The Nation Newspaper

Category: Issues

  • The youths’ business gamble

    The youths’ business gamble

    Faced with present day realities, many youths are taking their destinies in their hands. They are no longer looking for jobs; they are establishing their own companies, which have potential of blossoming into big enterprises. Assistant Editor CHIKODI OKEREOCHA reports on the inspiring exploits of budding youth entrepreneurs who, against all the odds, are exploiting opportunities in the SME sector.

    Omolere Oiku
    Omolere Oiku

    Despite  her mien, it is easy to see the determination of Omolere Oiku to conquer the business world. At 26, the 2010 Accountancy graduate from the Covenant University in Ota, Ogun State, is already an employer. Three people are in her employ, even as she plans to take more youths off the unemployment market.

    Lery B Designs, which came about through her resourcefulness, specialises in high quality hair extensions, hand-made jewellery, beads and hair accessories. “I want to meet the beauty needs of women in Nigeria and Africa,” she said, exuding a business tycoon’s confidence.

    It was a target she set for herself in 2013 when she set up the business. And two years down the line, Oiku is inching closer to realising the target.

    The uniqueness of her jewellery, made from crystals, corals, German stones and pearls, in line with customer specifications, has made her firm the toast of fashion-conscious women in Nigeria and beyond.

    When The Nation met with the budding entrepreneur at the recently concluded ‘TeamFest Africa 2015,’ she said customer satisfaction has been her unique selling point and one of the secrets of her success so far.

    Oiku said she has her eyes on building a flourishing small business empire in the burgeoning fashion industry.

    TeamFest Africa was a three-day African business exhibition fair, which provided a platform for Small and Medium Enterprises (SMEs) to sell and connect with customers.

    Organised in Lagos by Olsen Decker Nigeria Ltd., the marketing/TV rights owner of TeamFest Africa, the fair provided an opportunity for SMEs and budding entrepreneurs to network and build capacity. It also encouraged existing and aspiring entrepreneurs who cannot afford the cost of exhibition stands to exhibit their products and services free of charge.

    Interestingly, Oiku is not the only budding youth entrepreneur that jumped on the TeamFest Africa platform to take advantage of the bountiful but largely untapped opportunities in the SME sector.

    • Omadide
    • Omadide

    Dennis Omadide, another promising youth entrepreneur, has also taken the arts and crafts industry by storm. In and around Maryland, Lagos, the hub of cane craft business, he is one of the most sought-after cane weavers. His artistic and creative designs have earned him the confidence of customers who daily throng his workshop.

    “I have been in this business for more than 20 years,” he told The Nation, pointing out that “Everybody cannot work in banks or oil companies.”

    That was instructive. While most of Omadide’s peers are probably still roaming the streets in search of non-existent jobs in banks and oil companies, the Delta State-born cane weaver counts himself lucky to have shunned paid employment.

    “Patronage has been good,” he confessed, saying, “We sell some cane chairs under N120,000; some N80,000, depending on what the customer wants. Some people buy sets or singles, depending on the apartment they have.”

    Omadide, who is the Vice Chairman of National Cane Weavers Association, however, said patronage could have been better but for the rising violent campaign by Boko Haram insurgents. According to him, the activities of the Islamic extremists have became a pain in the neck of cane weavers, as products need to be carried to the North where most markets have been shut down. “We only transact the business between the South and the West here. We are selling but not like before,” he lamented.

    He said he and other weavers source raw materials from suppliers most of whom are members of National Cane Suppliers of Nigeria. The suppliers, he said, are in Delta, Bayelsa, and some parts of Edo State. Cane, which is the major raw material, is a non-timber product found abundantly in the bush, especially in the Niger Delta. It can be used to weave any kind of furniture, handicraft and other household articles, from baskets to rocking chairs, baby cots, settees, bridegroom chairs and even mirror.

    Some of the designs made by Omadide easily beat those made by wood, iron and plastic ware manufacturers in aesthetics and durability. Same for paintings made by Lekan Kushimo, another budding entrepreneur, who is into painting and photography. Since 2013 when he made his break, landing a juicy contract to do six large paintings and 60 small water colours for a hotel, the 2002 graduate of Civil Engineering has never looked back.

    Lekan cut his teeth in photography and paintings while in school.

    “I am a photographer and an artist. While I was doing my course, I used to go to a studio behind the engineering department with my friends to draw and paint,” he said, adding that he also visits the Internet to further hone his skills, aside attending a media school for photography.

    Some of the results of Lekan’s personal development could be gleaned from his artistic portrait of the Civic Centre that also encapsulates some of the buildings of 1004, the Nigeria Law School perimeter fencing on Ozumba Mdadiwe Road, and Falomo Ikoyi Bridge, among others.

    Although, he declined to say how much he makes from the business, he admitted that patronage has been encouraging, but could be better.

     

    The long road to the centre stage

     

    For budding entrepreneurs, running a successful SME particularly in Nigeria is no tea party. Their gradual but steady road to fame and fortune has been long and tortuous. For instance, many of them lack finance, which has been identified as one of the major challenges of establishing and running an SME. Because of this, they could not procure the necessary operational equipment and facilities. They literarily squeeze water from stone, with most of them constrained to rely on personal and family funds to carry out their businesses.

    A survey conducted by the Nigerian Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) showed that there are 17.28 million MSMEs in Nigeria employing 32.41 million people and accounting for an estimated half of Nigeria’s Gross  Domestic Product (GDP).

    However, access to affordable finance remains one of the major challenges inhibiting the MSMEs’ growth and development. According to the CBN, only 4.2 million MSMEs have access to finance. Because of banks and other lending institutions’ aversion to lending to small businesses in the informal sector, about N9.6t is said to be needed to bridge the financing gap in the MSMEs sector.

    That is not the only disincentive. A lot of them are weighed down by the country’s harsh operating environment. For instance, despite their small size, SME operators not only contend with excessive taxation, but also pay multiple taxes to the different tiers of government. They also struggle with government’s policy inconsistencies, which affect their projections.

    The huge infrastructure gap in the country has not helped matters either. Apart from dilapidated roads, which push up the cost of moving products by SMEs to areas where they are in high demand, the cost of acquiring and maintaining generators to power their businesses in the face of poor or even non availability of electricity has been a burden too heavy to bear.

    Other challenges that stand in the way of the growth and development of start-ups include bad management, which has to do with poor leadership, inadequate training, lack of succession plan, poor record keeping, no strategic or business plan, and lack of entrepreneurial skills, among others.

    The General Manager, Enterprise Development Centre (EDC), Pan Atlantic University, Mr. Olawale Anifowoshe, could not agree less on the big challenge posed by quality of leadership. He said some owners of start-ups are not properly trained and mentored into management roles.

    This, he said, explains why finding the right skill is a big problem for most SMEs, as they could not recruit the best people for the right roles.

    Anifowoshe, who spoke at the recent ‘SME Empowerment Innovation Challenge East and West Africa’ organised by HIIL Innovating Justice and Ford Foundation in Lagos,  however, said the Centre supports entrepreneurs and enterprises to strengthen their skills and abilities. It also helps them grow businesses that generate income, sustainable economic growth and impact.

    However, centres in the mould of EDC are private sector led interventions intended to help bridge the gap created by successive governments’ failure to harness, engage and unleash the innate productive potentials of youths for national development. This is despite the fact that Nigeria boasts a predominantly youth population of over 70 million most of who are unemployed.

    Director General/CEO, Nigerian Youth Chamber of Commerce (NYCC), Comrade Peter Ayim, noted that the concept of entrepreneurship, though an emerging phenomenon, is fast gaining momentum and acknowledged as the critical pathway to growing the economy, generating jobs and creating wealth thereby combating and reducing unemployment, hunger and poverty.

    • Ayim
    • Ayim

    Comrade Ayim, however, expressed regrets that although policy makers seem to appreciate the prospects, potentials and positive impact of entrepreneurship, it is evident that they have not been able to develop a result oriented and sustainable policy framework and intervention mechanism targeted at supporting the accelerated promotion and development of functional youth entrepreneurship in Nigeria.

    He told The Nation that though government has demonstrated commitment to promoting youth entrepreneurship through short term intervention programmes, most of the intervention programmes are limited in scope and does not benefit a broad spectrum of aspiring youth entrepreneurs to facilitate start-ups or assist existing youth entrepreneurs in expanding their businesses.

    Citing the YouWIN programme, an acronym for ‘Youth Enterprise with Innovation in Nigeria’, the NYCC DG said, for instance, that “Such short term measures are usually handouts and tokenism that cannot in any sense facilitate and grow a functional start-up or micro-enterprise.”

    ‘YouWiN’ is an innovative business plan competition launched by the Federal Government with the aim of creating jobs by encouraging and supporting aspiring entrepreneurial youths to develop and execute business ideas. The initiative hopes to trigger a ripple effect that would inspire the creative and entrepreneurial spirit of millions of youths across the country.

    The scheme is also expected to help identify and empower young Nigerian entrepreneurs with the technical skills and capital needed to start or grow a business such that they could create employment for themselves as well as for others in different areas. But Comrade Ayim argued that the scheme is limited in scope.

    He also decried the orientation of state and non-state actors who he said are in a hurry to jumpstart employment policies of state that are only targeted  at  giving  grants and  soft  loans  to  youth  to keep  them  off  the  street  and  engage  them  with  an  activity they don’t understand its guiding philosophy and modus  operandi. He insisted that such attitude must be discouraged.

    Hear him: “Entrepreneurship as it is currently being practiced should not become government’s bait to lure the youth only to maintain law and order. For them, the higher the number, the higher the score card.

    Entrepreneurship policies are not intended to build wealth in Nigeria but used as a criteria to boost government performance evaluation.

    This could be seen in the number of failed schemes in Nigeria youth empowerment drive.

    Ayim identified another obvious gap in the system as the lack of synergy between the public and the private sector working together to achieve a common objective of promoting the development of youth entrepreneurship. “The only seeming existing synergy recently fostered is the public/public synergy between the Industrial Training Fund (ITF), Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) and the BOI,” he pointed out.

     

    Youths see opportunities in challenges

     

    For the new kids on the entrepreneurship block, it is survival or nothing. What their peers see as challenges, they see as opportunities. Many of them see the opportunities in the SME sector too tempting and rewarding to ignore and so refused to be bogged down by the several hurdles on the way to greatness. They heed the wise counsel of starting small and growing big.

    Ocheni Onuche Simon is one of them. With a paltry N1, 250 seed capital, the Computer Science graduate from the University of Abuja, is today the proud owner of a flourishing manufacturing outfit that produces the ‘Kasso Flakes-Soaking Wakkis.’ “My business kicked off on June 7, 2013, with an initial capital of only N1, 250.00 during my service year at the Nigerian Army, Abuja, where I served. At the Headquarters of the Nigerian Army, I had a lot of customers and that made the business to spread to other arms of the Armed Forces,” he said.

    More than anything else, it was the innovativeness, ingenuity and creativity that the budding entrepreneur brought to bear on the business that should challenge other unemployed youths. Apart from the fact that Ocheni’s products are indigenous and are found virtually in every home. While every Nigerian knows it as garri, Ocheni and his company gave it the name “Kasso Flakes-Soaking Wakkis,” which simply means cassava only flakes.

    He explained it thus: The name ‘soaking wakkis’ simply means “soak and eat” with varieties such as meat (i.e Kilishi), milk, sugar and groundnut. Others are garri with groundnut only, garri with groundnut and sugar, garri with Kulikuli, better known as ground nut cake.  This is also in addition to our premium product “Sollo ‘G’, derived from swallow garri. This category is best for dough i.e Eba.”

    The same ingenuity and creativity also saw Amaechi Goodluck, a 28-year old 400-Level English/Christian Religious Knowledge student of Adeniran Ogunsanya College of Education, Lagos, establishinmg a strong foothold in the education sector where she is one of the most sought after private tutors. No fewer than nine pupils aged three to fourteen from different parents are currently receiving tutorials from her for a fee.

    Goodluck, from Abia State, told The Nation that her ultimate ambition is to set up a thriving private school. She said opportunities abound in the education sector for unemployed youths wishing to take up part-time or full time jobs as private tutors. She stated that from crèche to nursery, primary to secondary and even tertiary level, private tutors are in high demand to fill the gap left by inadequate and sometimes unqualified teachers in various levels of the education sector.

    She said although, she currently concentrates on nursery/primary pupils, secondary school students as well as those in adult education classes, she hopes to incorporate university undergraduates when she completes her degree programme. She said beyond certificate, passion, commitment, diligence and patience are qualities required for anyone to excel in any small business of his or her choice. BoI’s interventions.

    •Olaoluwa
    •Olaoluwa

    The Bank of Industry (BoI), Nigeria’s foremost development finance institution, says it is not unaware of the challenges facing operators in the SME sector. Its Managing Director, Mr. Rasheed Olaoluwa, said BoI recognises the Micro, Small and Medium Enterprises (MSMEs) sector as the engine of economic growth because of its potential to create jobs, boost production, and reduce poverty hence it has come out with intervention programmes to reposition the sector. Some of the interventions that stand out include the signing of a service agreement with 122 Business Development Service Providers (BDSPs) to address the challenges of poor packaging of loan requests and non-bankable business plans, which are believed to be responsible for the low level of financial support to the sector; partnering Grow Africa Equity Partners Limited to raise a $60m Venture Capital Fund (VCF) for SMEs.

    There is also the continuation of sector-specific intervention funds by the Central Bank of Nigeria (CBN), Ministry of Agriculture, Solid Minerals and others; managed funds from various state governments and foundations; long-term loans at very low interest rates from multi-lateral/international development institutions.

    Despite these interventions, Comrade Ayim insists that “there is the urgent imperative for a functional public/private partnership that will facilitate a robust, dynamic and sustainable enterprise development eco-system in line with contemporary trend and global best practices in the promotion and development of youth entrepreneurship.

     

  • TSA: Sack fever grips bank workers

    TSA: Sack fever grips bank workers

    There is palpable fear in the financial services sector, especially the banking industry, over possible job losses. This may be because of the serious liquidity problems facing the banks, following the implementation of Federal Government’s Treasury Single Account (TSA) policy, TOBA AGBOOLA reports.

    For workers in the financial services sector, especially banks, these are challenging times. With the implementation of Federal Government’s  Treasury Single Account (TSA) policy that mandates all Ministries Departments and Agencies (MDAs) to remit revenue into a single account, many bank workers have become restless.

    For them, the fear of job losses, following serious depletion of liquidity in the banks as a result of the policy, is the beginning of wisdom. There is widespread apprehension that the policy could lead to rationalisation of workers.

    Such  apprehension may have been fuelled  by the rush by MDAs, in an attempt  to beat the September 15 deadline set by Secretary to the Federal Government, to pull out N1.2trillion, about $60billion from commercial banks to the Central Bank of Nigeria (CBN). Also, no fewer than 20,000 accounts were said to have been closed.

    The effect of such huge remittance, it was learnt, was that commercial banks’ balances with the CBN usually earmarked for foreign exchange or bond purchases plunged from N73billion to N4.86billion. Already, banks are facing liquidity squeeze as the inter-bank, few weeks back, halted trading for three consecutive days due to sharp liquidity decline in the system. This was attributed to the implementation of TSA policy.

    Expectedly, the liquidity decline has triggered fear within labour circles, with bank workers jittery over possible rationalisation.

    Factional President, Nigeria Labour Congress (NLC), Comrade Joe Ajaero, says any policy that could lead to job loss does not only negate the quest for economic recovery, but also hinders national development. “Without employment, any policy geared towards empowering the majority and lifting them out of poverty, unfortunately, becomes a mirage,” he said.

    According to Ajaero, anti-corruption, employment creation and eradication of poverty are part of the cardinal programmes of this administration, which it has re-emphasised since assumption of office.

    While noting that these have been the expectations of many Nigerians, he said anything short of this would automatically force the organised labour to raise eyebrows.

    President, Association of Banks, Insurance and Financial Institutions (ASSBIFI), Comrade Sunday Salako, is no less worried.

    He said retrenching workers would worsen the country’s economy and bring untold hardships on the people, especially those employed in the banking sector. He advised banks not to be in a hurry to axe jobs because government can reverse the policy if it becomes harmful to the economy.

    “Employers should not be in a hurry to cut jobs just because of a single policy. Before the policy, banks were making money and declaring fabulous balance sheets. The government can look at the policy and reverse it if they believe it can harm the economy,” he said. He however, said the huge sum of N1.2trillion moved out of the commercial banks to the CBN because of the TSA could affect the economy.

