The Nation Newspaper

Category: Issues

  • Illicit cash: All eyes on Buhari to stem the haemorrhage

    Illicit cash: All eyes on Buhari to stem the haemorrhage

    The figures are unflattering. Over $150 billion was stolen from Nigeria in the last 10 years, with over 90 per cent of the loot related to oil. Africa’s largest economy also occupies an unenviable seventh position among the top 10 highest illicit capital outflows in the developing world, losing a cumulative $217.7 billion from 1970 to 2008. But there are indications that the President Muhammadu Buhari administration’s war against corruption is off to a good start. This has raised hopes that the monster may soon be caged to pave the way for real development. Assistant Editor CHIKODI OKEREOCHA reports.

    It may have been long in coming, but when it finally did last week, the shake-up at the Nigerian National Petroleum Corporation (NNPC), beginning with the appointment of a new Group Managing Director (GMD), Dr. Emmanuel Kachikwu, gladdened the hearts of not a few Nigerians.

    For one, it was an indication that the war against corruption is off to a good start. Most importantly perhaps, the choice of NNPC for the beginning of the cleansing, is seen by many as a clear and bold statement that President Muhammadu Buhari’s administration’s resolve to tackle the manace is on to a promising start.

    Barely a day after the appointment of Kachikwu as NNPC’s helmsman, all the Corporation’s Group Executive Directors were also booted out.

    That the NNPC is one of the first to come under the administration’s scrutiny is hardly surprising. The oil & gas industry, which the NNPC supervises, both as industry regulator and active player, is the cash cow and mainstay of Nigeria’s economy.

    It accounts for over 90 per cent of her foreign exchange earnings, about 8.97 per cent of the Gross Domestic Product (GDP), and 80 per  cent of government revenue.

    However, under its watch, much of Nigeria’s oil fortune is being squandered on account of the Corporation’s long history of graft, waste and mismanagement. This was what prompted persistent calls by experts and Nigerians for a probe of the management.

    Such calls are not without justification, considering the mind-boggling revelations of pervasive corruption in the industry. For instance, between 2009 and 2012, about 160 million barrels of oil worth $13.7b was stolen, according to the Nigerian Extractive Industries Transparency Initiative (NEITI).

    The United Nations Development Programme (UNDP), also estimates that $400billion was stolen from the country between 1960 and 1999. Even Buhari himself raised the alarm that up to last month, July 10, some people in government were illegally selling 250,000 barrels of oil per day.

    To date, Nigerians are yet to come to terms with the fact that despite earning about $500 billion from crude oil in the five years to 2014 and about $1tr in 50 years, according to the US Department of Energy, there is not much on ground to show for it either in physical infrastructure or human development indices. For instance, United Nations Children’s Fund (UNICEF) estimated that 76.8 million of the 170 million population still lack access to drinking water in 2014, while 64 million Nigerians were illiterate, according to the National Mass Education Commission. Over 50 per cent of Nigerians also lack access to basic health care services.

     

    Illicit financial flows

    Much of the disturbing statistics of Nigeria’s heavy losses to corruption appear to be in form of illicit financial flows (IFFs). For instance, a Washington DC-based research and advisory organisation, Global Financial Integrity (GFI), recently released a report, which placed Nigeria 7th among the top 10 highest illicit capital outflows in the developing world.

    GFI, which produces high-calibre analyses of illicit financial flows, said while Africa loses $50 billion annually in IFFs, Nigeria topped the league, losing a cumulative $217.7b from 1970 to 2008. GFI said over 90 per cent of that loss was related to oil. It also added that in the last 10 years alone, $150b was stolen from Nigeria, which perhaps, was why the recovery of the $150b stolen oil wealth was on the priority list of Buhari’s request on Kachikwu.

    GFI did not say anything new. It only added its voice to growing public outcry, particularly by economic experts and stakeholders that the economy is bleeding profusely from IFFs.

    Sometime last year, the immediate past Director General of the Securities and Exchange Commission (SEC) and Vice President/Treasurer of the World Bank, Ms. Arunma Oteh, raised the alarm that Nigeria lost over $140 billion to IFFs between 2002 and 2011, a period of nine years.

    Oteh, who was keynote speaker at the 2nd Christopher Kolade Lecture on business integrity held in Lagos in September, last year, said: “Nigeria has lost more to illicit financial flows than any other African country between 2002 and 2011, even being listed in the top 10 globally. Within a 9-year period we lost over $140 billion to illicit financial flows.”

    She added that poor countries are losing an estimated $1 trillion annually to such illegal financial activities as money laundering, tax evasion, transfer pricing and embezzlement.

     

    Multinational companies,

    banks culpable

    Oteh said a lot of the illicit outflows, which are basically monies illegally earned, transferred or utilised, was through the illicit commercial activities of multinational companies. The multinational companies some of which are in the oil & gas industry are allegedly involved in big ticket crude oil swap deals and contract splitting through the help of unscrupulous government officials and their collaborators in the organised private sector including foreign businesses.

    Some commercial banks are also said to be involved in the transfer of the loot.

    “In all sincerity, I don’t think the banks are doing or have done enough to curtail these sharp practices. More often than not, they are complicit. Such deals can’t be pulled without the active connivance of financial institutions,” a Security Expert and Founder, Forenovate Technologies Ltd, an Abuja-based security risk management consultancy, Mr. Don Okereke, said.

    The UK-trained security expert added that lately, Nigerian banks had found a new love: a penchant for opening foreign branches. “Some schools of thought see this as an avenue to siphon, launder money abroad. The Nigerian government must beam its searchlight on the plethora of foreign bank branches operated by Nigerian parent banks, Okereke told The Nation.

     

    How IFFs hurt economy,

    fuel terrorism

    Mr. Okereke said the implications of IFFs on the economy are grave and far-reaching. He said, for instance, that IFFs deplete the nation’s resources while enriching that of foreign countries where these monies are domiciled. Said he: “If these monies were/are invested in the Nigerian economy, even though ‘stolen’, at least jobs will be created for the teeming unemployed youths. It means that these outflows indirectly lead to increase in crime since our country’s resources are being looted by people in corridors of power and no jobs are created, this leaves idle youths with no choice than to do crime.”

    Another implication of this, he said, is that Nigeria now has a situation where some folks are richer than their State, possibly as rich as the country. “Some of these nouveau-riches use their ill-gotten resources to fight the government and ferment trouble. In other words, they see themselves as a government. Some even argue that illicit financial outflows could be channelled into sponsoring terrorism and insurgency,” he added.

    Oteh confirmed this much, saying: “We now have a situation where these illicit outflows are not only depriving our country of desperately needed capital but are also being used to finance terrorism abroad and within our shores.” she said a security expert who trained members of staff of SEC recently shared some pieces of intelligence with the Commission indicating that the rampaging Boko Haram sect received over $70 million between 2006 and 2011 through shady activities like money laundering, oil bunkering, kidnapping and dealing in drugs.

    That is not all. The $150 billion stolen in the last decade as confirmed by GFI is more than the about $100 billion the World Bank said Nigeria needed to invest in power in 10 years to lift electricity supply to an acceptable level and tackle poverty and unemployment.

    Again, Oteh agrees. While noting that this is money desperately needed for the Millennium Development Goals (MDGs) and could prevent as much as 3.6 million deaths annually in the world’s poorest countries, she said in the case of Nigeria, an estimated $50 billion investment is required to ensure stable electricity supply.

    The World Bank Vice President was emphatic that IFFs and corruption are two issues that countries have been battling with and Nigeria suffers greatly from both issues. “Corruption has been identified as the second most problematic factor to doing business in Nigeria ahead of factors including access to finance and terrorism,” she stated, adding that the G-20 is focusing on combating illicit financial flows especially considering the fact that poor countries are losing a lot to such illegal activities.

