have been engaged and trained. According to Famurewa, the knowledge sharing and exchange programme with The Netherland’s experts was a continuation of the development of the local milk production capacity in Nigeria.

     

    Boost for local content

    Famurewa said the company believes strongly in supporting local content wherever it operates and that it has made significant progress in the development of local milk production in Nigeria. She said although, the company targets 10 per cent local content in raw milk production every five years, it is currently doing three per cent.

    “We plan to meet 10 per cent local content contribution in the next five years, but it has been very challenging. We have signed a Memorandum of Understanding (MoU) with Federal Ministry of Agriculture and Rural Development to support us in our DPP. Presently, we are at three per cent because dairy development is a gradual process, but for us, slowly and steadily, we would surely win the race,” Famurewa said.

    Through the programme, the company may have also assisted government to address the grazing challenge in the country. Famurewa admitted this much when she said that smallholder farmers are beginning to explore inside grazing while cross-bred animals are being invested in for higher yields. “A lot of people in the country have complained about Fulanis going into their farms to graze, causing mayhem, but overtime we have been able to reduce this menace in Oyo State,” she said.

    The DDP may have also addressed the challenge of ageing farmers across the country, the scarcity of natural resources and the fast growing population. “We believe the way to address these challenges is having DDPs across all our regions. If you want to be sustainable, you must take care of the growing population, the issue of aging farmers and you must ensure managing resources well,” Famurewa said.

    While pointing out that if Fulani are allowed to continue moving around, land will still be a problem, she said if the company is able to gather them in a small dairy concept idea then it is possible to solve the problem of land.

    “In a small land you can get more milk because the more the cattle treks they would not be able to produce because they have trekked all their energy whereas cows that are stabled like in the Netherlands, they relax, they are very big, very fresh and happy. They also produce 40 liters of very good milk per cow per day,” she said.

     

    Cutting dairy

    products’ import bill

    Experts and operators in the dairy industry estimate Nigeria’s import bill for dairy products to be about $1.3 billion yearly. From an estimated total value of $336 billion in 2014, the dairy industry, which entails cattle raring for milk production and all the associated manufacturing processes from the farms to the tables, is projected to hit $442 billion by 2019.

    The thinking is that with the on-going diversification agenda and the push for industrialisation to mitigate the effects of the current economic recession, an initiative in the mould of the DPP could not have come at a better time. For one, it would help slash the nation’s huge import bill for dairy products, while also helping Nigeria claim a share of the $442 billion dairy business by 2019.

    However, for this happen, more players in the dairy business must come on board. Listen to Famurewa: “Other dairy companies can come in or borrow a leaf from us by investing in sustainable business model. We have done what we want to do in Oyo State, but we are not resting on our oars. We plan to extend it across the country because dairy development should be a national thing.”

    Although, the management of the dairy producer recently met with President Muhammadu Buhari and pledged its support for the government and also got endorsement as the preferred partner for dairy development in Nigeria, supportive infrastructure remains key to the success of the initiative.

    Imke de Boer puts it in perspective, saying that for the local dairy industry to grow infrastructure development especially in rural areas is key especially access roads in farming communities.

    Noting that it would be difficult to compare dairy development in the Netherland to Nigeria, which FrieslandCampina has just kick-started, because of difference in climate, she described the DPP as “a very good start”.

    “We came to find out which areas to share our knowledge and expertise to further develop the project. We can’t bring our knowledge to Nigeria and the African society without first understanding what’s on the ground,” de Boer said.

     

    Quality takes centre stage

    It’s FrieslandCampina’s emphasis on quality that earned it the Federal government’s endorsement as preferred partner for dairy development in Nigeria. First, the raw milk come in 10 and 20 litre special aluminium flasks distributed free to the farmers by the company.

    According to its Milk Collection Manager, Mr. Adekunle Olayiwola John, the special flasks, unlike the calabash, are more hygienic, enabling dairy farmers to get the milk to the MCCs in good quality.

    While the Fasola MCC has 7, 000 litres capacity, but collects 5, 200 litres of milk per day, Maya MCC has 12, 000 litres capacity. John said each MCC is equipped with cooling systems that guarantee quality and standard. This is because unlike some crops that can last for a day or two, milk is time sensitive and could get bad in two hours if it is not treated.

    Hear him: “We ensure that within two hours after milking, it should get to our collection centre for test. The challenge is actually at the farm level where you have to be sure that the milk doesn’t contain antibiotic. So we have experts on ground to train the farmers on hygiene and everything they need to know about how to handle cows and milk. So we have tackled quality from cows up till the transporters. Farmers even know when the milk is good or bad.”

    The Milk Collection Manager added that as part of quality control, rapid test is conducted on the milk for adulteration, antibiotic and coloration test right at the collection centre. “When accepted it is poured into the tank for processing and sent to the Bulk Collection Centre in Iseyin, where the milk is lifted to Lagos every three days,” John said.

    He, however, said if the milk coagulates in the process of testing, it means it is not fresh and it is rejected. “If they (farmers) bring milk of three days, we can detect it through test and reject it,” he said, noting that because of strict quality control measures, milk rejection level, which was as high as 7.5 per cent per day when the company started, has reduced to 1.2 per cent per day.