    According to Salako, anything affects the liquidity of banks will also affect their ability to lend to operators in the economy. He said the only agent that could kick-start the economy and make it robust is the banking sector and that if such money was taken from them and given to the CBN to keep, it was capable of hurting the banks.

    Salako however, said ASSBIFI is yet to advise government on the TSA because the union believes that the goal of the policy was to fight corruption and rebuild the economy. He said: “We want to be fair to the government, maybe in the process of finding a way to tackle corruption, TSA is the measure recommended to them. But with the policy and seeing the reactions of Nigerians, they can look at these reactions and try to harmonise the best way to move the country forward if the policy is not yielding the desired result.”

    Similarly, the National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE) urged the Federal Ministry of Finance to workout modalities on the implementation of the TSA that would not lead to job losses in the financial sector.

    The group, while speaking to reporters in Lagos, described the policy as a threat to the existence of banks due to the poor saving culture of Nigerians, low income level and high inflation rate which make total disposable income of the average worker worthless.

    NUBIFIE advised the Federal Government to think of better ways of creating jobs rather than creating a policy that will lead to job losses.

    Its National President, Comrade Danjuma Musa, said his group will resist any attempt to axe jobs due to the implementation of the policy, adding that as laudable as the objectives of TSA may sound, the blanket directive to warehouse all funds in CBN will have far reaching implication on the economy.

    According to Musa, the policy will surely slow down business transactions because most businesses in the country depend on loans to finance their projects. The pronouncement, he said, sent shock waves to  the financial services industry due to the weak economy and the low capacity of banks.

    “As a union, we sympathise with the banking community due to the effect of the Federal Government’s decision in its daily operations. We recall that during the consolidation and merger policy implementation, the effect of that policy was that it wiped out many banks from existence and brought about serious job losses,” Musa recalled, insisting that members of the group will not condone job loss this time.

    An economic analyst, Funso Adeyemi, said although the policy was good, as it would curb corruption in the system, it will also worsen the existing high unemployment rate in the country. He said already over 4, 000 workers had been laid off in public and private sectors in the last few weeks.

    According to the Managing Director, First Rit Nigeria Limited, Mr. Eric Umezurike, the purpose of allowing MDAs to operate separate accounts with commercial banks in the past and remit revenue generated after meeting their recurrent expenditures was to encourage workers of such agencies to amass wealth at the expense of their compatriots. He stated that it is reasonable that government has realised its mistake through the exemption of some agencies.

    The government recently exempted 12 agencies including the Nigeria National Petroleum Corporation (NNPC) from abiding by the policy.

    In spite of this, Umezurike said the entire policy was a decision taken without thinking of the mechanics of how its implementation will work.

    He expressed worries that bank workers handling public accounts may be retrenched, as there will be no need to retain them in service.

     

    Bank workers speak

    Some workers who pleaded to remain anonymous, said the directive raised fears of possible retrenchment in the sector. They noted that contrary to Federal Government’s promise of creating over three million jobs yearly, the new policy will invariably lead to job losses in the financial sector and the federal agencies.

    It is feared that agencies whose workers may be affected by the policy include the CBN, Securities and Exchange Commission (SEC), Corporate Affairs Commission (CAC) and the Nigerian Ports Authority (NPA).

    Others are the Federal Airport Authority of Nigeria (FAAN), Nigeria Shippers Council (NSC), NNPC, Federal Inland Revenue Service (FIRS), and Department of Petroleum Resources (DPR), among others.

    According to Mr Justus Oke, a worker with one of the old generation banks in Lagos, bank liquidity has continued to drop as many banks are moving money to the CBN in compliance with the government’s directive, even as banks continue to provide funding for advance payment for foreign exchange purchases.

    A public affairs analyst, Mr. Victor Ohai however, said the policy will strengthen banks to source for funds rather than relying on deposits from government agencies;  banks will be forced to adopt strategies of generating revenue by granting financial support to small scale industries, which are the engines of any economy.

    Banks must support the agric sector by granting loans to farmers at low interest rates so as to enhance the development of the agric sector and by extension, achieve self-sufficiency in food production. By next year, there will be a paradigm shift away from the past when banks relied on public sector funding.

    He further said the banking sector will focus on retail banking, which requires mass employment and not retrenchment of workers.

    Another analyst, Mr. Odili Ewepa, also said TSA will block leakages and enhance monitoring of revenue accruing to the CBN. He called for electronic-collection whereby all payments into the treasury account is reflected simultaneously in the budget office and offices of other relevant government agencies.

    Ewepa further stated that TSA will ensure that nobody utilises public fund without appropriation as it is the practice in other parts of the world. He dismissed insinuations that the policy will lead to retrenchment of workers in banks as baseless, noting that it will make banks come out of their comfort zone.

    According to him, the era when a worker would be appointed assistant general manager because he or she was able to attract a ministry to deposit funds in the bank is now over. Ewepa said with the present situation, banks will concentrate on developing small scale enterprises as practised in other parts of the world such as China and Indonesia.

    President Muhammadu Buhari, on assumption of office,  ordered that all revenues be paid into the TSA as a way to stem corruption and aid transparency. According to him, the scheme would automate revenue collection of all MDAs directly into the Consolidated Revenue Fund account of the CBN.

    The TSA was aimed at promoting transparency and facilitating compliance with Sections 80 and 162 of the 1999 Constitution.

    Independent Revenue e-Collection Scheme is implemented under TSA initiative, which requires that government revenue collection is put into a single account for proper cash management.

    Experts say the implementation of TSA would help curb corruption in the system, urging workers to embrace the new policy. But as it turned out, the closure of MDAs’ accounts domiciled in commercial banks and transferred to the Federation Account has caused huge revenue loss by banks. The fear now is that this would in turn, affect workers in form of right-sizing.

    However, the Federal Government has said that it would relax its rule on the TSA implementation to give special attention to security agencies.

    Speaking in Abuja  when he received the Inspector-General of Police (IGP), Solomon Arase, in his office, last week, the Accountant- General of the Federation (AGF), Ahmed Idris, said special attention would be given to security agencies in the implementation of the policy in view of the recognition of security of lives and property as one of the cardinal agenda of President Buhari’s administration.

    During the commencement of implementation of the policy, the AGF had insisted that there was no exemption for MDAs.

    The AGF did not give details of what the special attention would entail, he identified the security institutions that would benefit from the concession.

    They include the Police and the Armed Forces to enable them continue to successfully deliver on their respective mandates of securing the country.

    The AGF said his office was aware of the enormous responsibility the security agencies were facing in the fight to contend with armed robbery, insurgency, kidnapping and other societal vices.

    Idris said: “The government will ensure that the release of money required for the execution of all special operations aimed at overcoming these evils were not in any way affected by the implementation of the TSA.”

    He reassured the MDAs that the policy on the TSA was not meant to hamper their activities, but to entrench a more transparent, efficient and robust management of public funds towards the speedy realisation of government plans and programmes.’’

    He explained that the days of carrying money in sacks to payment points were gone, adding that the TSA would complement the existing electronic payment platforms.

    Some revenue generating agencies have made cases for the policy to be relaxed to accommodate their peculiar needs towards discharging their responsibilities.

  • Search for permanent solution to fuel scarcity

    Search for permanent solution to fuel scarcity

    For so long, Nigeria has depended on imported petroleum products, exporting crude oil and  importing its finished products, to run the engine of her national economy. The Nigeria Extractive Industry (NEITI) says  about N3.6trillion was frittered by the Federal Government on the importation of premium motor spirit (PMS) in six years. It is against this background that the approval of about 65 modular refineries by the Federal Government becomes significant. Stakeholders in the oil and gas sector say if the refineries go on stream, they will have a multiplier effect on the  economy, ending perennial fuel scarcity, turning the country into a hub of finished petroleum products for the West African sub-region and creating jobs, writes AKINOLA AJIBADE.

    Nigeria is a member of the Organisation of Petroleum Exporting Countries (OPEC) pumping an average of about 2.3million barrel of oil per day (bpd) to the group’s daily basket. But she is hardly able to meet her daily domestic fuel demand of about 35million litres.  The reason for this is not far fetched.

    The three refineries in Port Harcourt (1&2), Warri and Kaduna hardly produce to total installed capacity of refining 445,000 bpd. Thus, the need to  import finished petroleum products to augment the shortfall in domestic fuel need becomes inevitable.

    With falling prices of crude oil in the international market, Federal Government earnings have dipped. The situation has also forced policy makers to go back to the drawing board. One of the result of these brainstorming sessions by the PresidentMuhammadu Buhari’s administration is the grant of approval to about 65 companies to operate modular refineries, as part of efforts to increase fuel production, ease fuel scarcity, which has become a perennial problem in Nigeria.

    Though details of the companies that were approved to set up modular refineries are still sketchy, sector analysts say the approval is a step in the right direction. This is because for the first time, the Federal Government is showing more interest in the operation of modular or non-conventional refineries in the country to address the twin issue of perennial fuel scarcity and depletion of foreign exchange (forex) on the importation of PMS.

    Conceived by the Federal Government to serve as a back-up to the local refineries in the event that they suffer technical problems and stop production, the idea of modular refineries will in the short-term help assist in reducing fuel scarcity.

    Incentives that would boost modular refining operations in Nigeria include guaranteeing of 100 per cent crude oil feedstock for all refiners for at least 10 years; discounted price of crude oil for domestic consumption; a minimum of 60 days credit for each cargo of crude oil

    Prior to this period, stakeholders including the Federal Government, the Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Resources(DPR) and oil marketing companies, among others, in the value chain have been advocating for the establishment of modular refineries as part of efforts to ensure that Nigeria meets her domestic fuel needs. Also, calling for the establishment of modular refineries was the Joint Task Force (JTF), an agency charged with the responsibility of monitoring the waterways in the Niger-Delta region in order to check crude oil theft.

    At forums organised by both the government and private sector operators in the oil industry, the issue of modular refineries had always stood at the centre of discussion.

    The discussion was borne out of the need to allow smaller refineries to operate in order to  complement the efforts of state-owned refineries that have for long been grappling with problems such as low output, failure to meet the growing needs of users of petroleum products, and excessive spending of tax payers’ money on turn around maintenance (TAM).

    Other problems, which made stakeholders to call for the establishment of modular refineries include the huge bills by the government, as a result of sourcing for spare parts from the Original Equipment Manufacturers (OEMs) abroad in order to make the refineries work and further reduce importation of fuel into the country.

    Even though the refineries are believed to be working at 60 per cent capacity, with the figure expected to rise from  90 per cent to 100 per cent soon, barring any unforeseen circumstances, the refineries are yet to produce fuel that would meet the requirements of domestic users, which, according to the NNPC, stands between 39 million and 40 million litres  per day.

    To boost fuel production and meet local demands for the product, the government has decided to tinker with the idea of modular refineries.

     

    What are modular refineries?

     

    According to the search engine, Google,  “a modular refinery is a processing plant that has been constructed entirely on skid mounted structures. Each structure contains a portion of the entire process plant, and through interstitial piping the components link together to form an easily manageable process.”

    The Bureau of Public Enterprises (BPE) further defined modular refineries as refineries whose parts or equipment are constructed in modules, which are designed to be quickly and easily transported to any parts of the world.

     

    Modular refineries in Africa

     

    The idea of modular refineries is increasingly becoming popular in Africa. Some countries in the continent have already set up smaller refineries to complement the regular or conventional ones. The Nation gathered that countries such as Senegal is running a modular refinery with a capacity of 27,000bpd capacity, Cameroon has a modular refinery with 42,600bpd; Congo, 21,000bpd; Niger Republic, 20,000bpd; Chad, 20,000bpd; Zambia, 34,000bpd, and Gabon, 25,000bpd.

    A Professor of Energy Economics, University of Ibadan, Adeola Akinnisiju, said the idea of modular refineries is gaining ground in Africa, adding that it would be good if Nigeria can explore opportunities in modular refinery for growth.

    He said: “A few African countries are refining to meet their needs through the regular and modular refinery models. Apart from oil-producing countries such as Algeria and Libya, which refine 499,000bpd and 380,000bpd, respectively, South Africa and Egypt also do same with 626,500bpd and 1,102,550bpd, respectively.”

     

    Capacity/location

     

    Industry operators say modular refineries come in a variety of sizes with capacities that range from 500 to 20,000 bpd. The Deputy Director, Engineering and Standard, DPR Engineering, Mr. Alfred Ohiani, said modular refineries are made to refine smaller proportion of crude oil into petroleum products, adding that the refineries are best suited for remote locations or where marginal oil fields are located.

    Ohiani, who spoke during a one-day programme organised by the BPE in Abuja to sensitise Nigerians on the importance of modular refineries in the oil and gas industry and the country in particular, said such refineries could be established in rural and semi-urban areas in order to boost their economic activities.

    Also, the  Chief Executive Officer, Jehata Nigeria Limited ( owners of Abuja Power Station in Abaji) Jameel Jammal, said modular refineries are best suited for remote location, adding that his company is building one in Abaji to boost production of petroleum products in the area.

     

    Cost-benefit analysis

     

    It was gatherd that modular refineries can be set up with between $1m and $15m depending on their capacities, as against conventional refineries that require billions of naira to set up and maintain.

    Jammal said an average modular refinery costs between $2million and $5million, depending on the size, adding Jehata Nigeria Limited is building a modular refineries with 25,000 capacity in Abuja.

    He, however, said some modular refineries require a lot of money to operate, due to their complex nature. According to him, the modular refineries, which  Jahata Nigeria Limited is building in Abuja have complex nature, adding that it will have more than five different lines of production.

    This, Jammal said, means that his company would spend a lot  of money to bring the project to fruition.

    “There would be kerosene, PMS, AGO (diesel), jet fuel, and gas section. It will be a big project covering a large expanse of land,”’ he said.

     

    Socio-economic benefits

     

    The immediate past Commander, JTF, Major General Emmanuel Atewe said modular refineries would help in creating jobs for people. He said the idea would create direct and indirect jobs in the country.

    According to him, many youths in the oil-producing region of Niger-Delta, are committing crimes because they do not have jobs.

    He said areas such as Gbaramotu, Alakiri among others in the region, boast of illegal refineries, adding that such refineries could be converted into modular refineries to facilitate socio-economic growth.

    He said: “JTF, under my watch, has visited many communities in the Niger-Delta region. During the visit, we discovered that there is huge unemployment in the region. Many of the residents are jobless because their lands and waters have been destroyed by spills from vandalised oil pipelines. Farming and fishing are the two traditional occupations of the people of Niger-Delta, and inability to get jobs to do made them to indulge in criminal activities.”

    Atewe said when modular refineries are established in the region, its inhabitants would not only have jobs to do but further help in  contributing to the socio-economic growth of the area.

    The Deputy Director, Engineering and Standard, DPR, Engineering, Mr. Alfred Ohiani, said modular refineries would help create jobs for professionals from different field of endeavors aside improving the production of fuel in the country.

     

    Modular vs conventional refineries

     

    Both are serving the same purpose of refining crude oil into petroleum products, but differ in some aspects. The differences between modular and conventional refineries are in their configurations, production capacity, cost of investment, among other variables.

    Jammal said modular refineries are mostly installed on topping or hydro skimming plant, while the configuration of conventional refineries take the form of topping, cracking and hydro skimming. He said conventional refineries can process different kind of crude, while the modular refineries cannot.

    He said in modular refineries, the refining units may operate independently or be interconnected, or a combination of both aspects. According to him, the cost of installing equipment used in a modular refinery is small, adding that the rate of recovering money spent in setting up a mini-sized refinery is faster than a conventional refinery. He said Nigeria can operate  modular refineries alongside the conventional refineries in order to produce fuel that would meet the needs of its over 170million population.

     

    Challenges

     

    In spite of its overwhelming advantages, the process of setting up modular refineries, is not without hiccups or problems. Like previous initiatives, modular refineries are going to suffer problems such  as human, material and community attacks.

    Akinnisiju said certain challenges are bound to hinder the operation of modular refineries. According to him, such challenges are tied to political, land, funding, crude feedstock and market viability.

    He said: “These refineries are going to be located mainly in the Niger Delta, and the state governments may want to get involved because it is a high revenue earner, which grants only 28 days credit cycle.

    “Also, refinery requires huge land, and there may be issues with acquisition from the land owners and to cap it all, refinery of any capacity requires huge capital. You need at least $30,000 to produce  a 1,000bpd, which is a huge sum of money.“

    He said modular refineries require a strong market to survive, and provide multiplier effects on the economy.