    Oteh, however, said considering the impact of corruption and anti-money laundering violations on Nigeria, efforts have been made to strengthen the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in Nigeria.

    “Other countries are also implementing reforms to make it harder for wrongdoers to find a hiding place. The United Kingdom has the Anti-Bribery Act 2010 that requires companies with any link to the UK to have robust structures to forestall shady dealings. The United States has long had the Foreign Corrupt Practices Act of 1977, which provides for up to $25 million in fines and 20-year jail term,” she said.

     

    What options for Buhari?

    Since the inauguration of Buhari’s administration on May 29, his perceived hard stance against corruption has largely been read from his body language. His body language is believed to have galvanised the hitherto inefficient anti-corruption agencies, such as the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and Other Related Offences Commission (ICPC), and the Code of Conduct Bureau (CCB) into action, leading to the arrest of some Politically Exposed Persons (PPPs). However, the thinking is that last week’s shake up in NNPC was a pointer that the days of reckoning are finally here for corrupt people.

    However, experts have proposed some  measures that they believe will guarantee success in the war against entrenched corruption. With regards to IFFs, for instance, Okereke said ensuring strict financial regulation and intelligence surveillance of financial transactions as well as genuine cooperation and partnership with Western governments and institutions to check money laundering would go a long way in curbing the trend.

    Okereke was not done. He also wants the Federal Government to “Mandate all revenue generating, collecting Ministries, Departments and Agencies (MDA’s) to henceforth remit every dime they collect/generate to the federation account. Ensure that award of government contracts, crude oil blocks etc. are very transparent and in line with global best practices, and allow unfettered access to public information and free speech. Unnecessary bureaucracy enshrined in the freedom of information law must be purged.”

    He also urged government to strengthen the Federal Inland Revenue Service (FIRS), the Nigerian Financial Intelligence Unit (NFIU) and the anti-corruption agencies to be alive to their responsibilities.

    The thinking is that reforming the EFCC, the ICPC and the CCB involves a radical overhaul of their scandalous and uncoordinated investigations and weak prosecution, which are factors believed to be responsible for losing high profile cases in the past. It also involves the strategy of making the institutions strong and efficient and without overt interference from the political class. Incidentally, the need for some of these institutional reforms is not lost on Buhari. This was why the President gave the new NNPC helmsman a matching order to reshape the Corporation, by, among other things, cleaning up the NNPC system of corrupt elements, work with the EFCC and the Directorate of State Service (DSS) to trace and recover stolen oil cash, review NNPC’s structure to compete globally, and give targets to all subsidiaries and put in place performance benchmarks.

    The President also wants the GMD to fixe all refineries, which must work at optimal level, “even if it means using expatriates in the interim.”

     

    Support rises for fight against IFFs

    This must be music in the ears of African governments, which are hard-hit by the unbridled looting of their commonwealth. Already, the continent appears poised to compliment and collaborate with the world powers in the bid to halt the rampaging monster that has continued to frustrate efforts at sustainable growth and development.

    For instance, the International Trade Union Confederation (ITUC)-Africa pledged its commitment to support African countries and the African Union (AU) in the fight against IFFs from Africa. At the end of a two-day ITUC-Africa Human and Trade Union Rights Network meeting in Abuja, Nigeria, the ITUC-Africa General Secretary Mr. Kwesi Aou-Amankwah, said the Thabo Mbeki panel report on IFF from Africa showed that a conservative figure of $50b was leaving the continent annually.

    Aou-Amankwah therefore, pledged that ITUC-Africa shall continue to pressure big business and multinational companies to pay their fair and true share tax in countries where their production and profit activities take place. “The financial haemorrhage as a result of IFF continues to harm our economies and people, as it reduces monies for social spending on education, potable water, health and sanitation, among others.

    “These real drivers of development are lost because businesses continue to find ways to manipulate tax rules and administrations. We, therefore, say `stop the bleeding,’ which is our ongoing campaign on halting IFFs from Africa,” he said, urging governments to desist from the current harmful tax competition among themselves with the use of sundry and endless incentives.

     

    AfDB joins the fray

    The African Development Bank (AfDB) has also joined the battle to stop IFFs. In doing so, AfDB Country Director, Nigeria, Dr Ousmane Dore, said while Nigeria had embarked on milestone reforms aimed at improving her Domestic Resource Mobilisation (DRM), large scale IFFs out of the country still required urgent attention. “Some of the push factors in illicit capital flows include mainly issues like corruption perception indicators, the size of the underground economy, and weak regulatory institutions,” Dore said.

    Dore, while delivering a keynote address at a ‘Multi- Stakeholders’ meeting on Illicit Financial Flows (IFFs) out of Nigeria” in Abuja, said the AfDB recently commissioned a study entitled, ‘Nigeria: Illicit Financial Flows due to Trade Misinvoicing, 1960-2012″, with its report focused on trade mis-invoicing. According to him, Nigeria has for many decades experienced serious problem with trade misinvoicing in the form of over-invoicing of imports and under-invoicing of exports for the purpose of shifting money out of the country.

    “Between 1960 and 2011, Nigeria experienced cumulative IFFs totalling $83.3b or 5.6 per cent of total goods trade through trade misinvoicing only. Export under-invoicing takes the larger share of $44b, while the balance of $39.3b was due to import over-invoicing,” he added, stressing the need for government to undertake critical tax reforms with focus on regulatory, institutional and legal issues, including reduction in complications in tax assessment, computation and collection.

    Former UN Secretary-General Kofi Annan could not agree less. He noted that “Stemming the hemorrhage of finance lost through illicit financial transfers will be a key driver of domestic resources that can be used for future development.”  Annan is Chairman of the Africa Progress Panel whose recent report ‘People, Power, Planet’ highlighted the impact illicit flows have on the continent of Africa. The report calls on the international community to “support African efforts to strengthen tax and customs administration and reduce illicit financial outflows, especially via trade misinvoicing.”

     

    The buck stops on Nigeria’s table

    Though a continental problem, Nigeria, Africa’s largest economy with GDP size of $500b is saddled with the responsibility of coordinating the fight against corruption, especially with regards to IFFs. Buhari may have put the right foot forward in halting the trend by beaming the searchlight on the NNPC, but the consensus is that a strong commitment and political will, backed by the involvement of all stakeholders, is required to fight and win the war.

     

  • Wanted: Stricter regulation against illicit trade

    Wanted: Stricter regulation against illicit trade

    The boom in illicit trade, especially in tobacco, is hurting the economy. Apart from costing the country a revenue loss of over N140 billion annually, the business, which permeates all the sectors, is eroding the competitiveness of locally-manufactured brands. Consumers are also getting increasingly apprehensive over the health hazards of consuming products of dubious quality. This has prompted calls for stricter regulation and enforcement to halt the unwholesome trade that is posing a serious problem to Nigeria’s industrialisation. Assistant Editor MUYIWA LUCAS reports.

    It’s an ill wind that blows no sector any good. From pharmaceutical to telecoms, food, beverage and tobacco, and manufacturing, operators in virtually all the sectors, including the Federal Government, are feeling the heat of the flourishing illicit trade, especially in counterfeits and substandard goods. While it is seriously undermining the viability and competitiveness of locally- manufactured brands, leaving a sour taste in the mouths of local manufacturers, it has also continued to deprive the Federal Government of huge revenue. Illicit trade is also undermining the regulatory interventions of its agencies. For instance, government loses an estimated N140 billion annually to the menace, with illegal  trade in tobacco taking the lion share, according to the Federal Internal Revenue Service (FIRS).