    One of the major problems facing modular refninery project is dearth of funds. Banks are not ready to make funds available for the project. Besides, they are not ready to assist by way of standing for the company as guarantor

    “If there is no guaranteed market, we will face a similar situation like what is happening in the power sector, where meter manufacturers have manufactured millions of meters, but the distribution companies refused to take them,” he said.

    Also, in the area of funding, he noted : “some modular refining equipment manufacturers in the United States (U.S.) can partner with the licencees by contributing their equipment as equity investment in the project, while some can work with the U.S. Export-Import, EXIM Bank to finance their equipment.

    Jammal said problems such as funds, bureaucratic bottlenecks, infrastructural deficit in the host communities, among others, are responsible for the slow pace of work at the proposed power station and refinery project of the company.

    He said the resolve of the company to build the power station and the refineries was borne out of the desire to improve the energy needs of Nigerians, lamenting that funds have hindered the project.

    He said local banks have refused to show interest in the modular refinery and other projects, by not lending to the company.

    “One of the major problems facing modular refninery project is dearth of funds. Banks are not ready to make funds available for the project. Besides, they are not ready to assist by way of standing for the company as guarantor. When you are bringing foreign investments into the country, you need a local bank to stand for you to guarantee the foreign loans you are going to use for the project.  But, this is not forthcoming,” he said.

    Jammal observes that owners of modular refineries are going to have problems with land, stressing that his company is finding it difficult to get government’s approval on the land earmarked for its refineries

    “We have been waiting for approval of the land by the management of the Federal Capital Territory.  We want the Minister of Federal Capital Territory to intervene to get the land. We are not asking for the land for free.  The communities in which the land is located are cooperating with us. They have welcomed us but getting approval is a problem. Despite the fact that Jamata Nigeria Limited is planning to develop Abaji and its environs by citing its power station and refineries in that community, the company is yet to get approval on the land earmarked for the project. Many firms are likely going to experience similar problems too,” he added.

     

    Ways forward

     

    Sourcing for funds to execute certain critical projects is now a problem in Nigeria. The decline in the international prices of crude oil, and other issues in the global petroleum industry, makes it difficult for some oil and gas operators to get funds from financial institutions in the country and beyond. Experts said it is imperative that investors in modular refineries collaborate with one another for growth.

    The President of Nigerian Chapter, International Association of Energy Economists, Prof Wunmi Iledare, said the cost of funding businesses in the sector is high, arguing that financial institutions are skeptical about advancing loans to businesses whose rate of returns is low. He said collaboration among investors in oil and gas projects is important in this regard.

    Jameel said the provision of collaterals by the Federal Government would help in stimulating the growth of operators in the oil and gas sector,  urging  the Central Bank of Nigeria(CBN) to provide collaterals for ease of take-off of modular refineries.

    Besides these guarantees, he said other incentives that would boost modular refining operations in Nigeria include guaranteeing of 100 per cent crude oil feedstock for all refiners for at least 10 years; discounted price of crude oil for domestic consumption; a minimum of 60 days credit for each cargo of crude oil, at least for the first five years of operations; while the supply of crude oil feedstock should commence as soon as DPR certifies mechanical completion of each new plant.

    A few African countries are refining to meet their needs through the regular and modular refinery models. Apart from oil-producing countries such as Algeria and Libya, which refine 499,000bpd and 380,000bpd, respectively, South Africa and Egypt also do same with 626,500bpd and 1,102,550bpd

    Others are guarantee of 100 per cent refined products off-take by government (NNPC); government guarantee of foreign loans for domestic companies wishing to set up refineries; plants should be granted tax exemption for at least three years from date of commencement of operations; plants should be exempted from import and export duties and value-added tax (VAT) for at least five years; plants should enjoy accelerated capital allowance of about 95 percent and the percentage of assessable profit for the purpose of capital allowance recovery should be 70 per cent at most.

     

  • Concerns over dissolution of APCON council

    Concerns over dissolution of APCON council

    ALL is not well in the advertising industry following the dissolution of board of Advertising Practitioners Council of Nigeria (APCON) through a circular dated July 16, with reference number SGF.19/S.81/XIX/964 and  signed by the Head of the Civil Service of the Federation, Danladi Kifasi.  The order, according to players, has thrown spanners in the works of the advertising regulatory body.

    According to the circular, the Chief Executive Officer/Registrar has been empowered to run the affairs of the agency. Considering that the council was inaugurated on March 26,  industry observers believe such directive contravened the laws that set up APCON, and was a flagrant disregard for advert vetting guidelines. They also said it could lead to advertising violations and non-adherence to the provisions of the code of advertising practice by agencies and practitioners.

    Besides, industry sources said the order has put the new advertising reform, which had been gazzetted, in great danger. The reform, accordingly, is to protect the interest of Nigerian-owned advertising businesses while encouraging foreign partners to invest more in the industry and its people.

    In addition, the reform also requires agencies to register either as individuals or corporate while also making provisions for firms, which want to run an in-house agency to register. It also states the amount of equity a foreign agency can own in a Nigerian-owned agency and how they can register as players in the market. But with no council in place, to enforce the gazzetted reform, those who have complied, it was learnt, are disgruntled that those who failed to comply are doing business without being challenged, hence, making those who have complied “look like fools”.

    “The media needs to draw the attention of government to the dangers of merging APCON.  After APCON had gone in limbo for eighteen months, a new council was convened and then a new blanket was given. Everybody has to now have to lie low and it’s like back to incommunicado of sort. It doesn’t help the industry”

    With the way APCON operates, it is understandable why enforcement has been in limbo. Because of the nature of the industry, advertising campaigns for the public are expected to be decent, not based on falsehood, conscious of consumers’ health, not disparaging.

    The council also makes up the Advertising Standards Panel (ASP), which like APCON has a responsibility to consider and approve advertisements prior to exposure. The council members drawn from various sectoral groups in advertising are: Advertising Association of Nigeria (ADVAN), Association of Advertising Agencies in Nigeria (AAAN), Broadcasting Organisations of Nigeria (BON), Newspaper Proprietors Association of Nigeria (NPAN), Outdoor Advertising Association of Nigeria (OAAN), Consumer Protection Council (CPC), National Council of Women Societies (NCWS), Central Bank of Nigeria (CBN) and Federal Ministry of Health (FMH).

    With the dissolution of the council, many campaigns are run without approval; and there are fears that the advertising audience may have been exposed to materials that are offensive.

    “The council has not been able to enforce industry guidelines; the industry reform is under threat. This is the second time in two years the government is making such an error. You know the industry was in limbo for almost 18 months,” the President of Association of Advertising Agencies of Nigeria (AAAN), Kelechi Nwosu, told The Nation last week.

    Another industry source, who pleaded anonymity, said: “The industry reform has been gazzetted, but it cannot be enforced with the present state. ASP cannot meet and most of this function is being performed by APCON registrar, which is ultra vires. Installation of fellows of advertising is on hold and the corporate license under the new reform cannot take off.”

    With no committees and panels statutorily set up from member organisations in the council, the Permanent Secretary of the Federal Ministry of Information instructed APCON boss to perform its functions in a letter dated July 16. But industry players feel that a robust input from the council will ensure a sustainable growth and effective compliance with code of advertising practice.

    The Federal Government, under President Goodluck Jonathan,  appointed Ngozi Emioma, a non-APCON fellow, as chairman of the council two years ago on the expiration of Lolu Akinwunmi’s tenure.  With no council in place, the regulation of advertising was in limbo for almost 18 months. During the period, political advertising campaigns flouted code of advertising practice.

    In a joint statement  by the Heads of Advertising Sectoral Groups (HASG), which include ADVAN, AAAN, MIPAN, OAAN and BON,  Emioma’s appointment  on April 23, 2014, was said to have contravened Act of 1990, which established APCON.

    The statement, which was addressed to then Chairman, Senate Committee on Information, Senator Enyinnaya Abaribe, said: “By virtue of the provisions of Section 1 (i) of Schedule 1 of the APCON Act 1990, only persons, who are advertising professionals are eligible to be elected as members of the Governing Council. Section 2 (b) said a chairman, who shall be a distinguished fellow of the profession, is to be appointed by the President, Commander-in-Chief of the Armed Forces. From the above it is trite that non-advertising professionals are not eligible to be appointed or inaugurated as members of the Governing Council of APCON.”

    Under his watch, the 2015 election witnessed the worst of advertising campaigns. One of the most controversial was carried on the front page of Punch Newspaper  against  President Muhammadu Buhari, which allegedly violated the advertising code.

    “In obvious disregard of the advertising code and ethics of APCON (Advertising Practitioners Council of Nigeria) and the AAAN most of these political advertisements have been exposed without going through the vetting procedures and consequent approvals from the Advertising Standards Panel (ASP) of APCON. Our concerns are that the professional values of the advertising practice and indeed, public sensibilities, as well as the very stability of the polity, have been severely undermined by the continued character assassinations, wanton abuses, unrestrained attacks, threats and counter threats that have become the bane of the political communication building up to the elections,” Nwosu said.

    He continued:”We would all become losers, if the continued improper politicking; unbridled bloodlust for power overheat the system and tilt the polity into chaos and anarchy. Then there would be no political prize to be won only reversals and crises that would seek to prise us apart as a nation and plunge our generation and possibly those to come into a dark age. These are trying times for our dear nation, which demand a high level of maturity, tact, and discipline from everyone, the association mentored.”

    Also,  APCON Registrar Alhaji Garba Bello-Kankarofi, in the heat of the last political advertising campaign, said he was worried by the pedestal, combative, provocative, insensitive messages, language and style of many of the campaign communications during th electioneering period.

    He further noted that given the tendency of marketers (in this case, political candidates and their supporters) to abuse their freedom of speech and engage in spurious promotional campaigns, that exploit the public and undermine societal harmony and wellbeing, there is a need for the enactment and enforcement of various regulations to check the excesses. These, he noted, will protect the public from unsavoury and unwholesome communications.

    Although since the election ended, there has not been notable cases of violation, but APCON has expressed the fear that the absence of a council could lead to deliberate misconduct among practitioners.

    While the absence of a council remains a major concern, the fear remains speculations that the regulatory body may be scrapped or merged. This fear was fueled by the statement by the 19-member transition committee set up by President Buhari, when he was newly elected, that it will decide the fate of the Steve Oronsaye’s panel and other similar reports. The report proposed ways of reducing the cost of governance and recommended the merger of some federal institutions and the scrapping of others as a way of cutting public spending.

    Some of the institutions recommended and approved by the Federal Government for merger included the Nigerian Airspace Management Agency, the Nigerian Civil Aviation Authority and the Nigerian Meteorological Agency. It also approved the scrapping of the National Poverty Eradication Programme and the Fiscal Responsibility Commission, among others.

    The major plank of the Oronsaye report is that the federal public service is inefficient, ineffective, bloated, too heavy and full of duplicated ministries, departments and agencies (MDAs). The report said out of 541 MDAs existing in Nigeria, only 163 should be retained. Thus, there were recommendations that many of these MDAs need to be rationalised, while some would be merged and others simply closed down.

    The Oronsaye report went further to list agencies, which seemed to have duplicated mandate. Some of them are the National Communication Commission (NCC) and the Federal Radio Corporation of Nigeria (FRCN) which perform similar functions because they both exist in the information milieu. The same for Aviation agencies.

    The dissolution of APCON council, however, signaled the likelihood that APCON might not escape such proposed plan.  But why would such fears raise concern in advertising industry?

    “We have seen NAFDAC and SON clash over roles and most of the roles have a thin line dividing them. What I advocate is collaboration. We have had conflict before between CPC and APCON. It is a question of collaboration”

     

    The CPC, APCON and NLRC tango

    Who should regulate sales promotion run by over 500 advertisers in Nigeria? Advertising Practitioners Council of Nigeria (APCON); Consumer Protection Council (CPC) or the National Lottery Regulatory Commission (NLRC)? Are sales promotions and lotteries the same? These are questions that have generated bad blood against the NLRC, which is forcing advertisers and organisations to pay for vetting their sales promotional activities; a situation described as duplication of funtion.

    Observers say this amounts to subjecting advertisers to additional regulation. The CPC and APCON, through ASP, perform a similar role.

    The role of the NLRC in sales promotion regulation is being contested on the ground that the Nigerian Advertising Laws, Rules and Regulations through Act No 55 of 1988, Act No. 93 o 1992, Act No. 116 of 1993, among others, empowered “APCON to regulate advertising and sales promotion in all its aspects and ramification”.

    Also, industry observers believe that the Act 1992, No. 66 that established the CPC also empowered the commission to handle consumers complaints arising from consumption of products and sales, including promo.

    The former President of ADVAN, Mr. Kola Oyeyemi, said  the NLRC had no business meddling in the affairs of CPC and APCON. He said everyone in the industry has been quiet over the issue because they are afraid that fighting a government agency bring down the axe on them.

    “If you look at what has happened so far, what APCON seems to regulate is advertising and sales promotion, vet the consumer sales promo to ensure that the claims are true and the execution is credible and the prizes are given to customers and consumers. APCON is also to ensure that the mechanics are transparent and the participants are rewarded. What I know CPC does is similar, except the vetting of the communication or the messaging of the sales promo. That already is duplication, but for NLRC, it’s meant to regulate lottery and not consumer promo,” he said.

    The Dean, Adebola Adegunwa School of Communication, Lagos State University, Prof Lai Oso, said, on the regulation of sales promotion, APCON’s main concern is vetting the communication of sales promo to ensure that claims are genuine, adding that the CPC protects consumers when complaints arise. The NLRC, he said, is only to regulate national lotteries.

    “APCON is concerned with the communication of sales promo and its messages. As a result, it regulates to ensure that those promises are genuine. Lottery commission should not concern itself with that, but lottery only,” he said.

    The Deputy Director, Public Relations, CPC, Abiodun Obimuyiwa, said the council is empowered to validate promotions to ensure they are not organised to swindle consumers while a former CEO/Registrar of APCON, Prof Joseph Bel-Molokwu, said the NLRC is a victim of the duplication of function that is common in the public sector. “We have seen NAFDAC and SON clash over roles and most of the roles have a thin line dividing them. What I advocate is collaboration. We have had conflicts before between CPC and APCON. It is a question of collaboration. All I see is regulators jostling for territories to raise revenue. National Lottery should come under APCON’s Advertising Standard Panel as a representative where we have NAFDAC, CPC and others in other to enhance collaborated effort where there is a thin line function,” he said.

    When The Nation called the head of the commission, Lagos Zone, Mr. Fidelis Ajibogun, he refused to comment, but referred the reporter to the commission’s website for legal details

    While issues of this nature, among others, are likely to be considered if mergers take place, there are no clear indication that the new government has concluded plans to effect the recommendations of the Oransanye report.

    Meanwhile, on getting the government to restore the council, the new APCON Chairman,  Mr. Uffot Udeme, said: “We need to obey the last order. There is discussion ongoing with relevant levels of government and I expect that there will be clarity on how we moved on with APCON issue. There should be clarity in the coming weeks. We are confident on the APCON situation. Government in its wisdom has done certain things. We can only advise, but our concern is that things don’t go wrong. The media need to draw the attention of government to the dangers of merging APCON.  After APCON had gone in limbo for eighteen months, a new council was convened and then a new blanket was given. Everybody has to  lie low and it’s like back to incommunicado of some sort. It doesn’t help the industry. My way of putting it is that the industry has been arrested and detained. We can’t move, there is so much that needs to be done and no one wants to be seen as contravening the decision of the government. But everyone in government should appreciate what the problem is.”

     

    Effect on APCON Reform

    Udeme stated further that the dissolution of the council has hampered the advertising reform. “The reform has been gazetted, but the challenge has been effective implementation. Stakeholders, who had complied with the proper registration, have complained and said look, are we a goat? Are we the ones who are fools?  We are being penalized, we have gone to pay these fees, properly registered, but others did not do so. And they are still operating. You need a council to be in place for enforcement to take place. Until this lacuna is removed, the enforcement agency in APCON cannot completely do its job but APCON runs through its council. It is run by consensus. Everything is by the order of council because some other agencies are well represented in APCON to regulate advertising but as it is now everywhere is in limbo,” he said.

    Meanwhile, the concern raised by various professional groups has prompted Alhaji Bello-Kankarofi to urge the Federal Government to reverse the directive on dissolution of APCON Council.