    The thriving illicit trade in fake and substandard products has also left consumers holding the short end of the stick. Nigerians are getting increasingly apprehensive over the health hazards of consuming products of dubious quality, especially tobacco. The traditional and social media is awash with stories of avoidable deaths caused by the consumption of adulterated products. The death toll of people who died after consuming a popular local gin called ‘Ogogoro’ in Ondo and Rivers states, recently, brought nearer home the health dangers of consuming fake and adulterated products. Although the Federal Government swiftly banned the popular gin, the action did not go down well with local producers of Ogogoro.

    The producers under their umbrella organisation, Raw Gin Producers Association of Nigeria (RGPAN), urged the Federal Government not to ban the local gin following what they referred to as isolated cases of deadly poisoning from its consumption in some states.

    Its Chairman, Mr. Aritson Kroboakpo, said the local brewing and consumption of native gin pre-dated independence, and could, therefore, not be injurious to human health. But he added a caveat: unless when adulterated. This is instructive. It underscores the fact that adulteration of products is not peculiar to local gin alone; any product including tobacco can be adulterated.

    Tobacco industry hit

    The food, beverage and tobacco sector of the economy is a major point for smugglers and illicit traders. In the tobacco sector, illicit trading is high with about 80 per cent of cigarettes brought into the country illegally. However, the coming of the British American Tobacco (BAT) Nigeria into the country has over the years helped in reducing the preponderance level to 20 per cent. This, which has been made possible through BAT’s consistent collaboration with regulatory bodies, ensured that revenue and excise duty payments are not avoided.

    The Nation learnt that the tobacco sector, like pharmaceuticals, is delicate because it affects the well-being of the consumers of the products. Of all the consumables, the tobacco industry is particularly affected due to strict regulation and suppression. This creates a new source of demand, which smuggled goods appear to fill. But in doing so, the health of consumers is usually compromised.

    Jamiu Arogundade, a social commentator, blames the growing illicit trade on Nigeria’s several porous borders. According to him, goods are mostly smuggled into Nigeria through Benin Republic, which serves as the main market for Malaysian and Chinese goods includimg tobacco that are smuggled through sea and land borders. “Goods loaded at Benin Republic the previous day will be ready for sale in all the major Nigerian markets early morning the very next day. In the Northern part of Nigeria, there is a desert through which goods can be smuggled easily,” he said.

    Government’s policy summersault has also been blamed for the thriving illicit trade. For instance, a few years ago, government placed a ban on the importation of textiles into the country, only to reverse the decision; ditto for the ban on the importation of all lubricants needed by the Nigerian industries. But, this ban, rather than reduce the activities of smugglers, made it more lucrative. After the ban, goods are still being smuggled into Nigeria without any taxes paid, thus making government’s efforts fruitless.

     

    Textiles also affected

    The local textile industry is also agonising over the effects of influx of substandard foreign made textiles into the country. Anyone who visits Nigeria for the first time will be impressed by the shear ingenuity and creativeness of operators in the local textile industry.

    The colourful elegance, richness, artistic qualities, style, and texture of Nigerian textiles were second to none. That was in the early 1980s when the local textile industries were at its peak with over 124 companies in existence. All these have since changed. Despite the boom in the global textile trade, these local industries are fast diminishing in Nigeria because of the inflow of smuggled foreign textile products into the Nigerian markets.

    Indeed, the impact of illicit trading on local manufacturing is so intense that it has led to stiff competition arising from the massive dumping of basic but substandard consumables from Asia against locally produced goods. Some experts blame this trend on prolonged military rule, which led to the opening up of the economy to influx of foreign goods, either through dumping or smuggling. “That started the decline in productive activities in the land. Those that were not strong enough to compete felt it was easier and cheaper to go into trading, hence they went into importation and trading and the few that chose to remain in manufacturing eventually died due to the harsh economic conditions,” Alhaji Alli Madugu, Vice President, Small and Medium Industries, Manufacturers Association of Nigeria (MAN), said.

    Madugu explained that large quantities of both new and second hand garments from Asian countries now flood the Nigerian markets, thereby placing domestic markets under a major threat of going into extinction from smugglers importing cheaper textile fabrics from other countries and selling them at a price lower than the market price of garments manufactured locally.

    The effect of this, he said, is the closure of over 65 textile mills and lay-off of over 1.5 million workers employed by the textile industry in the last two decades. Textile workers also lament that apart from direct job losses, over one million indirect jobs have been lost. Mostly affected are cotton farmers, traders, and suppliers etc who have lost their source of revenue as a result of the shutdown of textile mills across the country.

    A textile dealer in Balogun Market, Lagos, Kudirat Animashaun, said quality of textiles from Asian countries fall short of what is produced by the few surviving textile firms in Nigeria. According to her, most of the textile products coming from these countries contain hazardous chemicals that are used for waxing and printing the clothes. “Garments with wax prints are very popular in Africa. These clothes are manufactured specifically for smuggling and hence do not adhere to the quality standards. Many chemicals used in printing these kinds of clothes are banned by the World Trade Organisation (WTO) because they are harmful to human skin, but they are used in clothes and are sold at a very cheap price in the market,” she explained.

    Animashaun expressed regrets that quite a number of Nigerians are unaware of the health hazards associated with using such substandard garments, which is why they rush to buy imported clothes due to their low prices and the perception that imported clothes are better than locally manufactured clothes.

     

    How illicit trade affects industrialisation

    According to experts, trade in illegally or unethically procured goods, otherwise known as illicit trade, covers a range of activities, from illegal trade in natural resources, the supply of counterfeit goods, smuggling of contraband goods, trade in illegal drugs and weapons, to trafficking in humans.

    Due to Nigeria’s large population, which presents a viable market for goods and services, many manufacturers and product owners have reaped the benefits of faking or counterfeiting products in huge quantity.

    However, in doing so, they put the nation’s industrialisation drive in reverse gear, as their activities pose significant threats to successful businesses that would have added their quota to the industrialisation drive.

    Specifically, illicit trade, and especially trade in counterfeits and substandard goods, undermines the viability of manufacturing firms in the African region, especially Nigeria. There are a number of cases where leading industrial firms in Nigeria have come close to total closure. The effects of illicit trade result in the market being saturated with fake products which are sub-standard to the consumer and in cases of products like drugs, food and other consumable items, the repercussions could be more injurious.

    For the manufacturers and product owners, the effects are losses for the company in terms of profits, while government loses huge revenue in terms of taxes on products in the industry. For instance, in 2009 alone, giant telecommunications manufacturer Nokia was reported to have lost almost $20 billion to illicit trade in counterfeit devices.

    Furthermore, Africa Investor Magazine in its July- August 2010 edition estimated the value of counterfeits in Kenya in 2009 at US$ 642 million. It also put the value in South Africa at $ 402 million and in Nigeria at about $219 million. These amounts are all lost in annual tax revenues because of the preponderance of counterfeit products.

     

    All eyes on regulators, govt agencies

    Recently, the Anti-Counterfeiting Collaboration (ACC) in Nigeria, and the Association of Nigerian Representatives of Overseas Pharmaceutical Manufacturers (NIROPHARM) in conjunction with the National Agency for Food, Drugs Administration and Control (NAFDAC) and other stakeholders in the pharmaceutical industry came together to draw public attention to the dangers of counterfeit drugs and the effects of counterfeiting on the nation’s economy.

    The Standards Organisation of Nigeria (SON) is the government agency saddled with the responsibility of ensuring standards of goods manufactured locally or imported into the country. Although, SON has had to destroy several seized substandard products, Animashaun and other stakeholders say the agency needs to put in more efforts to deter defaulters who are only interested in making extra cash at the expense of the Nigerian economy and citizens.

    “Defaulters need to be properly prosecuted to serve as deterrent to others engaged in illicit trade or fake and substandard products.