    Nevertheless, an industry source said APCON has always suffered from the government seeing it as a parastatal and an agency other than a professional council with statutory recognition and mandate to regulate advertising in Nigeria. However, with the ministerial appointments expected to be approved soon, industry players are hopeful that the dissolution of the council would be reversed while the fear of a possible merger of APCON remains.

     

  • Banks’ scramble for agric business

    Banks’ scramble for agric business

    The National Bureau of Statistics (NBS) report that agricultural imports declined by 11 per cent from N738 billion in the first quarter of the year to N664 billion in the second quarter, indicates that farmers are beginning to meet food needs. Banks are exploring ways of funding  agric business to create jobs and reduce food importation, writes COLLINS NWEZE.

    Banks with eyes on the future know where to put their money. Many of them have identified the agric sector and its value-chain as a key area to play in this period of deposit drought and reduced profitability.

    Already, farmers are seeking more credit to expand to meet the increasing needs of local consumers.

    For the  Chairman, Tractor Owners & Hiring Facilities Association of Nigeria (TOHFAN), Alhaji Danladi Garba, now is the time for banks to grant more credit to farmers and see the impact of improved food production not only on employment market but on the economy.

    At a media forum on agriculture financing in Lagos, tagged: “Agric Business: Diversifying the Nigerian Economy,” the farmer said Nigeria could produce food, noting that agric business is profitable.

    He is probably right. Gone are the days when borrowers beg banks to lend to the agric sector. Today, the tides have turned. The buzz for agric financing is on, and no lender wants to be left behind.

    Ten years back, no lender would give depositors’ funds to a farmer. Such loans would be considered lost from the date of approval. But today, the lenders have begun to scramble for agric businesses, having seen the potential, and knowing how much a well-priced loan can add to their profitability, many lenders are keying into the agriculture financing scheme.

    Sterling Bank Plc has financed the purchase of tractors for members of the TOHFAN. The bank noted that its involvement in the agricultural sector was based on the need to reposition the sector as the main stay of the economy given the dwindling oil revenue.

    The bank’s Managing Director, Yemi Adeola, said it finances the purchase/acquisition of tractors from reputable manufacturers such as Massey Ferguson, Mahindra, New Holland, John Deere and Tak Tractors, who will also provide basic training on utilisation and offer after-sales maintenance services.

    The tractors which have been distributed to members of the association following the first disbursement would help in the adoption of mechanized agriculture, leading to additional hectare coverage, higher yields and enhance food security in the country.

    “Sterling Bank Plc has continually restated its commitment to the strategic growth of the agricultural sector by providing adequate funding in alignment with the ongoing reforms in the sector aimed at repositioning it as an attractive business proposition, an input provider for the manufacturing sector and a key foreign exchange earner.

    “The best bank in Agric Award was conferred on the Bank in recognition of its critical role in the dispensing of financial services to actors in the Nigerian agricultural value chain. This we have demonstrated again with the financing of the tractors which will add value to the sector,” he said.

    Also, Group Managing Director/Chief Executive of First City Monument Bank (FCMB) Limited, Ladi Balogun, assured that the bank will intensify its support to the agricultural sector and its value chain including lending more to the subsector in the interest of the economy.

    “We note that four basic commodities that are consumed by Nigerians – rice, wheat, fish and sugar jointly account for a significant amount of the country’s annual import bill. We are convinced that the nation has the capacity to produce these consumables in required amounts to meet our domestic consumption needs. With its attendant impact on GDP and job creation, agriculture remains a critical focus sector of the financial system”

    The bank chief said the lender is focused on being a strategic partner to the government and other stakeholders in the agric sector to ensure food sufficiency, employment and revenue generation.

    Balogun assured that the lender will continue to provide credit to the sector and its value chain, including small and medium scale businesses. He said the 30 per cent of Nigeria’s Gross Domestic Product (GDP) come from the agricultural sector, and was 40 per cent before the economy was rebased last year.

    “The agric transformation is real. It is not rhetoric. We built agric business that is at the centre of transforming the economy. If we really want to continue employing the growing population, we need to not only feed Nigeria, but feed the world,” he said.

    He said the bank realises that there are millions of farmers across the country that need credit at affordable rates, considering the level of attraction the agric sector has garnered. That is why we are increasing our level of support.

    Likewise, Group Managing Director, United Bank for Africa, Phillips Oduoza said the bank has continued to channel resources to the sector, given that it remains the mainstay of most economies in Africa. “UBA has a deliberate policy to continue to fund agriculture. Our lending to the sector is already above the industry average. We are doing about seven per cent of our total portfolio in agriculture,” he said.

    He praised the fact that lending to agriculture is generally on the upward trend from Nigerian banks, disclosing that banking sector funding to agriculture has moved from just about 0.5 per cent of total industry portfolio prior to 2009 to about 4.9 per cent of banking industry loan book currently.

    “Interestingly, the non-performing loans coming from agriculture lending is lower than most people would have thought,” he said.

    Oduoza also said UBA is expanding its electronic banking products to improve the way it serves its more-than seven million customers. He said the bank has rolled out an array of electronic banking products, from cards to point-of-sale terminals, which is helping to reduce the cost-to-income ratio of the bank while making a positive impact on the bottom line.

    Group Managing Director of Union Bank of Nigeria Plc Emeka Emuwa urged Nigeria and other African nations to make agriculture more productive in their fight to end poverty in the continent.

    He spoke at the International Conference organised by the African Rural and Agricultural Credit Association (AFRACA) sponsored by the bank.

    In his welcome address to the conference which was themed “propelling Economic Development through Functional Agricultural Value Chain financing models: lessons learnt and emerging opportunities, in Lagos, Emuwa advised the African nations to redouble their efforts  to make agriculture more productive.

    “If you can get agriculture to become more productive, you will be better positioned to tackle the scourge of poverty in the continent. It is unfortunate that there has been a decline in the sector due to the emergence of other economic sectors in Africa,” he said.

     

    CBN’s position

     

    Central Bank of Nigeria (CBN) Governor, Godwin Emefiele said at a workshop on innovative agricultural insurance products, in Lagos that the agricultural sector provides up to 70 per cent of employment in Nigeria and accounts for about 42 per cent of the country’s Gross Domestic Product (GDP).

    Emefiele, who was represented by the Acting Managing Director of Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL), Edwin Nzelu, said the large import food products include wheat, rice, flour, fish, tomato paste, textile and sugar.

    “We are confronted, as a nation with a wide range of development challenges especially with the dwindling global crude oil prices and the nation’s dependence on it as its major source of revenue. There is the need to diversify the mono-cultural tendencies of the economy by developing other sectors of the economy especially agriculture,” he said.

    He said that Nigeria’s formal financial system is lending about four per cent of all formal credit to the agricultural sector compared to three years ago when only about one per cent of all credit went to agriculture. He insisted that lending is still low given the lingering perception by banks that agriculture is highly risky.

    Emefiele said development and expansion of the agricultural insurance sub-sector will go a long way in mitigating against natural disasters and eventually encouraging banks to lend to agriculture.

    Former Agricultural insurance has been proven to be instrumental in transferring risks and stabilising farmers’ income, but in Nigeria, agricultural insurance is one of the less developed line of business. Therefore, there is the need for insurance companies in collaboration with relevant stakeholders to develop innovative products that will cater for the needs of farmers in their provision of agricultural insurance,” he said.

    He explained that over the years, only the Nigeria Agricultural Insurance Corporation (NAIC) was licensed to underwrite agriculture insurance in the country, until two years ago when NAICOM liberalized the insurance subsector for conventional insurers to underwrite.

    “I urge private insurance companies to take advantage of this opportunity and consider extending insurance cover to the agricultural sector to create a competitive market which will eventually increase insurance penetration to rural areas,” he said.

    Emefiele said expansion of agricultural insurance products has become imperative especially now that climatic reports have it that Nigerian farmers are prone to risks from natural disaster such as flood, draught as well as different crop and livestock diseases.

    He said that NIRSAL was established to tackle both the financial and commodity agricultural value chains and that its Insurance pillar was created to facilitate the expansion of the agricultural insurance products for lending by encouraging the introduction of new products such as weather index insurance, yield index insurance, multi-peril among others.

    He said the workshop was organized in collaboration with Alliance for Green Revolution in Africa (AGRA) which has garnered experience over time in introducing various insurance products in some African countries and was one of the major stakeholders in designing NIRSAL.

     

    Bankers’ Committee

     

    The CBN and deposit money banks, under the aegis of the Bankers’ Committee also restated its commitment to expanding bank lending in agro-business in order to discourage importation of goods can be produced locally.

    The bankers also stated their resolve to explore large corporates as anchors to lend to participants across the value chain to improve the capacity of Nigeria’s agro-businesses so as to create sustainable jobs and inclusive growth.

    The bankers also affirmed their commitment to financial deepening of the economy, improving financial access to key sectors of the economy, innovative solutions for the critical finance of generation, provide finance for small and medium enterprises, among others.

    “We note that four basic commodities that are consumed by Nigerians – rice, wheat, fish and sugar jointly account for a significant amount of the country’s annual import bill. We are convinced that the nation has the capacity to produce these consumables in required amounts to meet our domestic consumption needs. With its attendant impact on Gross Domestic Product (GDP) and job creation, agriculture remains a critical focus sector of the financial system,” it added.

     

    CBN’s roles

     

    The CBN set the tone when it introduced Nigerian Incentive-Based Risk Sharing Agricultural Lending (NIRSAL) to the banks. By that single policy, banks can lend to agricultural sector and its value chains without fear of losing such funds. The NIRSAL is already being implemented by the banks and is expected to drive agricultural revolution in the country.

    The CBN explained that NIRSAL, unlike previous schemes which encouraged banks to lend without clear strategy to the entire spectrum of the agricultural value chain, emphasises lending to the value chain and to all sizes of producers.

    The Federal Government also plans to double agriculture’s share of banks’ credit to 10 per cent in two years. The loans to agriculture as a share of total credit rose to N320 billion, or five per cent, at the end of last year from less than one per cent in 2011.

    Agriculture Minister Akinwunmi Adesina said the Federal Government has made a fundamental shift that agriculture is not a developmental activity, but a business. “The CBN has shifted the mind-set of the banks. It’s a new agriculture sector in which they can actually invest money and make money,” Adesina said.

     

    Agric potential

     

    Already, banks and the CBN are discussing how to increase lending to the sector. For the apex bank, government needed to pay more attention to agriculture, which still has one of the greatest potentials in growing the economy.

    CBN Deputy Governor, Economic Policy, Dr. Sarah Alade said that one way of achieving this, is by collaborating with the banking system to fix the value-chain problems in the agricultural sector. She said economic development was about enhancing the productive capacity of an economy by using available resources to reduce risks, remove impediments, which otherwise could hinder investment.

    Speaking at an international conference on agricultural value-chain financing held in Lagos, she said the CBN has so far committed about N1.169 trillion to different intervention schemes being promoted by the Federal Government.

    Alade said the funds were committed by the CBN in collaboration with the Federal Government into key economic schemes for economic development.

    She listed the schemes as the Agricultural Credit Guarantee Scheme (N69 billion); Commercial Agricultural Credit Guarantee Scheme (N200 billion); the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (N200 billion); Small and Medium Enterprises Credit Guarantee Scheme (N200 billion).

    Others are the SMEs Restructuring and Refinancing Scheme (N200 billion) and Power and Airlines Intervention Fund (N300 billion). Alade, who was represented by CBN Director of Research, Charles Mordi said schemes were meant to address the challenges confronting agriculture and agric business in the country.

    She said the Federal Government and CBN instituted the intervention programmes to enable key players in the economy have access to finance adding that access to credit remains important to agricultural value-chain.

    Speaking further, she said the Agricultural Credit Guarantee Scheme was introduced in 1978 to encourage lending to the agric sector. Alade said the scheme has up to date, supported the sector by guarantying loans to over 800,000 beneficiaries.

     

    NIRSAL performance

     

    According to the CBN, NIRSAL is also expected to be a catalyst for innovative risk management strategies, long-term financing for agribusiness and significant job creation by new entrepreneurs.

    “The mandate of NIRSAL is to act as the custodian of all credit guarantee schemes, interest draw back schemes, and commercialisation initiatives related to an integrated value chain approach to agriculture and agribusiness in Nigeria,” the CBN said. Under NIRSAL, there are five pillars to be addressed by an estimated $500 million that will be invested by the CBN, according to the programme document.

    There is also a Risk-sharing Facility of $300 million, planned to address banks’ perception of high-risks in the sector by sharing losses on agricultural loans. There is equally an insurance Facility of $30 million intended to expand insurance products for agricultural lending from the current coverage to new products, such as weather index insurance, new variants of pest and disease insurance.  Besides, there is also a Technical Assistance Facility amounting of $60 million meant to equip banks to lend sustainably to agriculture, producers to borrow and use loans more effectively and increase output of better quality agricultural products, among others.

    The improvement in the sector was linked to access to credit through the new policy on increasing private sector participation, emphasis on the entire agriculture value chain, and using agriculture to boost employment, wealth creation and food security.

    Analysts have commended the performance by the banks as a demonstrating of their belief in the ability of agriculture to transform the economy. The CBN said with the credit trend in the banks, Nigeria may be close to realising its economic diversification objectives that will lead to less dependence on oil.

    “The agric transformation is real. It is not rhetoric. We built agric business that is at the centre of transforming the economy. If we really want to continue employing the growing population, we need to not only feed Nigeria, but feed the world”

     

  • 12 years on: Cabotage Act dead on arrival?

    12 years on: Cabotage Act dead on arrival?

    The need for a review of the Coastal and Inland Shipping Act, 2003, otherwise called the Cabotage Act by the National Assembly as part of the change mantra remains an issue. The clamour for its review is gaining momentum so the benefits inherent in the Act can be harnessed, writes, Maritime Correspondent OLUWAKEMI DAUDA.

    The expectations were  high. Stakeholders in the maritime sector, both in private capacity and  government, were upbeat about the benefits that would accrue to their operations should the Act  see the light of  day. It was therefore not surprising that no effort was spared in ensuring the passage of the Cabotage Act  by the Second National Assembly (NASS) Session. That was in 2003.

    However, 12 years after its enactment, maritime operators are yet to start reaping the attendant benefits from the Act. This situation has now presented the current NASS- the Eighth Session, with a demand for a review of the Act. The reasoning being that the Cabotage Act of 2003 may have outived its usefulness considering that the bottlenecks that it should have addressed, and the implementation of its provisions, are yet to be addressed.

     

    2003 Cabotage Act and Policy thrust

     

    The Act was enacted to encourage indigenous companies’ participation in shipping, increase capacity building and provide employment for Nigerian seafarers. It would also help to develop the domestic maritime fleet, create employment opportunities for trained but unemployed seafarers, boost training requirements at the Maritime Academy of  Nigeria, lead to optimal exploitation of the currently under- utilised facilities at Nigerdock, and encourage the development of required infrastructure and technical know-how in the inland waterways, transport and haulage system.”

    Aside other considerations, the policy thrust of the Act, include  the Protection of the nation’s territorial waters; safeguard national security; promote and preserve national shipping operators; development of the national fleet; and the development of intermodal transportation.

    Others include freight generation and   capacity building to stimulate and expose indigenous shipping firms to coastal shipping business as a launch pad to deep sea and international shipping; acquisition of shipping technology; creating and diversifying employment opportunities in the industry, improved environmental safety, promotion of economic growth and national development among others.

     

    Concerns

     

    For stakeholders in the maritime sector, the Cabotage Act has presented nothing but 12 years of failed expectations and worries. The Executive Secretary, Nigerian Shippers Council (NSC), Mr Hassan Belllo, captured this feelings succintly last week when he told The Nation that 12 years after the Act was signed, Nigerians were still awaiting for its full implementation because the Act is yet to perform the laudable objectives for which it was enacted.

    For instance, The Nation’s investigations revealed that contrary to the provisions of the Act, there are several foreign owned vessels providing shipping services locally. According to industry sources, there are over 100 vessels owned by foreigners but trading in Nigeria under questionable circumstances. They alleged that these category of vessels are often patronised by the oil majors in collaboration with some officials of the Nigerian National Petroleum Corporation (NNPC),  in less than legal transactions and that they keep changing names and flags at wil.The Nation’s sources at NIMASA may have tacitly corroborated this allegations as they equally alleged that most of the accused vessels do not have up-to-date survey and requisite certificates to trade in other overseas countries and so are stuck in Nigerian waters where they carry out their illicit business.