    ‘’Other government agencies such as the Economic and Financial Crimes Commission (EFCC), Consumer Protection Council (CPC), and Nigerian Customs Service (NCS) should also work in collaboration to strengthen our weak borders and keep an eagle eye on goods that come into the country through the nation’s borders,” she said.

    Another analyst said there is need for more proactive approach by government in tackling illicit trade. In doing so, the analysts, who chose to be anonymous, said Nigeria would be learning from the experience of the government of Switzerland, which took drastic measures to curtail the menace of illicit trade, which had threatened to castrate its “Swiss Watch” industry.

    Switzerland’s Swiss watch industry is reputed as the nation’s cash cow. Before the move against illicit trade in that country, its watch industry was losing several billions of dollars to the activities of illicit traders in fake and substandard Swiss wrist watches. In 2010, for instance, about 7,000 replica Rolex watches were said to have been crushed with a steamroller and the culprits were sent to jail for six months.

    “Illicit trade is a menace in Nigeria and the world at large. This affects all industries as well as intellectual property owners. It harms brands, damages businesses, promotes criminality, misleads consumers into buying products of dubious quality, and ultimately could harm consumers. It also deprives the Federal Government of revenue and undermines the regulatory regimes of the government agencies,” the analyst said, enjoining the Nigerian authorities to borrow a leaf from Switzerland.

    “Defaulters need to be properly prosecuted to serve as deterrent to others engaged in illicit trade or fake and substandard products, Other government agencies such as the Economic and Financial Crimes Commission (EFCC), Consumer Protection Council (CPC), and Nigerian Customs Service (NCS) should also work in collaboration to strengthen our weak borders and keep an eagle eye on goods that come into the country through the nation’s borders”

    He added that a well-structured policy on regulation and an enforcement approach to blocking loopholes along the nation’s several porous borders would do the tricks. According to him, research studies have shown that countries that have recorded steady reduction in illicit trade, smuggling and counterfeiting have a well-structured policy on regulation and enforcement. He said this is the only way Nigeria can be one of these countries.

    He however, warned that if Nigeria does not move against illicit trade effectively, her dream of industrialisation may never materialise.

    Other repercussions, he pointed out, will be loss of investments, jobs, tax revenues, including innocent lives that would be lost as a result of consumption of fake products.

    “The thriving illicit trade in fake and substandard products has also left consumers holding the short end of the stick. Nigerians are getting increasingly apprehensive over the health hazards of consuming products of dubious quality, especially tobacco”

     

  • How agric sector can leverage ICT tools

    How agric sector can leverage ICT tools

    Things are gradually looking up for the agric sector. The agric transformation agenda is changing the fortunes of farmers, as most of them now have access to improved crop varieties as well as trainings to become better managers. Some of them are also moving into larger acreages, leading to improved food production. To sustain the tempo, experts say there is need to embrace Information and Communications Technology (ICT) tools, otherwise known as e-agriculture. DANIEL ESSIET reports. 

    As an expert and key stakeholder in the agric sector, President, National Cashew Association of Nigeria (NCAN), Mr. Tola Faseru, has been pushing for the deployment of Information and Communications Technology (ICT) to promote agricultural development. He tells whoever cares to listen that the use of ICT in agric, otherwise called e-agriculture, remains a strategic and ambitious way of modernising the agric sector by pushing possibilities into the hands of farmers and ultimately, achieving food sufficiency.

    Faseru told The Nation that with widespread connectivity to global markets and networks, using the Internet and related technologies, there was need for Nigeria to establish a comprehensive ICT infrastructure for the agric sector. He noted that through formal institutionalization of e-agriculture, which is a global practice where people exchange information, ideas, and resources related to the use of ICT for sustainable agriculture and rural development, Nigeria stands a better chance of using the agric sector to achieve sustainable economic growth and development.

    Faseru is not only in this growing strategic approach of using ICT to drive agriculture. Worldwide, e-agriculture has emerged as a strategic tool, drawing private capital and large-scale investment to projects that benefit small farmers and boost food security. The strength of the approach, according to Faseru and other experts, is its integration of investments, policy frameworks and local institutions and ability to bolster connectivity to improve the functioning of markets, improve agricultural opportunities, create jobs and catalyze improved governance along the value chain. All of these are ingredients needed to spur inclusive and sustainable economic growth.

    The consensus of experts is that Nigeria will advance the agricultural sector through integration with other industries such as processing, storage, logistics, and e-commerce. This is so considering that transactions now thrive mostly online between nations and the international markets, as companies are now deploying money and resources into e-commerce platforms to fuel their growth. This has expanded into many different industries, including agriculture and transportation. Already, an increasing number of sellers and buyers are emerging to improve online agro produce transactions through overseas destinations ordered through e-commerce platforms.

    However, while there are indications that e-commerce in agriculture is emerging as a lucrative area in the online shopping sector, the development of e-commerce in the agricultural sector still lags far behind other sectors, especially in Nigeria. This has prompted agitations by agric experts most of who say there is need to shift focus from the traditional factors of production to the use of modern technologies, market-driven innovation and knowledge, which are growth drivers.

    In addition to ensuring food security and safety, such paradigm shift would modernise the sub-sector to provide employment opportunities, generate higher income and ensure sustainable development through better agronomic practices, quality inputs, modern farming technologies and improved infrastructure.

    With current efforts at making farming a business and encouraging young people who are interested in modernised agriculture, Faseru emphasised that e-agriculture will improve access to information services and training on how to use them. He however, wants government to adopt a participatory approach to the development of an e-agricultural strategy by involving a wide range of stakeholders.

    The expert added that the government should seek advice from experts and various agricultural educational and research institutes and other professional organisations in the agric sector. For start, he recommends that major agricultural institutions be equipped with relevant ICT hardware with Internet access, while their staff be trained to use and maintain the equipment.

    Besides, experts are calling for data centres and community multimedia centres as part of the infrastructure package. The thinking is that such systems would provide rural development extension services to farmers in rural areas.

    Chief Executive Officer, Anjorin & Atanda Nigeria Investment Limited, Mr. Sunday Anjorin, is one of those excited by the prospects of changing the fortunes of farmers and the agric sector generally by developing and embracing the e-agriculture strategy. The goal of the strategy, he noted, should be geared towards building the competitive advantages of the agriculture sector so that the untapped growth potential can be maximised.

    According to him, continued increase in globalisation and integration of food markets has intensified competition in the agric sector and also brought unique opportunities. He told The Nation that e-agriculture strategy would have stronger impact as it would help to deepen potential market opportunities for exports and assist young entrepreneurs explore openings in the international markets.

    As Director, Africa Region, Cassava Adding Value for Africa (CAVA), Prof Kola Adebayo pointed out, several types of activities related to e-agriculture applications are widely recognised today. Some of them, he said, involve delivering services such as market prices, extension services, technology, policies, programmes and projects using the Internet and related technologies. On the whole, he said e-agriculture provide end-to-end services to the agricultural value chain, bringing together farmers, input producers, transport providers, and banks/financiers.

    Adebayo expressed optimism that with e-agriculture working well, the industry will record more achievement than from conventional agricultural extension and farmer outreach programmes. This, he said, is because information given to farmers will be quick and timely. Besides, the outreach will be tailored to meet the needs of individual farmers. It is also cost effective. He added that with the social media and the key role youths are playing in agriculture, more opportunities for young agro entrepreneurs would be created.

    “The consensus of experts is that Nigeria will advance the agricultural sector through integration with other industries such as processing, storage, logistics, and e-commerce. This is so considering that transactions now thrive mostly online between nations and the international markets”

     

    HarvestPlus electronic

    (e-market) portal

    HarvestPlus, which leads a global effort to improve nutrition by developing and deploying food crops that are rich in vitamins and minerals, is riding on its electronic (e-market) platform to attract investors and create markets for vitamin A cassava products.