     

    Call for review Vs Lobbyists

     

    Following these allegations and others, stakeholders have at various times called for the intervention of the NASS for a review of the Act. Bello is one of such making the calls. But how far can this agitation go given the intense lobbying being mounted by the beneficiaries of the faulty arrangement, especially the foreign ship owners?

    Further investigations have  revealed that multinationals and foreign shipping companies are lobbying the Nigerian Maritime Administration and Safety Agency (NIMASA), some politicians and some former members of the NASS to ensure that a review of the Cabotage Act does not see the light of the day.

    A senior official of NIMASA, who craved anonymity, told The Nation that foreign shipping companies and others are making the move so that they can continue to get a bigger slice of the market. At the moment, only about 60 of the over 600 vessels in the upstream sector of the oil and gas industry are owned by indigenous operators; yet, only about six of the 60 do business in the offshore sector.

    The implementation of the Act have not been effectively handled due the role of the Minister as imbedded in the Act, as well as the role of the Nigerian Maritime Administration and Safety Agency (NIMASA)

    From this anomaly, our source claims that  each vessel used for offshore jobs charge at least $5,000 daily. This, according to the official, is the least amount collected by a foreign vessel. The country, he said, loses over N2 trillion yearly.

    “As at today, for ships that earn $5,000 and above per day, there are about 600 of them. There are those that even earn $150,000 per day. You have 60 belonging to Nigerians out of the over 600. Those 60, if you go to our waters, you will see them there; they have no jobs because there is no full implementation of the Cabotage Act because of its deficiencies that necessitated the current review,” the official said.

    Sources at the Ministry of Transport alleged that multinationals, with the support of some officials of the Nigerian National Petroleum Corporation (NNPC) have been mounting pressures on the ministry to ensure the implementation of the Act does not see the light of day. He said foreigners, who will be affected, are worried over the review.

     

    Wasted opportunities

     

    The Cabotage Act also stipulates that all cargoes and passengers in the inland and coastal waters be transported by ships and ferries built, owned, crewed and manned by Nigerians. Therefore, if fully implemented, the Act would have inevitably led to the development of support industries such as moving, towage, pilotage, dredging of the channel and waste disposal and the development of the inland waterways by dredging coastal waterways and silted.According to the former Managing Director, Nigerian Ports Authority (NPA), Omar Suleiman, oil and gas sector plays a predominant role in the nation’s sea trade, with an estimated contribution of about 95 per cent to coastal and inland shipping allied marine activities. The remaining five per cent is made up of fishing trawlers and break-bulk carriers. Therefore, Suleimon reckoned, the physical and economic environment, would have thrown up opportunities in a well-implemented Cabotage regime such as envisaged by the Act.

     

    Structures for the implementation of Cabotage regime

     

    A number of institutional structures that are supposed to define the building blocks for the implementation of Cabotage regime had been put in place by the government.

    Some of the institutions are: The Nigerian Ports Authority (NPA)), NIMASA, The Nigerian Shippers Council (NSC), the Joint Maritime Labour Industrial Council (JOMALIC),the National Inland Waterways Authority (NIWA) among others.

    Operators said there may be need to tinker with these institutions, but the main institution that needs serious funding, according to them,  is the NPA, which is saddled with the responsibility of providing an integrated approach to port administration in the country.

    Despite the ports reform and the laudable efforts of the Mallam Habib Abdullahi-led management of the authority, the nation’s sea ports are still regarded as far below international standards and commercially unfriendly as terminal operators are accused of charging high tariffs and the roads leading to the ports are in poor shape.

    Other problems, according to importers and stakeholders, are myriad and include an inadequate supply of craft and plants, a cumbersome documentation system, unnecessary delay in releasing cargo from the ports, extortion, dilapidated port infrastructure, low labour productivity, corruption, vandalism, criminal damage, congestion, problems of empty containers and gridlock on the road despite the past synergy between the Federal and Lagos State governments.

    All these problems, stakeholders said, are part of the problems confronting the Cabotage law that need to be looked into by the lawmakers while carrying out the review to make the law effective.

     

    Ports reform

     

    The importance of the ports to Cabotage administration, the President, National Association, Nigerian Licensed Customs Agents (ANLCA), Alhaji Olayiwola Shittu said, cannot be overemphasised.

    According to him, there cannot be regulated loading or discharging under the Cabotage trade without proper systems for controls. The NPA, he said, must have regulatory control over all harbours, piers and jetties used in the Cabotage trade for the law to be effective.

    The port reforms by way of investing the NPA with only landlord functions, Shittu said, suits the Cabotage regime.

    But in order to achieve the desired objectives of the Act, the port reforms, he said, should include achievement of efficiency in port operations, reduction of port costs, reduction in bureaucracy, 24 hours port operation, provision of modern cargo handling equipment, easy clearance of cargo, efficient pilotage, reduced tariffs and increased level of productivity.

    Contrary to the provisions of the Act, there are several foreign owned vessels providing shipping services locally. According to industry sources, there are over 100 vessels owned by foreigners but trading in Nigeria under questionable circumstances

    Lack of synergy between the remaining government regulatory agencies at the port collating levies and charges, the ANLCA chief said, may hamper the successful implementation of the Act, as operators will have to deal with each of the agencies separately.

     

    Waivers and the role of NIMASA

     

    The Minister of Transport is given powers under the Act to grant waivers to foreign vessels to partake in Cabotage trade where he is satisfied that there is no capacity on the part of Nigerians with respect to satisfying the requirements as contained in Sections 3-6 of 32Section.

    The waiver system adopted by the Act is based on grounds of non-availability.

    Speaking with The Nation, the former National President of Nigerian Bar Association (NBA), Mr. Olisa Agbakoba, called for the removal of the power given to the Minister from the Act.

    Agbakoba said that the power given to the minister in the Act has been responsible for the poor implementation of Cabotage law since inception.

    He lamented that issues relating to the implementation of the Act have not been effectively handled due the role of the minister as imbedded in the Act, as well as the role of the Nigerian Maritime Administration and Safety Agency (NIMASA).

    “The job of NIMASA should be clear, then we will have the relevant policies in place. The new NIMASA I am talking about should carry on without interference from anybody including the Ministry of Transport. For this to happen, the legal framework of Cabotage must be amended. Wherever the name of the minister occurred in the Cabotage Act must be deleted and its place it will be inserted NIMASA,” Agbakoba said.

    Also, a maritime lawyer and university don, Mr Dipo Alaka, identified financial involvement at the point of applying for waiver under the Cabotage Act as one of the reasons for the circumvention of the gains of the Act.

    He alleged that waivers are granted “before approval because those who apply for waivers are made to pay while their applications are still being processed.

    “The Act stipulates that 100 per cent rating, 60 per cent of officers for Nigerians and 40 per cent for foreigners. But the foreigners come in with a waiver clause that the country does not have qualified hands to man the industry.

    The Executive Secretary, Indegenous Ship Owners Association of Nigeria (ISAN), Niyi Labinjo, said that most of the foreign ships are hiding under the provision of waiver in the Cabotage Law to continue to use foreign crew instead of employing Nigerians to man their vessels. This development, according to ISAN scribe, has impacted negatively on the Cabotage Law as it is denying Nigerians the benefits of getting employment opportunities.

     

    Indigenous ship owners, Cargo lifting

     

    As part of its efforts to increase the internally generated revenue (IGR) of the country, the National Assembly is beaming its searchlight on the maritime industry with the aim of amending the Cabotage Act, so as to increase the involvement of indigenous ship owners in trade activities along the nation’s coastal lines and boost revenue generation

    One of the major challenges confronting the implementation of the Act which the review must address is the issue of putting cargo lifting in the hands of indigenous ship owners.

    Stakeholders said the Assembly members need to examine solutions to this issue which has made the country to lose several millions of dollars which can be used to further the development of the country to foreign ship owners.

    For almost 12  years after the enactment of the Cabotage Law, the purpose of the law, they said, has failed to yield its desired outcomes, the reason being majorly because of the non-coverage of indigenous vessels in oil and gas off shore operations and other obligations under the law.

    It is a global trend for governments to reserve the domestic shipping activities for indigenous participation but the case has not been the same in Nigeria. The fact remains that    cabotage is still largely comprised of foreign operators with foreign built, crewed and flagged vessels.

    The review of 2003 Cabotage law must address the issue of developing the nation’s economy as well as meeting the agitation of operators and stakeholders in the sector through the review of the Act by restricting  foreign vessels in the nation’s coastal trade and promoting indigenous tonnage and  establishing financing and related matters.

    One key area they operators fingered as the problem was the seeming exclusion from jurisdiction of several offshore operations in the Oil and Gas sector as prescribed in the 2003 Act.

    According to part II of the amendment to the Act prescribed in the clause titled ‘Restricting of Vessels in Domestic Coastal Trade’, “A vessel other than a vessel wholly owned and manned by a Nigerian citizen, built and registered in Nigeria shall not engage in the domestic coastal carriage or cargo and passengers within the coastal, territorial, inland waters, island or any point within the waters of the Exclusive Economic Zone of Nigeria.”

    It also adds in clause 4(1) “A tug or vessel not wholly owned by a person who is a Nigerian citizen shall not tow any vessel from or to any port or point in Nigerian Waters, or tow any vessel carrying any substance whatsoever, whether of value or not or any dredge material whether or not has commercial value from a port or point within Nigerian waters.”

     

    Cabotage Vessel Fund (CVFF)

     

    The Cabotage Act establishes a fund to be known as the Cabotage Vessel Financing Fund (CVFF).

    The purpose of the fund is to promote the development of indigenous ship acquisition capacity by providing financial assistance to local operators in the domestic coastal shipping. The sourcing of the fund shall be from a surcharge of two per cent of the contract sum performed by any vessel engaged in the coastal trade; a sum as from time to time to be determined and approved by the NationalAssembly; tariffs, fines and fees for licensing and waivers; such further sums accruable to the fund by way of interest paid on and repayment of the principal sums of loans granted from the fund. The Fund shall be managed under guidelines to be proposed by the minister and approved by the National Assembly.

    While the fund is salutary, it is hoped that it will not have to go the way of the SASBF, which was bedeviled by corruption and bad management. The fund on its part will in all probability not be enough to satisfy the demands that would be made on it. Recourse will have to be made to other sources of funds like commercial banks, multilateral and development institutions assistance, grants aid and shipyard credit.The target funding level of NIMASA is to attain a funding base of $500 million.

    Today, the money is over $250million  and NIMASA is yet to disburse the money because of bureaucracy and stringent conditions attached to the money by ministry officials.

    The National Assembly, operators said, should see to the quick disbursement of the fund to assist local ship owners.

    The former President, Indigenous Ship Owners Association (ISA), Chief  Isaac Jolapomo said the Act had been ineffective due to poor implementation.

    Jolapomo advocated N200 million penalties and forfeiture of ship, five year- jail term instead of the current N10 million for offenders.

    He said that the existing temporary importation regime should be abolished and a maritime bank established.

     

    Maritime Bank

     

    A maritime expert, Mr Solomon Adedayo  said the Cabotage Vessels Financing Fund(CVFF) should also include maintenance and repairs of vessels used for Cabotage trade.With the recapitalisation in the banking sector, he said a specialised bank should be established to fund maritime industry and activities

     

    National security

     

    There is the question of national interest and security, which is the prime benefit of Cabotage. According to the President, Association of Nigerian Licensed Customs Agents, Alhaji Olayiwola Shittu “Cabotage laws are critical to every maritime nations security interest. More than 40 nations, including all G8 members, he said, agreed that free markets are bedrock ideas but secondary to the welfare of their citizens…”

    Shittu’s position is self-evident and the country cannot afford to be an exception; security of the country must not be sacrificed on the altar of globalisation and free trade and its must be  given serious consideration during the review of the Cabotage Act.

     

  • Bridging MSMEs’ financing gap

    Bridging MSMEs’ financing gap

    The Micro, Small and Medium Enterprises (MSMEs) sector has been described as critical to the economic growth of any country. Its potential to create jobs, boost production and reduce poverty has been globally acknowledged. But the sector’s capacity to do so in Nigeria has been limited by its inability to secure credit from Money Deposit Banks, a development that has created a huge financing gap of N9.6 trillion. Assistant Editor OKWY IROEGBU-CHIKEZIE looks at the various innovative financing options, technologies and products that could bridge the gap and reposition the sector.

    Micro, Small and Medium Enterprises (MSMEs), the world over, drives the growth of the economy, but Nigeria with its population of over 170 million has not been able to tap the benefits of the sector. This is due to lack of access to funds by operators in the sector. Operators believe that if the required funds are accessed, the economy will experience substantial growth much more than what obtains now. Besides, with the growth of the sector, unemployment at all levels will be reduced. The funding requirement of the MSME sector is in deficit of N9.6 trillion.

    However, in recent years, the Bank of Industry (BoI) has striven to address the issue by entering into agreement with some Money Deposit Banks (MDBs) to buoy credit advancement to entrepreneurs in MSMEs.

    BoI signed a Memorandum of Understanding (MOU) with 10 SME-friendly banks. The banks were carefully chosen to partner with BoI in the financing of its SME customers. The banks are Access Bank, Diamond Bank, Ecobank, Fidelity Bank, First Bank, First City Monument Bank, Skye Bank, Stanbic IBTC Bank, Standard Chartered Bank, and United Bank for Africa.

    “The BoI is also exploring other alternative modes of funding such as continuation of sector-specific intervention funds by the Central Bank of Nigeria (CBN), Ministry of Agriculture, Solid Minerals and others; managed funds from various state governments and foundations; long-term loans at very low interest rates from multi-lateral/international development institutions”

    Under the arrangement, BoI and the banks will collaborate in the provision of long-term loans to qualified SMEs based on BoI’s Risk Acceptance Criteria (RAC) and the provision of working capital to the SMEs by the banks also based on their individual RAC.

    BoI Managing Director Mr. Rasheed Olaoluwa said: “The synergy that has evolved between BoI and the SME-friendly banks is unprecedented. It will undoubtedly foster greater access to finance for SMEs, financial inclusion for Nigerians and engender wealth and accelerated job creation for Nigerians.

    “Nigerian businesses cannot be built on debt alone. It has long been part of the bank’s vision to find ways to provide needed equity capital and business advice to promising Nigerian businesses”

    “It is also our expectation that the SMEs that will benefit from this partnership will be good corporate citizens and meet their financial obligations to the partnering banks. This will stand them in good stead for consideration for larger loan amounts with the hope that they will in the near future metamorphose into large enterprises.”

    To address the challenges of poor packaging of loan requests and non-bankable business plans, which are believed to be responsible for the low level of financial support to the sector, BoI in fulfilment of its mandate of providing long-term finance and business support services to large, medium and small projects, signed a service agreement with 122 Business Development Service Providers (BDSPs).

    At the signing of the agreement in Lagos, Olaoluwa said the BDSPs would collaborate with BoI to identify credible SMEs that require finance. They would also develop bankable business plans and proposals for SMEs to facilitate their access to finance, including providing post-finance services such as mentorship, handholding, financial advice and inculcation of best practices among others.

    However, in doing so, BoI is aware of MSMEs’ age-long poor record keeping and weak financial management, which make it difficult to evaluate their financial performance and invariably. They inhibit their ability to access loans from banks or attract investors. This was why the bank has since repositioned its systems, processes and services by riding on the back of robust technologies and products. This was in the hope of taking advantage of the new digital and mobile world to offer its customers the benefits of speed, mobility and convenience that come with it.

     

    Addressing the issues

     

    BoI’s chief, Olaoluwa, has never hidden his intention to turn things around at Nigeria’s foremost development finance institution. On assumption of office on May 19, last year, he resolved to use the bank as a vehicle to drive Nigeria’s industrialisation by focusing on the MSMEs sector. This is because of his belief that  the sector  is the engine of economic growth on account of its potential to create jobs, boost production and reduce poverty.

    To unleash the industrialisation drive, the bank under Olaoluwa’s watch, unveiled a number of innovative financing options, technologies and products to position the MSME sector to play its catalyst’s role in industrialisation. Some of them included seed and angel funding, value chain finance, venture capital and crowd funding, among others.

    The BoI is also exploring other alternative modes of funding such as continuation of sector-specific intervention funds by the Central Bank of Nigeria (CBN), Ministry of Agriculture, Solid Minerals and others; managed funds from various state governments and foundations; long-term loans at very low interest rates from multi-lateral/international development institutions.

    Just last week, BoI partnered Grow Africa Equity Partners Limited to raise a $60million Venture Capital Fund (VCF) for small and medium enterprises (SMEs). The VCF aims to provide equity capital, along with strategic and operational support to early stage and fast growing businesses involved in technology, agriculture, consumer goods and services sectors.

    Under the arrangement, BoI made an investment commitment of $6million to aid provision of equity capital for fast growing businesses. “Nigerian businesses cannot be built on debt alone. It has long been part of the bank’s vision to find ways to provide needed equity capital and business advice to promising Nigerian businesses,” Olaoluwa said.

    He explained that the partnership with Grow Africa is one of the avenues for realising this vision and that the bank remains committed to the pursuit of its core mandate of providing long-term financial support to small, medium and large companies/projects in Nigeria’s key sectors, adding that the investment commitment was informed by the track record of Grow Africa’s partners, the developmental impact of their existing portfolio and their strong pipeline for potential new investments.

    The Chairman of Grow Africa Equity Partners Limited, Adedotun Sulaiman, noted that with the right type of support, Nigerian businesses can become global leaders. Sulaiman, who also chairs the Boards of Interswitch, SecureID,  IDEA,  New Horizons and others, said: “Over the past 10 years, I have provided capital and advice that have helped several businesses grow from ideas into multi-billion naira industrial leaders. Through this partnership, I hope to see many more entrepreneurs realise their dreams of creating leading companies and delivering massive value to Nigeria.”

    For instance, BoI in partnership with Kinesis Consulting Limited developed an SME Accounting Application (SAAPP), which allows users keep proper records of transactions and generate requisite financial statements. SAAPP, The Nation learnt, is a user-friendly, simplified and menu-driven accounting tool that does not require formal accounting knowledge by the entrepreneur. With the software, SME customers will be empowered with business information on their mobile phones.

    Because of its unique features and benefits, the application enjoys the buy-in of operators and stakeholders. For instance, SAAPP will allow BOI SME customers to easily generate basic financial statements such as balance sheets, which report on the SMEs’ assets, liabilities and ownership equity; profit & loss accounts, which report on the SME’s operation in terms of income (sales), expenses and profit or loss; cash flows such as SMEs’ operating, investing and financing activities.

    “A survey conducted by the Nigerian Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) showed that there are 17.28 million MSMEs in Nigeria employing 32.41 million people and accounting for an estimated half of Nigeria’s Gross Domestic Product (GDP)’”

    One of the key features of SAAPP is the integrity of the financial statements generated on it. Once financial statements have been prepared, they cannot be altered at will. Consequently, it is the same statements that will be produced for submission to the tax authorities, statutory government agencies and financial institutions. The App also contains a link that enables the SMEs mail their financial statements directly to BoI. The App is programmed for installation on a maximum of three devices per business entity and is available at a pocket-friendly price of N20, 000.

    BoI has also gone a notch higher, unveiling an online loan application portal for the convenience of its prospective SME customers. With the portal, customers no longer need to come physically to the bank to submit their loan applications. This has the advantage of shortening the bank’s loan processing Turn-Around-Time (TAT). The portal has document uploading capability as well as allows the loan applicant select the preferred BoI state office location where the application will be processed. The online loan application portal can be accessed on the Bank’s website.

    Many operators and stakeholders, who spoke with The Nation said through the use of these innovative strategies, BoI has been able to enhance access to some of the sector-specific intervention funds. The bank is charged with administering the several sector-specific intervention funds and schemes introduced by the Federal Government in the hope of breathing life into dead or dying key sectors of the economy, particularly the industrial sector, which is recognised  as holding the key to sustainable economic growth.

    The expectation was that government through BOI would leverage on these special intervention funds to address the dearth of long term investible funds required by manufacturers and industrialists particularly MSMEs to transform the industrial sector into a vibrant and globally competitive one capable of guaranteeing bountiful returns to all stakeholders and the economy.

    With BoI’s online loan application portal, local designers seeking for funds for expansion now have a seamless way to access the recently launched N1billion Fashion Fund for players at the micro, small- and medium-scale levels. The Fashion Fund joins two other SME funds recently launched by the bank namely, the N5billion Cottage Agro Processing Fund and the N1billion NollyFund.

    Olaoluwa explained, the Fashion Fund is in fulfillment of the bank’s commitment to develop special funds and credit products to deepen penetration of and enhance support to specific SME clusters. “We see an opportunity to support Nigeria’s leading fashion businesses to increase their production volumes and quality, thereby making them more competitive in both the domestic and international markets,” he said.

    The BoI boss observed that African prints, known as Ankara fabrics, have become very popular in the fashion world due to the ingenuity and industry of Nigerian designers such as Dakova, Frank Oshodia, Tiffany Amber and Deola Sagoe, among others. He said amazing designs are now created using local fabrics and are featured in both local and international fashion shows.

    He added that many Nigerian Fashion designers have received training in some of the best fashion schools in the world, and therefore have the intellect, talent, creativity, skills and drive to take Nigeria’s fashion industry to the next level on the global fashion stage. According to him, the growth in Nigeria’s urban population, the macro-economic environment, increasing purchasing power of the emerging middle class and a strong appetite for consumer goods are positive factors in favour of a flourishing fashion cluster.

    However, these funds are the latest addition to the long list of similar funds intended to give the industrial sector the required push. Some of the earlier special intervention funds that have been introduced, targeting one segment of the industrial sector or the other include the N100 billion Cotton Textile and Garment (CTG) Fund, for the revitalization of the CTG industry along the entire value chain; N10 billion Rice Intervention Fund, to ensure Nigeria attains self sufficiency in rice production; and Africa Development Bank (AFDB) $500 million Line of Credit, for the development of export-oriented Small and Medium Enterprises (SMEs).

    Others are: Federal Ministry of Women Affairs and Social Development (FMWASD) N90 million Business Development Fund, to provide soft loans to women entrepreneurs; Central Bank of Nigeria (CBN) N220 billion Intervention Fund, for Micro, Small and Medium Scale Enterprises (MSMEs); National Automotive Council’s N16.91 billion Fund, for the development of the automobile industry sub-sector; and N2 billion Sugar Development Council Fund, to ensure Nigeria attains self sufficiency in sugar production by 2020.

     

    How to check the high mortality rate of MSMEs

     

    Olaoluwa identified financial illiteracy, poor technological skills as the reason behind the high mortality rate of Small and Medium Enterprises (SMEs). To check the failure rate, the bank, he reiterated the reason behind the accreditation of some BDSPS to help some start-ups in packaging their documentation such as feasibility studies and doing business plan that can enable them obtain loan from the bank.  “We not only want to support SMEs in terms of financial, but also in imparting knowledge to help the businesses grow. We upgraded our banking application from Equinox to a more robust version called Rubikon, which provides a strong platform for the automation of our processes to deliver improved services to our customers.

     

    Why MSMEs are critical

     

    The consensus of experts and stakeholders is that the future of Nigeria lies more on the leveraging of MSME’s. The sector, according to experts, is strategically positioned to provide up to 80 per cent of jobs, improve per capita income, increase value addition to raw materials supply, improve export earnings and step up capacity utilisation in key industries. This was why BoI focused on providing innovative, dynamic and wide range of financial services to the sector.

    The bank believes that increased integration of these smaller businesses into the mainstream economy will provide a creative solution to Nigeria’s crisis of unemployment. MSMEs generate employment opportunities per unit of capital investment because they are generally more labour intensive. The bulk of Nigerian businesses fall within the small scale businesses, which account for over 90 per cent of all companies in the country.

    A survey conducted by the Nigerian Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) showed that there are 17.28 million MSMEs in Nigeria employing 32.41 million people and accounting for an estimated half of Nigeria’s Gross Domestic Product (GDP). However, access to affordable finance remains one of the major challenges inhibiting the MSMEs’ growth and development.

    According to the CBN, only 4.2 million MSMEs have access to finance. CBN Assistant Director, Development Fund Department, Mr. Jonathan Tobin, said because of banks and other lending institutions’ aversion to lending to small businesses in the informal sector, about N9.6t is needed to bridge the financing gap in the MSMEs sector.

    Tobin, who spoke last week in Abuja at a workshop on Micro, Small, Medium Enterprise Development Fund (MSMEDF) organised by the Banker’s Committee of the CBN, said from 2002 till date, lending by Money Deposit Banks to the sector has reduced significantly, requiring N9.6trillion to bridge the gap.

    The BoI chief, however, was not unaware of this, which was why he prioritised the need to address the imbalance caused by Money Deposit Banks’ aversion to financial inter-mediation for industrial firms and small businesses through the roll out of various financing options and interventions.

    In doing so, however, he has consistently argued that the problem of many SMEs is not access to cheap funds as claimed by many existing and intending small businesses, but the inability of such entrepreneurs to develop and defend bankable projects. He also identified poor packaging of loan requests as being responsible for the low level of financial support to the sector.

    He said it was in recognition of these challenges, and in fulfilment of BoI’s mandate of providing long-term finance and business support services to the sector, that the bank engaged the services of BDSPs and introduced other techsnologies and innovative financing strategies and products tailored to the needs of operators in the sector.

     

  • Poultry still troubled despite import curbs

    Poultry still troubled despite import curbs

    Nigeria has banned frozen chicken  import. The move has provided local  producers with an opportunity to gain a bigger market share, but it has also presented stakeholders with some challenges, DANIEL ESSIET writes.

    The ban on frozen chicken  imports would have been a boom to local producers, allowing them to enlarge their market share and boost sales.  But, so far,  the policy has proven successful only in boosting domestic output. The problem is partly the mismatch between the high demand for poultry products, the productive capacity of the local industry and the harsh operating realities.

    Indeed, the  mood in the industry is lukewarm. Smuggling continues; high feed costs and red tape threaten growth. The sector that could have turned out to be a huge asset for the growth of the national economy remains a todler.

    While  the  international  community  may  see Nigeria as a fading import market for chicken, stakeholders  see  the  inability  of the  domestic poultry industry  to  respond  adequately to expanding demand for  poultry products, as opening up a market for smuggling.Nigeria is losing about $2.7billion (about N399.4billion) yearly in revenue to smuggling of poultry products, the Poultry Association of Nigeria, has said.

    “The supply of  corn  is  not  adequate to meet expanding feed use, and restrictions on corn imports could combine to constrain growth in both the poultry and egg industries, raising production costs and consumer prices and slowing consumption.” 

    The President of the association, Dr. Ayoola Oduntan, said at the Nigeria Poultry Summit that local production of chicken has fallen short of the demand for the product, thereby creating an avenue for smuggling.

    According to Oduntan, while the local demand for frozen chicken is above two million metric tonnes yearly, Nigerian farmers produce 300,000 metric tonnes, leaving a wide gap of more than 1.7 million metric tonnes.”Out of this figure, smuggled chicken accounts for 1.2 million metric tonnes annually,” he said.

    The  industry still appears  unprotected, a state of affairs that is being exploited by smugglers.  Oduntan said smuggled  chicken  and rising costs of production are forcing local poultry producers to shed a bigger chunk of the chicken industry. The local poultry industry, experts    maintained,  has  seen the demise of some of smaller poultry producers.  In the last couple of years, some of small producers have either gone under, or scaled down production.

    According  to  the PAN   President,  though the  ban on import  is supposed to boost production, yields are lower, and the viability of poultry is reduced by its high production costs and increased chicken imports.

    To this end, Oduntan said  local producers must be committed to increasing output and supplying fresh chicken to limit the import of chicken.  While  local  producers  are  making  efforts  to  produce more  chicken, he  said the  industry is  bewildered  by  the  negative  impacts  of    higher input costs, especially maize, soya, power, labour and fuel.

     

    Feed costs

     

    The high price of feed raw materials is an issue everywhere.  Since the high feed costs are felt  throughout  the  industry, operators have  found  the business  less competitive. Feed is the single biggest input cost, making up 60 to 70 per cent of total input costs. Inputs and costs have presented the poultry industry with huge challenges, he said, highlighting the fluctuations in feed ingredients prices.

    “Many  farmers have  complained  that the  industry  doesn’t  have  the  capacity  to  facilitate smooth movement  of  poultry  products  from the farms  to  supply  points. While  there are  marginal    investment in infrastructure, not  so much  have  been  recorded  to make  specialised  chick delivery vehicles  commonplace”

    For the Vice- President (Agriculture), Association of  Small Business  Owners of Nigeria (ASBON), Mr.  Stephen Oludipupo,   the  sector  is  not moving  forward  as  it  battles  soaring feed costs and  rising electricity bills. He believes if poultry and egg production are sustained, growth in demand for corn and soybean meal is likely to outpace gains in domestic production.

    Farmers like him also complained that  the supply of  corn  is  not  adequate to meet expanding feed use, and restrictions on corn imports could combine to constrain growth in both the poultry and egg industries, raising production costs and consumer prices, thereby slowing consumption.  The same thing is said about soybean meal, which the industry cannot guarantee local surpluses and ready availability.

    Currently, the poultry industry accounts for about a third of local maize consumption and almost all the soya consumption in the country, its sustainability and future development are also in danger. This scenario represents an “industry in distress” as acknowledged by experts who are considering measures that help producers to remain in business.

    The concern is that Nigeria is on the verge of becoming a major importer of soymeal, thanks to the country’s surging poultry production, boosting feed demand. The layer industry is also expanding rapidly as it is able to provide a relatively cheap protein source compared to other sources of protein. However, poultry feed manufacturers are also finding a ready growth market in livestock, for which production of suitable rations is increasing at an accelerated pace to meet the demand .This has resulted in a shift in demand of soymeal by feed millers from the traditional poultry farmers.

    The increased demand for  soymeal is driving feed mills beyond their typical origin and  supplies also suffer from consistency in quality.

    Already, like  the Chairman,Lagos Chairman,Dr Dotun Agbojo  once disclosed, local operators have    demanded permission to import soybean meal, to help them deal with the impending competition of cheaper  smuggled  chicken. Producers think this will help the poultry industry to get cheaper raw material and reduce its cost of production, which is three times the cost of production of imported ones.

    He  said corn supply was important because the commodity was the main material used in poultry feed, which currently consumes 90 percent of national corn production.

    However, as he  said, it is not only feed prices that present challenges to producers.  The sector now faces a number of issues and difficulties including water, food, electricity and other major problems.  As a result, the economic efficiency of local producers does not compare as well as their technical efficiency, largely due to higher production costs. Therefore, the industry is struggling to remain competitive. Many farmers  have  abandoned commercial poultry production because it was uncompetitive, and instead focus on  other things.  In addition to the challenges posed by the various pathogenic diseases, the farmers also face the problem for low capital. Unfortunately, lack of financial support and incentive packages for players in the industry has, over the years, led to the gradual collapse of the industry and the retrenchment of a large number of employees in it. Due to the high-risk nature of poultry farming, many commercial banks shied  away from giving loans to operators in the industry.

     

    Foreign direct investment (FDI)

     

    Foreign direct investment (FDI) has, so far, not been a major factor in the development of  poultry sector.  But to watchers the nation’s    competitive, and potentially large industry offers investment opportunities in input activities, such as breeding, medicines, feed, and equipment, as well as vertical integration and processing. While the country permits FDI in these activities, investments are constrained by market and policy uncertainty, poor power and transport infrastructure, and high taxes on processed food.

    Capital and infrastructure for future production is a concern. Very little investment in infrastructure has been made in the last 10 years because of  poor returns, restricted access to credit because of the economic situation, the difficulties in obtaining planning permission and the new requirements for environmental permits. Currently, the poultry business is still kept by smallholders.

    The poultry production system is a mix of family businesses and commercial operations, from the small- to large-scale with varying degrees of modern technology.  This has clear implications for rising demand for poultry meat.

     

    Bird flu

     

    There have been four more outbreaks of highly pathogenic avian influenza in Nigeria. The outbreaks were of the H5N1 subtype, and all four involved layers of different ages between 20 and 60 weeks.

    “Except there is a development plan for the poultry sector to  boost production of chickens and eggs, the  import ban on frozen chicken meat may not achieve its goal”

    There were 668 deaths from the disease out of a susceptible population of 3600. The remaining birds were destroyed to prevent the disease spreading. The disease report to the World Organisation of Animal Health (OIE) commented that the one farm and three backyard operations involved displayed poor biosecurity. Help from the side of the government and other investment institutions, is all that is needed by them for ensuring health growth and development conditions for the domesticated animals.