    Located within the precinct of International Institute of Tropical Agriculture (IITA), Ibadan, Oyo State, HarvestPlus Country Manager, Dr. Paul Ilona, said the organisation has linked major players and investors along the vitamin A cassava value chain to its e-market portal.

    He said through the use of the portal, HarvestPlus has been able to identify ulking agents, cassava stem traders, and investors who were then linked with farmers and cassava processors to create market for vitamin A cassava products. According to him, this strategy would do the magic of attracting investors to the business.

     

    SlimTrader

    SlimTrader, an e-commerce firm headquartered in Seattle, Washington, has partnered agro-chemical producer, Notore to streamline fertiliser delivery and collections.

    The firm also developed a mobile commerce platform called ‘MoBiashara’ (mo’ business in Swahili), specifically designed to serve fast-moving consumer goods companies. It is a mobile platform that enables people to purchase goods and services directly via their phone using Short Message Service (SMS), interactive voice response (IVR), or mobile web. It allows consumers to search for products from multiple providers and make purchases on their mobile phone using local payment providers.

    SlimTrader partners with trusted brands, whose distributors and retailers can upload their inventory onto MoBiashara, which also helps consumers to be certain that they are buying the genuine product. It brings the convenience of price comparison to basic feature phone users who lack reliable access to the Internet.

    When MoBiashara was initially launched, Notore was using it to enable farmers to shop for and purchase fertilisers from its accredited retailers. Retailers use the same platform to update their inventories via SMS in real time. Technologies used include mobile phones, SMS, IVR, and mobile web.

    SlimTrader charges a small percentage of the transaction value, which is charged to the merchant.

    MoBiashara is currently being piloted in Nigeria and the pilot is currently reaching several thousand users. Its greatest advantage is that everyone in the supply chain benefits. The main distributor incurs a significantly reduced supply chain credit risk and the retailer has reduced storage costs. These reductions in supply chain costs can benefit farmers with lower prices for fertilizer as well as a more efficient supply chain for them as end-users.

    Experts believe e-agriculture has the potential to increase profitability in agricultural markets by increasing sales and decreasing search and transaction costs.

    The creation of electronic markets that are expected to be more transparent and competitive than physical markets may attract more consumers.

    E-agriculture offers an alternative venue of promoting and marketing agricultural products that has a benefit of reaching extensive geographical populations and providing detailed product information at a relatively low cost.

     

    Fed Govt’s electronic

    wallet initiative

    The immediate past Minister for Agriculture and Rural Development, Dr. Akinwunmi Adesina, sometime ago disclosed said Nigerian farmers now access fertiliser procured by the Federal Government via mobile phones or e-wallet. Government claimed that in 2012 alone, the e- wallet initiative saved the agric sector over N29.7 billion (US$188 million).

    At that time, Cellulant Nigeria Limited, the company running the e-wallet scheme, said the figure represents the amount that would have been lost by federal and state governments during the distribution of subsidised fertilisers, seedlings and other services. Its Chief Executive, Goke Akinboro described the initiative as a landmark success.

    “We are indeed, satisfied that we have helped start a revolution in the agric sector by bringing in seemingly simple and practical technology solutions, which have helped address age-long problems in the sector. We believe that this is the beginning of great things to come and we can only improve in years ahead,” he said, noting that the e-wallet scheme allowed government to effectively target its resources while providing an efficient accounting tool.

    According to Akinboro, the e-wallet initiative handled disbursement of subsidies valued at $294 million for federal and state governments into the wallets of farmers. The farmers used $52 million of the subsidy deposits and agro-dealers got US$50 million as matching funds from farmers, leaving about $192 million of unused funds, which would have been lost to corruption under the old scheme. The unused fund, he said, was returned to government’s purse.

    Akinboro added that in addition to saving money for the government, the e-wallet scheme’s greatest achievement was the fact that Nigerian farmers truly and directly benefited from government’s subsidy.

    However, with the departure of Adesina, there are fears that the e- wallet initiative would be short-lived. Perhaps, to prempt possible discontinuation of the scheme, a World Bank consultant, Prof Abel Ogunwale said if e-agriculture is adequately supported, farmers will access updated information to cope with challenges affecting production.

    He said the sector needs to improve delivery of quality information on farming techniques and practices, agricultural inputs and technology, agricultural markets/market information, science and research, data/statistics, environment, climatic changes and training and capacity building.

    Ogunwale also said research institutes need veritable e-agriculture platforms to enable agricultural experts and community members exchange opinions, experiences, good practices and resources.

    According to him, farming community members and other stakeholders need to interact with each other through regular forums and community networking to contribute to a range of resources to the platform, including case studies, success stories, lessons learnt, documents, links, learning resources, news and announcements.

    One of the areas farmers need to be connected is in soil testing. Soil testing, experts say, is important for any farmer to know what minerals their soil is deficient in and what type of fertiliser or other inputs may be used to increase soil health and fertility, yields, and resistance to pests and diseases. There is need for a soil testing service that provides results via SMS.

     

    Challenges

    As exciting as the new approach is, there are challenges. Faseru says, for instance, that he is concerned over how farmers and organisations will pay for obtaining and providing technical and market information through the use of ICT tools. Tariffs for ICT are still considered high.

    Besides, nationwide, there is serious limitation for ICT use, particularly in the rural areas despite the worldwide ICT revolution. The other issue is that government is not making serious investment in ICT.

    According to experts, the nation still suffer from poorly developed ICT infrastructural facilities including poor and limited number of telephone lines, most of which are still in the analogue mode.

     

    Bright prospects ahead

    Experts say that many factors would drive the use of ICT in agriculture in the next few years such as improved connectivity to mobile phones, Internet, and other wireless devices. Already, Nigerians are witnessing increased broadband Internet reach. Besides, affordability is improving dramatically.

    There is a National E-Agriculture Web Portal, which is a strategic initiative of the National Information Technology Development Agency (NITDA) in collaboration with the Federal Ministry of Agriculture and Rural Development (FMARD), to showcase the essential features and key aspects of the food and agriculture industry in Nigeria.

    The portal also highlights the strategic and operational components of the agricultural value chain in Nigeria, particularly as it relates to the Agricultural Transformation Agenda (ATA) of the Federal Government, as developed and implemented by the Federal Ministry of Agriculture and Rural Development.

    The web portal introduces investors and other stakeholders to food and agriculture as regards finance, farming, agro-industry, distribution and logistics, as well as food security, nutrition, and consumption. Some of the most vital information required is locally developed and adapted to meet the requirements of the average user.

    It is presented to enable planning, research, development projects, investments and policy-making. There are also links to relevant sites – from related industry partners and stakeholders – for updated resources; news and information on various aspects are regularly updated.

    The National E-Agriculture Web Portal is relevant for the comprehensive and integrated Nigerian food and agricultural value chain; from farm to fork. Interactive mechanisms for audience contributions and stakeholder feedback are available via forms, discussion forums, and an agric-centric social network.

    The portal is accessible on various devices and platforms – Web and Mobile (Android, BlackBerry, iOS, Windows 7, and Java-enabled phones such as Symbian OS).

     

    To sustain the tempo

    On the whole, experts want the government’s e-agriculture initiative to create a multi-stakeholder, people-centred, cross-sectored platform that will bring together stakeholders representing relevant constituencies in the industry.

    They also want the government and agricultural support institutions to develop ICT initiatives to support a National Market Information System. Farmers and investors need functional services – from daily commodity prices, to virtual shopping cart and mobile applications – along with an extensive archive of market information from previous years.

    Experts also want government to explore the possibilities of an e-agriculture strategy, which will synergise agriculture and ICT in a more structured manner. The strategy should recognise the real and current challenges leading to low ICT uptake in the agric sector and seek to address these challenges to the benefit of all stakeholders.

    In pushing these recommendations, the belief is that agricultural activities are categorised under crop cultivation, water management, fertiliser application, pest management, harvesting, post harvest handling, transporting of products, packaging, preservation, processing/value addition, quality management, safety, storage and marketing. What this means is that stakeholders need information and knowledge about these phases to manage them efficiently.

    “We are, indeed, satisfied that we have helped start a revolution in the agric sector by bringing in seemingly simple and practical technology solutions, which have helped address age-long problems in the sector. We believe that this is the beginning of great things to come and we can only improve in years ahead”

  • Planned scrapping of aviation ministry: Matters arising

    Planned scrapping of aviation ministry: Matters arising

     

    The Federal Government allegedly plans to scrap the Ministry of Aviation and make it a department in the Ministry of Transport.The merger plan has become a subject of heated debate amongst aviation industry experts and stakeholders. KELVIN OSA OKUNBOR reports.Nigeria is among a few countries  that have aviation as a separate ministry. Other countries, such as United States, Britain, Canada, and South Africa have their aviation ministries subsumed under the ministry of transportation. Also, continental and regional economic bodies, including the African Union (AU) and the Economic Community of West African States (ECOWAS) have, over the years, urged member – states to put their aviation sector under the transport ministry. This, the economic bodies argued, would make room for cohesive planning on all modes of transportation.

    They also argued that aviation as a unique industry requires technocrats and seasoned professionals to run, not politicians and civil servants who are not abreast with issues related to negotiation for bilateral air services agreements, airport safety and security and other developments in the sector that requires expertise. In the opinion of such continental bodies, the arrangement allows governments design a blueprint, marshal plan or roadmap for transportation that is inclusive of all modes.

    However, despite the obvious benefits of putting aviation under the ministry of transport, attempts by the Nigerian authorities to heed the counsel, which will ultimately lead to the closing down of the avition ministry and make it a department in the ministry of transport are causing disquiet in the industry. The Nation learnt that opinions are sharply divided over the plan.

     

    Push for merger intensifies

    For Head of Strategy at Zenith Travels Limited, Mr Olumide Ohunayo, scrapping the ministry is long overdue. He argued that unless the ministry is scrapped, the bottlenecks and bureaucracy that constitute stumbling blocks to accelerated growth of the industry would remain. He, therefore, urged the government to toe the line adopted by other countries, which have ministry of transport and not aviation. He said: “We need to scrap the ministry, strengthen the agencies by respecting their respective Acts with little or no interference.”

    Former President of Aviation Roundtable, Captain Dele Ore, also thinks so. Ore described the aviation ministry as one of the major problems of the industry. A former Secretary General of the Aviation Roundtable, a platform of industry stakeholders, Mr Sam Akerele, agreed with Ore on the call for the scrapping of the ministry.

    He said: “Nigeria cannot operate aviation in isolation. The ECOWAS Parliament in 2000 recommended that member – states should not appoint ministers to preside over aviation. The aviation ministry should be scrapped while the Ministry of Transport should supervise the various segments of transportation.”

    Indeed, the planned merger is in line with the decision reached by the ECOWAS Parliament in 2000. ECOWAS recommended that member-states should not appoint ministers to preside over aviation, stating that rather, it recognises a minister of transport to be in charge, with specialists in various segments of transportation, including aviation.

    The agitation is not new. In 2007, aviation was fused with transportation with a junior minister in charge of air transport appointed to oversee its affairs. A source, however, hinted that the model to be adopted in the new arrangement will see a substantive minister oversee the transport ministry but a department for aviation is to be created to be headed by a director general or secretary. Aviation agencies are to be managed by directors as against the current arrangement where managing directors are overseeing their affairs.

    Ore noted:  “What ECOWAS Parliament is proffering is very sound. And if we are leading the organisation in this sub-region, we are supposed to be taking positive steps. Not only did we make moves, we made presentations to the President at that time, Chief Olusegun Obasanjo.” He said the ECOWAS Parliament knew the peculiarity of the sub-region before recommending it. “And I keep saying that we need to look at that, but many selfish Nigerians will want the status quo to remain so that they can have a place to carry their bag to look for contracts,” he stated.

    The argument is in sync with the one canvassed by a civil society representative in the aviation sector, Comrade Abdulrasaq Siedu. He said the scrapping of the ministry of aviation would help the sector move forward. He argued that the ministry, through undue interference and policy inconsistency, has contributed significantly to the slow growth of the aviation sector. He, therefore, said, “The aviation ministry should be scrapped outright to whittle down the interference in the duties of the Nigerian Civil Aviation Authority (NCAA) and allow it to carry out its obligations and oversight functions without political interference from the ministry.”

    He insisted that if government is sincere about reducing the cost of governance, it should scrap the ministry with immediate effect. “We can effectively operate without a standalone ministry. What we get from the ministry is signing of unfavourable Bilateral Air Services Agreement (BASA) that is detrimental to our carriers, impulsive interference in the day-to-day administration of the agencies, and insatiable appetite for spending BASA funds,” he added.

     

    Aviation unions kick

    However, the proposed merger has drawn the ire of many industry players, including aviation unions. Most of them described it as the handiwork of a ‘cabal’ bent on undermining the growth of a sector considered strategic. Already, three aviation unions namely, Air Transport Senior Staff Services Association of Nigeria (ATSSSAN), National Union of Air Transport Employees (NUATE) and the National Association of Aircraft Pilots and Engineers (NAAPE), have urged government not to buckle under pressure by what they described as a cabal in the sector to scrap the ministry of aviation.

    The unions, in an open letter to the President, alleged that the ‘selfish group’ in the aviation industry is trying to foist its ideas on the presidency in a bid to push its agenda.

    The unions advised the president to steer clear of the ‘nefarious cabal’, saying: “The cabal has strong interest in, and is the unseen force behind the re-emergent distractive debate about the merger or de merger of the aviation industry with, or from, the transport ministry.”

    The unions recalled that under the President Olusegun Obasanjo administration, the aviation industry and the transport sector were merged twice, due to ill advice from the same cabal under different pseudo names and was reversed the minute it was discovered that the move was retrogressive.

    “For us, as representatives of the most critical element in the productivity chain (the workers), we have no particular interest in the merger or de-merger argument. We wish not to be involved in the politics of it. Our only concern is the profiteering that adversaries of orderly aviation growth seek to make from it,” the letter read.

    The group further stated that the problem of the aviation industry is corruption and the government’s inability to put the right professionals in the right places. “We wish to state very clearly that we will stand with Mr. President’s final decision on this matter. However, we hasten to equally state that our position and advice to Mr. President remains the same, an aviation ministry with a seasoned professional who has sound managerial experience and integrity and not blemished, with business orientation as an added advantage, will surely take the industry to greater heights,” the letter concluded.

    The unions seem to have allies among personnel of the aviation ministry and its agencies who suspect they could be adversely affected under the proposed arrangement. Their suspicion may not be unfounded considering that part of the consideration for the merger, The Nation learnt,was hinged on plans by government to cut down on administrative costs and position the sector for enhanced productivity and efficiency.

     

    Experts, stakeholders kick

    But ECOWAS Parliament’s position and those of other experts who think that merger is the way to go has not gone down well with some stakeholders. For instance, Chief Executive Officer of Belujane Konzults, Mr. Chris Aligbe; Executive Director, Centre for Aviation Research and Safety, Engr. Sheri Kari, both opposed calls for scrapping of the aviation ministry.

    Aligbe, for instance, described the proposal as ‘a non-starter.’