     

    Power

     

    Meanwhile, as far as poultry  farmers  are   concerned, a more reliable supply of electricity is needed if food security is to be truly enhanced.  Some  frozen food traders in Ijora-Olopa, Lagos, lost approximately N10 million worth of product to spoilage in late May, following a electric grid blackout compounded by a scarcity of petrol to power backup generators.

     

    Inefficient supply chain

     

    A major concern is the inefficient supply chain in handling poultry production and distribution  is another of those sob stories which still poses a big question mark on management skills.

    Oduntan said  cold chains , a crucial  part  of the  supply chain infrastructure in poultry  production  is  not  sufficient to  support  massive  production. His  concern  is that  not  only  is the  industry  lacking  in  the  issue of storage facilities but  other  vehicles  such  as  refrigerated vehicles. For him, the cold chain is essential. This is because  it is  the  conduit for the flow of poultry products.

    He is not alone sharing this concern.  Other stakeholders  believe the  cold  chain  segment   plays a critical role in the poultry supply chain. Most of the domestic poultry business is in chilled product, but freezing is necessary for longer journeys. Stakeholders believe  the  industry  operators  of  cold chain transportation need to pay close attention to market trends and best practices as  continuous temperature monitoring is also of growing importance to the industry. Many  farmers have  complained  that the  industry  doesn’t  have  the  capacity  to  facilitate smooth movement  of  poultry  products  from the farms  to  supply  points. While  there are  marginal    investment in infrastructure, not  so much  have  been  recorded  to make  specialised  chick delivery vehicles  commonplace. These differences in infrastructure and logistics performance translate into real costs for supply chains.  To  overcome these constraints, government intervention is required, for instance, to build infrastructure such as roads, which need to be improved to allow heavy feed trucks and chicken transporters  move around easily in rural areas.

     

    Day-old chicks and broiler producers

     

    The industry’s challenges also include lack of large quantities of day-old chicks and broiler producers or even farmers who could move into poultry. Though the  number of broilers slaughtered and poultry meat produced have increased, the  industry does not produce sufficient quantities to satisfy demand, with the shortfall addressed through imports.

     

    Opportunities for sector expansion

     

    There are various opportunities available to commercial poultry producers, and chief among these are production of further processed products, expansion of broiler breeding facilities to meet hatching egg requirements.As foreign nationals  are  not  involved  in  production,  partnerships between current medium-size producers and foreign companies  with access to capital and technology are the way forward. There are good opportunities for the poultry industry, which Oduntan  summarised as the growing demand for foods and those produced to higher welfare standards, as well as cost savings.

     

    The business environment

     

    Watchers have expressed concern  that  the  once flourishing small-scale poultry industry has over the past two decades undergone a severe deterioration as a result of fortunes that have diverted the industry from near self-sufficiency to a net importer of poultry products. The market has followed a steep and uncontrolled influx of cheap poultry meat from subsidised poultry producers from advanced countries.  A multiplicity of factors have accounted for the decline and mortalities of the domestic poultry industry. These include unfair competition from subsidised smuggled poultry  from advanced countries, unfavourable and indifferent government’s policy direction, escalating costs of production, inefficient methods of production, lack of funds and credit, inadequate knowledge in poultry management, lack of information needs on the part of small-scale poultry farmers, inadequate access to market, lack of processing facilities, and high rates of perishability. The business environment for the poultry industry has been challenging in recent years. For Oladipupo,  if  the  challenges are overcome and poultry production  and industry are enhanced, the industry has the potential of employing more people  and thereby helping to reduce the problem of unemployment in the country.

    Watchers believe if Nigeria creates a more friendly business environment, the poultry industry will grow and attract more investment.

     

    Technical training and assistance for  farmers

     

    More specifically, poultry producers face multiple challenges such as inefficient feeding practices and low quality of baby chickens-the two key inputs that together represent a large  percent of their costs.

    Another issue is disease management, which are critical to the sustainability of the industry.

    To  address  a lot  of   issues, stakeholders  canvassed  training programmes  to provide awareness to the famers on various diseases, health conditions, strategies and techniques to ensure the quality of poultry products and for the better health of the chickens, ducks and other domesticated animals.

    Training and mentoring on poultry production and business are also needed.  Small poultry farmers need the services of specialist extension officers who are continually assessed and up-skilled. Gaining market access is a common problem.  The    poultry sector has  lost  a  lot  in profits  over  the  years.  This loss is primarily due to the fact that local SMEs lack formal training on farm management and struggle to stay profitable.

     

     Prospects for change

     

    The outlook for the future is unclear. The plight of the poultry industry comes to the fore with regular cries for help from the industry, followed by regular promises from the government and answered with regular accusations of insufficient government support. The solution lies in the hands of the  government.The other issue  is that  watchers are  not  anticipating  any major industry investments in the short-term, given the country’s economic situation. A lot of farms  are  facing  challenges  due to limited access to bank credit and operating funds.  For  farmers, food security will be put at risk if the chicken business is not well funded. The one thing that might change this picture again could be future developments. To observers, except there is a development plan for the poultry sector to  boost production of chickens and eggs, the  import ban on frozen chicken meat may not achieve its goal. Oladipupo   urged  the  government to provide incentives  for poultry farmers, such as support for those who import poultry feed and other inputs, so that those items can be obtained at affordable prices. He  wants  commercial banks  encouraged  to give favourable responses to the funding of the poultry industry by devising innovative products to meet the needs of poultry farmers. For  him,  there is a compelling need for such interventions to restore the vibrancy of the poultry industry  and   create jobs, which will also help realise the government’s dream of reducing the rate of unemployment. There is  need  to  work  with  Small and Medium Enterprises (SMEs) and farmers in the poultry sector to strengthen their technical skills, increase profitability, and expand access to markets. The government needs to  build the capacity of  local poultry companies and poultry farmers, address industry-wide challenges, such as lack of veterinarian skills and bio-security standards, low production efficiency, and limited farm management skills.

    For sure, the ban calls for further action and reaction. On  the  whole , producers in the poultry industry are welcoming a government ban on poultry products imports.  The  ban was imposed following ongoing concerns about potential health threats.Farmers say, the ban will boost business for local poultry producers by giving them an increased foothold in the local  market.Poultry  farmers had been advocating for a ban to  protect  the  local  industry . They  say  the  ban will support hard working small holder farmers. They  also  say the ban is good news for  small and medium enterprises and will provide more job opportunities in the community. They  said  the ban is a step forward in the right direction towards improving policies that will protect local produce and increase trade

  • Fears over rising cases of aircraft collision

    Fears over rising cases of aircraft collision

    Increasing incidents of aircraft clipping each other’s wings at aprons, taxi-ways and runways nationwide has become a source of concern to experts, most of who have warned that unless the ugly trend is nipped, air safety may be threatened, KELVIN OSA – OKUNBOR, reports.

    Experts in the aviation industry are  getting increasingly worried over the recurrence of on-the-ground incidents involving aircraft at major airport runways, taxi -ways and aprons.

    The aircraft ground collision is putting aircraft owners under pressure on account of the huge sums spent to fix damaged aircraft  at either the apron,  ramp , taxi way or runway.

    The affected airlines may have spent millions of naira on repairs arising from collision not covered by insurance. At the Lagos Airport, Arik Air, Emirates Airlines, Hak Air, First Nation Airways and other domestic carriers aircraft have been involved in ground collision with the affected airlines’ personnel and airport authority officials trading blames on the cause of such incidents.

    This has brought to the fore critical questions bordering on the implementation of safety management systems by the affected airlines as well as the regulatory authority.

    Industry watchers are asking questions on what measures are being put in place by the regulator, airport authority and airlines to deploy adequate technology and training of ground personnel to avoid such incidents.

    Some experts, including secretary of the Aviation Roundtable ( ART), Group Captain John Ojikutu ( rtd), attributed the rising incidence of ground collision of aircraft to the failure of the Nigerian Civil Aviation Authority (NCAA) to implement safety recommendations by the Accident Investigation Bureau ( AIB).

    Ojikutu said unless urgent steps are taken to check the rising incidents of ground collision at the apron, taxi – way and runway, the stage is set for an avoidable accident.

    He said though airside incidents  are  bound to happen, but the relevant authorities, including the airlines, must take urgent steps to learn useful lessons to avoid recurrence.

    “The recurring incidents involving aircraft clipping each other’s wings at the apron, taxi-way and runway should be re-examined with the regulatory authority held responsible. The NCAA were doing its job of proper regulation of the industry, why should airlines be experiencing regular ground collision of their aircraft”

    According to Ojikutu, rather than taking urgent steps to address the safety challenge, airlines and the Federal Airports Authority of Nigeria ( FAAN) have been shifting blame.

    He said:” The recurring incidents involving aircraft clipping each other’s wings at the apron, taxi-way and runway should be re-examined with the  regulatory authority held responsible.

    If the NCAA were doing its job well, we should not be witnessing such incidents.

    The NCAA should be held responsible, that is why we are having incidents of aircraft collision on the apron.  If the NCAA were doing its job of proper regulation of the industry, why should airlines be experiencing regular ground collision of their aircraft.

    A few years ago when an Arik Air aircraft collided with a Nigerian Air Force plane in Jos Airport, the incident ended up as a blame game.

    The NCAA claims that it carries out investigations on aircraft collision, what has happened to previous investigative reports? Where are the accident reports?

    After the June, 3, 2012 DANA Air crash, the AIB issued over 150 safety recommendations, but the NCAA did not implement up to 30 per cent of the safety concerns.

    Lending his voice to the issue, the President of Association of Foreign Airlines Representatives in Nigeria (AFARN), Kingsley Nwakoma, said if the size of aprons at airports nationwide are not expanded, the industry risks more incidents at the airside.

    He said the recurring incidents could be reduced if airsides at airports are illuminated. He accused the airport authority of not doing enough to expand airside infrastructure, which he said is long overdue. He said the facilities put in place many decades ago can no longer contain the size of aircraft on the apron for either passenger or cargo operations.

    He said: “I think the authorities are not doing enough to expand apron facilities. This explains the increase in aircraft ground collision. Until urgent steps are taken, the ugly trend may continue.”

    AFRAN has, therefore, appealed to the Federal Government to begin the expansion of the cargo apron of the Murtala Mohammed International Airport (MMIA), Lagos. He said  the present limited size of the apron is affecting their operations.

    Nwokoma said the expansion of the cargo apron was long overdue, after decades of its construction as its current size could not match the scale of their operations.

    He said the expansion would generate more revenue for the government, especially at this time, when the price of crude oil is crashing.

    Nwokoma said that it was becoming more difficult for wide-bodied planes to land at the airport, as a result of the inability of the government to construct a bigger apron for the airport. He urged the government to address the situation to avoid embarrassment from the international community.

    “We have an airline that brings in goods and is directed to park at the international terminal’s tarmac, instead of using the cargo terminal. This is because the cargo apron is so small and we have had issues and incidents involving cargo planes in the past.

    “That the cargo apron has not been expanded since the airport was built and inaugurated in March 1979 is an eye sore; we have been crying, calling for this expansion because safety is key here,” he said.

    Nwokoma frowned at the abandonment of  the cargo by a contractor awarded the contract for its expansion, noting that the facility would be of benefit to the nation.

    “This is one of the projects that the government must look into,” he said.

    A few weeks ago,  a Boeing 777-200LR belonging to Emirates Airline and a domestic airliner a B737-400 owned by HAK Air were involved in ground collision at the Murtala Muhammed Airport, Ikeja, Lagos.

    Worried over  the incident, the  AIB deployed a team of investigators to determine the circumstances surrounding it with a view to making safety recommendations. The Emirates Airlines aircraft  marked A6-EWD, according to the spokesman of the AIB, Tunji Oketumbi, was taxiing for take-off en-route Dubai when its wing tip cut into the B737-400 HAK aircraft parked on the apron of the domestic wing of the airport.

    While the Emirates aircraft had little damage on its wing tip, the HAK Air B737 was damaged substantially.

    The Emirates flight was aborted as a result of the accident. A few weeks later, two aircraft belonging to First Nation Airways also  collided at the Murtala Muhammed Airport.  The incident occurred when one of the planes was reportedly taxiing from the runway to MMA2 to drop off passengers while the other was preparing to take off for Port-Harcourt.

    Confirming the mishap, the General Manager, Public Affairs of the NCAA, Fan Ndubuoke, said there was no casualty and the incident had been referred to the AIB for further investigation.

    However, First Nation Airways blamed officials of the FAAN for the incident. An official of the airline, Rasheed Yusuf, in a statement, said if FAAN officials were diligent the incident would have been avoided.

    The airline said: “We wish  to clarify the ground incident that occurred on Friday, July 17, 2015. Our Aircraft Registered No. 5N-FND wing tip touched the wing tip of another sister aircraft already parked at another gate. This incident was avoidable if the Federal Airport Authority of Nigeria marshallers had been diligent to avoid marshalling the aircraft wrongly.”

    He went on:”We urge FAAN to retrain the marshallers as we understand that the marshallers at MMA2 are deployed by FAAN under an MOU with Bi-Courtney Aviation Services Limited, the operator of MMA2, Ikeja. It is important to emphasise that at no time was the safety of passengers at risk.

    “The regulatory authorities will also need to enhance oversight of the marshallers and their authorisation to arrest the growing incidents of aircraft damage on ground in Nigeria which is embarrassing. Besides the huge losses that First Nation and other airlines suffered as a result of avoidable ground incidents.You will recall that a similar incident involving Emirate aircraft occurred only a couple of days.”

    A few years ago, a Turkish Airline plane wings collided with that of Max Air plane which  brought in Pilgrims from Saudi Arabia.

    The Turkish Airline plane landed safely but was taxiing to stop at the apron when its wing collided with  that of Max Air.

    “The collision resulted in minor damages to both airplanes,” according to the report.

    Ndubuoke confirmed the incident. He however, said damages to the aircraft belonging to both airlines were minor and that both planes had been taken away for repairs.

    According to aviation experts, the global aircraft industry loses up to US$11 billion annually to accidents and incidents on the ground. Experts say commercial aviation, which is a multi-billion dollar industry employs high level technologies to maintain safety standards.

    Such current high level of flight safety,  experts say, has been achieved by investment in overlapping safety systems such as surface movement radar, altitude transponders and other technology with the aim of preventing a single source error leading to a reduction in safety margins.

    However, the same systems, experts say, cannot be utilised to protect the aircraft from collisions during ground operations.

    A Nigerian pilot who pleaded not to be named said: “This remains one area where single source human judgment remains unchecked, namely clearance between the aircraft structure and obstacles during aircraft maneuvers on the airport ramp and taxiways.

    “A single ground crew member usually makes decisions on safe clearance during “push- back” or a flight crew member during taxiing to and from the standard positions

    One of the difficulties in assessing implications of aircraft ground accidents is that the available data is insufficient. ”

    Experts have called on the NCAA to furnish the AIB with sufficient information to investigate the recurring trend of aircraft ground collision.

    Worried over the trend, the Nigerian Air Traffic Controllers Association ( NATCA) urged government to take a critical look at the reconstruction of the Lagos Central Taxiway, a second Abuja runway, a backup for the  Total Radar Coverage of Nigeria (TRACON ) system as well as rehabilitation of airport facilities.

    According to its president,  Victor Eyaru the taxiway has been out of use for more than six years leading to usage of Eastern taxiway whenever only Runway 18L/36R is available for landing and take-off. He said ground collusions have been recorded whenever wide bodied aircraft make use of the Eastern taxiway

    He said :”Aircraft accidents on ground have been recorded more than twice whenever wide bodied aircraft make use of the Eastern taxiway. The most recent was at 2045 UTC on the July 6, 2015 when the Emirate’s aircraft B777 flight UAE784 ran into parked Hak Airline’s aircraft on the apron when FAAN Electrical department switched off lights on the longer Runway 18R/36L for maintenance.”

    “The un-serviceability of the same Eastern Taxiway has prevented aircraft from accessing the only Compass Swing available in the airport. We call on government to urgently fix this taxiway to prevent avoidable aircraft accidents on ground and to increase the capacity of the airport.”

    As part of measures to fix the sore situation,the Federal Airports Authority of Nigeria ( FAAN) last week directed owners of abandoned aircraft at the graveyard of the Lagos International Airport to evacuate them to create more space for functional for aircraft for maneuvering at the airside .

    According the spokesman of the authority, Mr Yakubu Dati, the action has become necessary due to recurring operational hitches that have been posing serious safety concerns to aircraft and some infrastructure at the terminal.