    As Aligbe said: “One critical question to ask is where the pool of professionals to draw from. I think the ministry of aviation should remain. It should not be scrapped. What government needs to do is to strengthen it with core aviation professionals to enable it function more efficiently on technical issues of policy and safety. My only concern is that the crop of seasoned professionals at the ministry is drying up. Today, the pool of highly trained, experienced and exposed professionals has dried up.”

    He recalled that after the ill-advised liquidation of Nigeria Airways, which provided the pool of aviation manpower, no effort was made again to create a new pool.  “As at now, in spite of the fact that age has caught up with the professionals of yesteryears, they remain the backbone of NCAA whose success is a factor of the input of returnee professionals. From records available, none of the aviation agencies can boast of any record of robust manpower development over the years.  The dearth of professional manpower is real and frightening,” he revealed, asking, “If we now scrap the ministry of aviation, is that not more trouble for the sector?”

    While noting that on a face value, the proposal is in line with what exists in many countries where aviation has advanced remarkably to global standards such as US, UK and other European Union states as well as in smaller countries with smaller populations and little or no strides in the aviation sector, he said the situation in Nigeria is different.

    His words: “We do not have to scrap the aviation ministry because of what other countries have done. Look at India, which has retained aviation as a separate ministry, as an emerging market with vast population and ambitious aviation development programmes, it has found it expedient to maintain a highly functional, purposeful and focused ministry of aviation to drive her programmes.”

    Aligbe said the Indian model is therefore, closer to Nigeria than the US and UK models with decades of stabilised institutions and procedures in the aviation sector. He pointed out that a deeper reflection on Nigeria’s transport sector will reveal a comatose sector that is problematic in every sub-sector.

    “From road transport infrastructure to archaic railway system, to a revenue- losing maritime sub-sector with its poor port infrastructure, processes and poor corporate governance, as well as very weak regulatory agencies, the transport sector is a story of an under-developed nation,” he argued, adding that the result of the merger of transport and aviation under one ministry will be obvious immediate collapse of the two sectors or, at best, a worsening off of each.

    On his part, Kyari said the proposal is totally unacceptable. According to him, Nigeria’s development has not reached that stage yet. “We should have a ministry which supervisor can reach the President and not a Director of Aviation who cannot take a major and urgent decision. We want to increase bureaucracy, the same thing we have been running away from in the management of aviation business,” he said.

    Citing Nigeria Airways, merger of Federal Airports Authority of Nigeria (FAAN) and Federal Civil Aviation Authority (FCAA) concessions, Kyari recalled that previous decisions taken in the past in many areas and championed by many people in the industry had negative effect on the sector.

    “I encourage government to do a good study on the benefits of such a merger before going that way again. This merger was done in 2007 during Mr. Felix Hassan Hyat and it didn’t work,” he said, asking, “Why should we go that way again?” He said there is need to manage the industry for now and see what can be done to grow its contribution to the Gross Domestic Product (GDP) from the current four per cent.

    For aviation expert and Chief Executive of Mulaky Konsult, Majoku Ilaki, the call for scrapping of the ministry of aviation is “wrong and unreasonable.” Ilaki pointed out that forced merger was tried in the past, but did not succeed because it became clear that aviation, on its own, is a big project that needs to stand alone. I strongly disagree with the position because it has been tried before and it never succeeded,” he insisted.

    The aviation expert recalled that aviation and transport ministries were merged sometime ago, but throughout that period, nothing literally happened in the aviation sector because attention was on the transport section. “It has been tried briefly, but it did not work and that was why it was de-merged again. The fact that ECOWAS recommended a merger does not make it final”, he pointed out.

    To further push his ‘no merger position,’ Ilaki raised the following posers: “How many countries are in ECOWAS? What is the population of those countries?  Put all of them together, they don’t even meet the size of our own population. Look at our own circumstances; it is not what is recommended for the Gambia or Ghana, it does not fit into our own system because our population is almost 10 times of these populations.”

    Ulaki therefore, advised that Nigeria should look at the issue carefully rather than implementing the proposal immediately simply because ECOWAS and others say so. As far as he is concerned, the proposal is “an ill wind that will blow nobody any good.”

    As opponents and proponents of the proposed merger push their arguments back and forth, it is not yet clear what the position of the new administration of Buhari is on the issue. It is, however, clear that Buhari’s government considers the aviation sector as one of the priority areas it must focus on for development.

    His thinking, and rightly so, is that aviation is critical to economic development. And as an airline operator, who pleaded not to be named said, there is nothing unusual if he decides to scrap the ministry of aviation and fuse it with the ministry of transportation for enhanced productivity and efficiency.

    Will Buhari call the bluff of aviation unions and do just that and in the process probably risk workers’ rage? Whichever way it goes, the matter promises to be another litmus test of his ‘change’ mantra.

  • Labour squares up against workers’ retrenchment

    Labour squares up against workers’ retrenchment

    Organised labour has issued a warning to the Federal and state governments, as well as the  private sector of the danger in retrenching workers due to the economic downturn, saying the body would resist such a move since there is an alarming rate of unemployment in the country, reports TOBA AGBOOLA.

    The organised labour has read the riot act to the Federal, states and private organisations, that it would react to any downsizing measure against its members under the guise of harsh economic condition the country is passing through. They said reducing staff strength cannot be the only  solution to the problem.

    It warned that such an action  may further fuel the uncertainty in the labour market.

    The warning by Labour may not be unconnected with the statement credited to the former Coordinating Minister of Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, that government is living on borrowed money to pay workers salaries.

    In addition, strong indications have also emerged that workers in both private and public sectors are faced with mass retrenchment as crude oil price continues its descent.

    However, the organised labour is accusing the states, and particularly, the past government of diversion of money resrved for wages payment to prosecute the just concluded 2015 general elections.

    According to them, it is worrisome to note that the general elections gulped a lot of money which has taken a toll on governments’ finances.

    They said both the private and the public sectors should not retrench workers at this  time when the purchasing power of the average Nigerian worker is at its lowest ebb, adding that already, there is  high unemployment rate in the country.

    Stakeholders in the oil sector painted a gloomy picture of the economy and the prospects of workers this year. They based their projections on recent happenings in the Nigerian and global economies.

    Oil prices have been on a steep decline since June 2014 as a result of slow demand and the United States’ oil boom, which has resulted in  over-supply. The global oil benchmark, Brent, against which Nigerian oil is priced, recently, tumbled below $58 per barrel, hitting its lowest level since May 2009.

    Recently, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), gave indications to this effect when it raised the alarm that companies, especially petroleum companies, have plans to retrench some staff.

    According to the association, non-core employees of oil firms in the country may be asked to quit their jobs, if the fall in oil prices persists till the end of June.

    The Media Officer, PENGASSAN, Mr. Babatunde Oke, said employers have grown weary of the slump.

    “The effect might be severe if it continues till middle of the year because some employers are already complaining that they may need to shed weight, if it persists.  Of course, it will affect contract staff, if the slump persists,” Oke added.

    The President, Trade Union Congress, TUC, Comrade Bobboi Kaigama, warned of dire consequences if the both the  government and private sectors decide to retrench workers under the guise of bad economy.

    “Any attempt by the government to sack workers or reduce their salaries in the name of bad economy will amount to a declaration of war on Nigerian workers and would be resisted by the labour movement.

    “0ur warning is very clear because when the economy boomed, the political office holders were freeloading as if there is no tomorrow while most Nigerian workers live below $2 per day.

    “While workers called for better pay package in the past, but were rebuffed by the ruling elite, especially those in government, then, the  helpless workers roasted as if they were not stakeholders in the system,” Kaigama said.