    The director general of NCAA, Captain Mukhtar Usman, has however absolved  the regulatory authority of any laxity in the recurrence of incidents.

    He said the authority will continue to insist that safety recommendations arising from such incidents are implemented.

    He said relevant aviation agencies are collaborating to ensure air safety is not threatened. Ground collision is not restricted to Nigeria.It is a major concern for air safety in other countries including the U.S.

    The International Air Transport Association ( IATA) is also worried over the issue.

    In a report published in late 2007, the U.S. Government Accountability Office (GAO) highlighted that the lack of complete accident data and standards for ground handling hinders the effort to understand the nature, extent and cost of accidents and to improve safety. Investigative agencies only look into certain classes of accidents, and that their data is incomplete, especially in the area of nonfatal injuries.

    In 2002, the Flight Safety Foundation (FSF) were requested to investigate methods of improving ramp safety. During their research, FSF discovered that the extent of the cost of ground accidents far exceeded expectations due to the hidden nature of indirect costs.

    For example, the cost of repair is included in the cost of maintenance, and gate closures, diversion and re-ticketing costs are recorded elsewhere and usually not correlated to the incident. Because accidents also result in cancelled flights, lost ticket revenue, added costs for passenger lodging, and overtime for repairs, even minor ramp incidents can cost airlines $250,000 or more. The FSF estimates that for every dollar of aircraft damage, the actual cost to airlines is at least five times that amount.

    In 2003 the FSF launched the Ground Accident Prevention (GAP) programme. Using data developed by the International Air Transport Association (IATA), the Foundation currently estimate that 27,000 ramp accidents and incidents occur worldwide every year, which represents one per 1,000 departures. About 243,000 people are injured each year in these accidents and incidents; the injury rate is nine per 1,000 departures.

    The FSF currently estimate that the combined costs to the industry for ground accidents worldwide to be around US$10.8b. This includes commercial aircraft repairs (US$4b), corporate aircraft repairs (US$1b) and litigation charges as a result of injuries or deaths (US$5.8b).

    The Operator’s Flight Safety Handbook (OFSH) published by the FSF shows that damage and indirect costs from an aircraft to aircraft ground collision are 28 times greater than when a service vehicle collides with a stationary aircraft.

    Figures are not given in the report for the cost implications of a moving aircraft colliding with airport facilities but it can be reasonably conjectured that it would be at least half of the cost of an aircraft to aircraft collision.

    “Worried over the trend, the Nigerian Air Traffic Controllers Association  (NATCA) urged government to take a critical look at the reconstruction of the Lagos Central Taxiway, a second Abuja runway, a backup for the  Total Radar Coverage of Nigeria (TRACON) system as well as rehabilitation of airport facilities”

     

  • Towards a paperless stock market

    Towards a paperless stock market

    The stock market is looking at next January to enter a new phase of full dematerialisation; an era where there will be no share certificates and shareholdings will be denoted in electronic form. In this report, Capital Market Editor, Taofik Salako highlights the issues around the conversion from a certificate-based market to fully automated market.

    Rectangular and squared, with swarming colours and terse words; share certificates come in various shapes and colours. For decades, they have represented the ownership of shares in a company. They come with the aura of wealth, class and symbolic reverence.

    From generation to generation, there have been exciting stories of framed share certificates, rat-bitten and well-tucked shares in old wardrobes and boxes, among others. While Nigerians have since learnt to deposit money in banks and take the statement of accounts and credit alerts as evidence of their deposits, the attachment and decade-long bond with share certificates have made many people to demur from converting their share certificates into electronic share depository.

    “Shareholders will be required to provide the CSCS with their stockbroker’s details. Shareholders with accounts in more than one stockbroking firms will be required to indicate their preferred stockbroking firm”

    Protesting shareholders and reluctant capital market operators and quoted companies frustrated the initial effort to do away with share certificates from January 1, 2013.

    Now, capital market regulators, operators, government, companies and other stakeholders are launching a new scheme to achieve full dematerialisation of share certificates and automation of issuance and depository at the capital market. Securities and Exchange Commission (SEC) and other stakeholders under the auspices of the Capital Market Committee (CMC) had set December 31, 2014 as deadline for full dematerialisation of share certificates. Dematerialisation is the elimination of share certificates or documents of title representing ownership of securities.

     

    From share certificates

    to electronic depository

     

    The latest effort at full dematerialisation is by nearly all stakeholders in the capital market. The CMC, chaired by the director-general of SEC, consists of chief executives of all registered capital market operators, including stockbrokers, solicitors, custodians, fund managers, issuing houses, rating agencies, registrars, reporting accountants, trustees and consultants among others.

    Other members included chief executives of the Chartered Institute of Stockbrokers (CIS); Nigerian Stock Exchange (NSE), Central Securities Clearing System (CSCS),  NASD Plc, FMDQ OTC Plc, Africa Exchange Holdings (AFEX) and Nigeria Commodity Exchange (NCX).

    The CMC also included two members each from observer groups, which included Asset Management Corporation of Nigeria (AMCON), Central Bank of Nigeria (CBN), Corporate Affairs Commission (CAC), Debt Management Office (DMO),  Federal Ministry of Finance, Federal Mortgage Bank of Nigeria (FMBN), Federal Inland Revenue Service (FIRS), Nigerian Deposit Insurance Corporation (NDIC), Investment and Securities Tribunal (IST), Nigerian Investment Promotion Council (NIPC), National Insurance Commission (Naicom), National Pension Commission (Pencom) and Financial Services Regulation Coordinating Committee (FSRCC).

    The missing link, the minority retail shareholders, is being co-opted through a programme of massive enlightenment. The only obvious challenge, besides the unwillingness to turn in share certificates by individuals, is the Companies and Allied Matters Act (CAMA), whose sections 146 and 147 (1)  enshrined share certificate as evidence of shareholding.

    The CMC is addressing legislative constraints through a high-powered lobbying and advocacy group, a capital market advisory council that will serve as advocacy front to lobby for legislative and policy changes.

    The advisory council, whose membership is being finalised by SEC, will be mandated to engage the National Assembly, Judiciary and the Federal Executive Council on key changes to enhance the growth of the market. Under full dematerialisation, all share certificates will be converted into investors’ share accounts in the CSCS while subsequent issuance will be allotted through electronic-allotment (e-allotment). E-allotment is the direct transfer of subscriber’s share allotment to his investor’s account with the CSCS. Dematerialisation will also include automation of bonus share or scrip issuance, otherwise known as electronic bonus (e-bonus).

    General Manager, Central Securities and Clearing System (CSCS) Plc, Joseph Mekilliuwa, has identified three categories of investors now under the CSCS; those who have fully dematerialised, partially dematerialised and those still fully holding to share certificates. The target now, according to him, is to get all shareholders into the first category of full dematerialisation. Under the  initiative, registrars will be required to turn in the registers of companies in their custody to the CSCS, which will create shareholding accounts for all the certificates. Shareholders will be required to provide the CSCS with their stockbroker’s details. Shareholders with accounts in more than one stockbroking firms will be required to indicate their preferred stockbroking firm while those with multiple accounts either with the CSCS or stockbroking firm will be required to indicate their preferred account for the final uploading of the dematerialised shares. Shareholders can obtain dematerialisation forms from their stockbrokers and on the websites of the CSCS and SEC. Already, some 17 registrars have complied with the request to turn in their registers to the CSCS. Mekiliuwa said CSCS has created a seamless process to effortlessly convert and credit the shares to shareholders’ accounts.

     

    The making of an e-stock market 

     

    The full dematerialisation of share certificates is the main link in a jigsaw of the full automation of stock market. Initiatives, including electronic allotment (e-allotment), electronic bonus (e-bonus) and electronic dividend (e-dividend), would synchronise with fully dematerialised shares to create a stock market that runs figuratively on the screen, almost without papers. E-allotment, the direct transfer of subscriber’s share allotment to his investor’s accounts with the CSCS, will remove some loopholes in the current process of capital issue.

    The capital issue is long-drawn, with many steps but allotment is a major stage during which shares are allocated to subscribers according to their applications, the volume of shares on offer and the subscription level. After the verification and clearance of the allotment by the SEC, then come several steps, including printing of share certificates, signing and sealing of certificates and packaging and posting, all which are subject to many extraneous manipulations.

    Complaints of missing-in-transit, incorrect names and addresses and the often-excruciating process and cost of dematerialisation are major disincentives in the share certificate system. The process of correction of any error, no matter how small, is as laborious as the initial process of issuance, and sometimes more difficult. To the issuer, the cost element in the share certificate system is usually high given costs of printing several thousands of share certificates, some with units that barely worth the cost of the paper, packaging, posting and duplicate share certificates among others. Under the e-allotment, the registrar will simply send a “soft” (electronic) copy of the final allotment, cleared by SEC, to the CSCS, which will automatically credit the account of all shareholders, cutting off all other cumbersome steps, especially dematerialisation. The registrar, however, will still notify shareholders of the allotment. The same applies to bonus issue.

    Perhaps the most significant immediate gain from the full automation of the shareholding framework is the enshrinement of the principles of equality and access in the capital market. All shareholders, high networth, medium and small; highly connected and less influential, insiders and outsiders, will be on the same pedestal with regard to access to their shares and can take investment decision as they wish. Allotted shares from initial public offerings (IPOs) and supplementary offers as well as bonus issues would be credited to shareholders’ accounts simultaneously, removing a major incentive for share certificate and market manipulation. This is an immeasurable gain to the public.

    The share certificate system has been under unyielding criticism over allegations of preferential release of share certificates to select influential investors, who quickly take advantage of high capital appreciation before the masses of investors get their share certificates and follow through the windy dematerialisation process. Besides, equal access to listed shares, will enhance the efficiency of the market and minimise extraneous influences that unduly distort the price discovery process in the stock market. With other systems, such as e-dividend, the registrar-to-bank direct lodgement of shareholders’ dividends in their bank accounts, and direct cash payment, a new system that will directly pay net proceeds of any investor’s transaction to his bank account rather than the current system of payment to stockbroking firm for onward disbursement, dematerialisation will enhance good corporate governance and best practices in the capital market, the much-needed tonic for sustainable long-term growth.

     

    Between hopes and fears

     

    For effectiveness of the full dematerialisation plan, all stakeholders have crucial roles to play. The first role is for all stakeholders-shareholders, registrars, issuers, issuing companies and other professional parties and the regulatory authorities, to put their collective will behind the dematerialisation and other related systems and form a collective front to seek for solutions that may impede the realisation of the objective. There is already a groundswell of supports for the dematerialisation, but these also come with some reservations and fears of possible unintended negative consequences.

    Chairman, Ibadan Zone Shareholders Association (IBZA), Chief Sola Abodunrin, said dematerialisation would further enhance the global competitiveness of the capital market. Abodunrin, who is a member of the board of the Investors’ Protection Fund of the NSE, said minority retail shareholders have realised the need for full dematerialisation and would support the initiative.

    He however called for adequate investors’ education to enlighten investors about the benefits of full dematerialisation and other initiatives under the capital market master plan. Most other shareholders’ leaders echoed the same opinion. Shareholders’ leader and founding member of the Nigeria Shareholders Solidarity Association (NSSA), one Nigeria’s largest and most active minority shareholders’ group, Alhaji Gbadebo Olatokunbo, said while the older generation of shareholders might find it difficult to adjust to the technology-driven system, adequate investors’ education would assist in bridging the gap and convince all about the need to embrace the new system.

    He said the CMC should design appropriate checks and outputs that ensure that shareholders can still have access periodic hard-copy and printable reports on their shareholdings. “We might start to lose focus on record-keeping of our stocks if everything is done electronically. We need to have periodic paper notifications on all the transactions. Even though some registrars do send counterfoils and notices on e-dividend and e-bonus, most others only rely on the electronic system, which are not good enough for record purposes, because several people still don’t take “SMS” serious,” Olatokunbo said. He said the full dematerialisation framework should include some mandatory hard-copy notices in addition to electronic notifications from registrars and the CSCS. He noted that CSCS provides such print-out based on shareholder’s request but rather it should be a generalised service to ensure that all shareholders have periodic updates on their accounts.

     

    The stance of shareholders

     

    President, Constance Shareholders Association of Nigeria, Shehu Mikail, said the capital market is ripe for full dematerialisation.

    “Modern-day business transaction is being done electronically; why not make market also compliant. We, investors, just have to understand that we cannot stand on one point; we need to move along the modern way of business transaction. It will also give more room for the companies to save some expenses,” Mikail said.

    He called on the National Assembly to earnestly undertake any amendment that would facilitate the process of full dematerialisation, urging the legislature to enact laws that would block all loopholes and leakages to enhance investors’ confidence in Nigeria.

    Managing Director, GTI Securities Limited, Mr. Amos Aledare, said full dematerialisation would further unlock the latent potential of the stock market and lead to increase in turnover at the NSE and better price discovery.

    According to him, full dematerialisation will save time, cost and translate to efficiency in the operation of the market while positioning it as internationally competitive and transparent.

    “It is a welcome development as it will cause a better turnaround timeline for settlement between purchase of a security and selling of a security. However, it will impose huge responsibility on the CSCS in ensuring that the shares domiciled in its system are properly aligned to the right owners,” Aledare said.

    He also stressed the importance of massive enlightenment to outline the process and benefits of the new system to the people.

    Chief Executive Officer, Finawell Capital Limited, Mr. Tunde Oyekunle, emphasised the need for all-inclusive approach and evaluation as undertook in the conception of the framework all through the implementation.

    “The advice is that stakeholders should sacrifice self interest and work together towards an efficient and successful dematerialisation process that will improve the capital market. The process should be viewed from all stakeholders’ perspective with participation and contribution from all stakeholders. The objectives should be streamlined and revisited to ensure that the process does not lose sight of stated objectives,” Oyekunle advised.

    Director-General, Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, said the Commission would work with all stakeholders to address the main challenges facing the implementation of the full dematerialisation and other initiatives, including inadequate investors’ data bank, otherwise known as Know Your Customer (KYC), regulatory bottlenecks and low level of financial literacy.

    SEC has already demonstrated that it can build interconnected platform to drive the initiative with the launch of the e-dividend payment portal, which was developed in collaboration with the Central Bank of Nigeria (CBN) and Nigeria Inter-Bank Settlement System Plc (NIBSS). This collaboration removed long-standing barrier in paying dividend to non-current and dormant accounts. The e-dividend will facilitate payment of dividends into any type of bank accounts, including current and non-current accounts as well as dormant accounts.

    The CMC is also looking at leveraging on the bank verification number (BVN) to complement the shareholder authentication. According to NIBSS, there are 17.5 million Nigerians with the BVN. There are about five million investors in the capital market.

    Gwarzo assured that SEC would make all necessary institutional changes to ensure the success of the dematerialisation while driving collective efforts by all stakeholders to address changes beyond the ambit of the Commission. Already, SEC has reviewed some of its rules and issued new guidelines.

    For instance, SEC, through new guidelines, directed registrars to convert company registers they manage into electronic formats and supply same to the CSCS as part of the dematerialisation. SEC has also launched a massive public enlightenment campaign that covers the 36 states and the FCT, being aired in Nigeria’s three major indigenous languages, English and Pidgin English. The campaign is expected to run massively for three months and continue incrementally afterwards.

    Undoubtedly, the success of the full dematerialisation depends on the supports of all stakeholders. While the regulators should provide enabling environment and seamless process to facilitate the success of dematerialisation, they must also show the firmness to push this through and deter flimsy excuses by other parties. Shareholders, arguably the greatest beneficiary of dematerialisation, should support the success of this scheme by complying with basic requirements.

    “Perhaps the most significant immediate gain from the full automation of the shareholding framework is the enshrinement of the principles of equality and access in the capital market. All shareholders, high networth, medium and small; highly connected and less influential, insiders and outsiders, will be on the same pedestal with regard to access to their shares and can take investment decision as they wish”

    Registrars’ reaction

    Registrars have onerous responsibilities in the implementation of dematerialisation. The main task is that of adequate technological and human capacity to back up the system. Registrars need to build up adequate resources including compliant software to support full dematerialisation. The listing of CSCS on the NSE, besides its listing on NASD Plc, will also reinforce confidence in the depository as a collective asset of all shareholders. In all these, SEC, beyond its regulatory muscle, could further incentivise the process to encourage operators that interface with investors, such as stockbrokers and registrars, to lead the change.