    According to Kaigama, labour is worried that indeed, as at today, the meagre N18,000 monthly minimum wage approved in 2011 by the Federal Government has not been fully implemented by some state governments and as such, it will be the height of insensitivity for any government to contemplate sacking civil servants or reducing their pay in the name of austerity measures.

    “Our union has urged the Federal Government to reduce their pay packets and mouth-watering allowances of political office holders and check other leakages that encourage corruption in the system, but the wise counsel fell on deaf ears.

    “Records will also show that this union on several occasions advised the Federal Government to stop the depletion of foreign reserves and needless rush to seek foreign loans for white elephant projects because such mindless profligacy can only lead to the collapse of the economy.” he said.

    The Secretary-General, Association of Senior Civil Servants of Nigeria, ASCSN, Mr. Alade Lawal, said workers should not be made to bear the burden of the country’s distressed economy.

    Lawal said: “As for the issue of resorting to retrenchment as a result of the drop in the price of crude oil in the international market, labour will surely resist it.

    “We have already sensitised and mobilised our members on the matter.

    We workers did not create the problem and we will surely not allow the ruling elite to use us as tools to be dumped because of the temporary setback in the pricing of oil.

    “When the going was good, we were left unattended to. Now that the chicken has come home to roost, they, and not innocent workers, should bear the brunt.

    “We are fully prepared and on red alert, waiting for signals from the two labour centres in the event of any attempt to retrench workers as part of recently introduced austerity measures.”

    He  added that there is high hope among Nigerians that the new government would bring fresh perspective to bear on governance as is the case in civilised countries of the world.

    His words: “There is no doubting the fact that the challenges that lay ahead are enormous. We nonetheless believe that with hardwork, perseverance and selfless service to our fatherland, you will overcome and move the country to the next level.

    “Today, Nigerians yearn for good governance, freedom of conscience and freedom of expression so that they can participate actively on how they are governed as free citizens entitled to fundamental human rights in a democratic society.

    “Consequently, we solicit that this administration should hit the ground running and live up to expectations of many Nigerians who crave for change by healing the wounds and bitterness occasioned by the electioneering campaigns and lift Nigeria to greater heights by addressing the myriads of problems facing the country, including economic problems, infrastructural decay, energy crisis, joblessness and corruption.”

    He enjoined the new government to be focused and wary of public officials or anybody who may want to advise him to toe the path of retrenching workers in the name of reforms citing the temporary setbacks in the global oil market as reasons.

    “We need to caution that such step, if taken, will only worsen the already precarious situation the country has found itself in.

    “Our take is that with the plugging of loopholes where heavy leakages from the treasury are experienced on a daily basis, coupled with robust management of government’s expenditure profile, Nigeria as a nation will surely get it right and be better for it,” he said.

    On his part, the General Secretary, Nigeria Labour Congress, NLC, Dr. Peter Ozo-Eson, warned that the NLC would meet to take an appropriate decision, should any state government decide to sack workers.

    He said: “Our position, as already stated, is that there are adjustments that government can make by cutting the cost of governance.

    “We have already warned that they shouldn’t allow workers to be victims of the downturn in the oil price.

    “We believe that the down-turn should not be used to sack workers, they should cut excess waste and the cost of governance. We have a situation where a governor has a retinue of excess aides and entourages; all these can be cut. These are areas where we feel adjustments should be made.”

    Deputy President (South), National Association of Small Medium Enterprises, NASME, Mr. Orimadegun Agboade, said retrenchment had already begun in some sectors.

    He said: “With the way things are right now, many companies may reduce their staff.

    “Based on recent events, federal, state and local governments still owe salaries. It is an indication that things are not right at all. In fact, many of us are afraid of what will happen.”

    Agboade stated that the current foreign exchange rate is the harbinger of the gale of retrenchments that would sweep workers out of the manufacturing sector.

    “For instance, I am a manufacturer of medicine; I received a notice from my bank recently that the Federal Government had placed an embargo on all letters of credit. The implication of this is that immediately we run out of the raw materials we have now, the hope of getting more will be slim, or it won’t come on time.

    “In the pharmaceutical industry, where I belong, close to 98 per cent of our raw materials are imported. A lot of companies are already cutting salaries,” Agboade added.

    He said the scale of retrenchment could be as high as 25 per cent, adding that if things were not sorted out quickly, it could reach 50 per cent.

    Similarly, the Chairman, National Association of Small Scale Industrialists, Lagos State chapter, NASSI, Mr. Segun Kuti-George, said the fact that the foreign exchange rate was not in equilibrium with the naira was a sign that mass retrenchment might be closer than expected.

    “We have more naira chasing fewer dollars now. Also, the monetary policy is moving from 12 per cent to 13 per cent higher interest rate. We now have a higher rate of exchange, which inherently means inflation.

    “It means that prices of imported and locally-made goods will go up, which would mean lower demand and, therefore, lesser profits for companies. This may then lead to layoffs,” he said.

    The Director-General, Lagos Chamber of Commerce and Industry, LCCI, Mr Muda Yusuf, predicted that the year would be challenging for businesses, as the cost of production would increase, while purchasing power would decline.

    He explained that businesses would have to look at all possible options for survival, including cost reduction in other areas. The process of reducing costs, according to him, may result in cutting the number of employees.

    Recently, the International Labour Organisation, ILO, in its report predicted that unemployment and retrenchment will continue to rise in the next five years in Nigeria and other countries, as the global economy has entered a new period combining slower growth, widening inequalities and turbulence.

    By 2019, more than 212 million people will be out of work, up from the current 201 million, according to the World Employment and Social Outlook – Trends 2015, released by the ILO.

    “More than 61 million jobs have been lost since the start of the global crisis in 2008 and our projections show that unemployment will continue to rise until the end of the decade. This means the jobs crisis is far from over so there is no place for complacency,” the ILO Director-General, Guy Ryder, said.

    The report noted that the employment situation had improved in the United States and Japan, but remained difficult in a number of advanced economies, particularly in Europe.

    The employment situation according to ILO, has not improved much in Sub-Saharan Africa, despite better economic growth performance.

    It stated that the steep decline in oil and gas prices, if sustained, might improve the employment outlook somewhat in many advanced economies and several Asian countries according to some forecasts.

    By contrast, it will hit labour markets hard in major oil and gas producing countries, like Nigeria.

     

    Way forward

    For this challenge to be addressed, the organised labour has advocated cut in the cost of governance, describing the country’s presidential system as the most expensive in the world.

    TUC urged the government to work towards reducing  the cost of governance in the country.

    It stressed the need to cut down on political appointments, insisting also that the situation whereby lawmakers fix their own salaries and allowances must be discouraged and discontinued.

    “We condemned all the state governments owing workers salaries, as it is unhealthy for the nation. We urged both the Federal and State government to cut their expenses in order for them to meet with workers’ salary”, he said.

    The NLC President also canvassed a drastic reduction of the cost of governance in the country which he said was unacceptable.

    He said the high cost of governance could be rectified not by workers’ rationalisation but through fighting corruption and removal of waste in the system.

    “The  cost of governance at all levels, including the legislature, is very high and morally reprehensible and must be brought down, not through rationalisation of personnel (as personnel emoluments constitute an insignificant fraction of cost of governance) but through wiping off of corruption and reduction of waste in the system.”

  • Cost of banking regulation

    Cost of banking regulation

    Banks, which hitherto made huge profits, are now struggling to survive, no thanks to the impact of tougher regulatory demands on their profits. Experts insist that banks must play by the rules to stave off regulatory clampdown, writes COLLINS NWEZE.

    hen the profit of Stanbic IBTC Bank tumbled 46 per cent to N4.81 billion in the first quarter ended March 31, this year, many people wondered what hit the bank that raised profit by 63 per cent to N40.1 billion in its 2014 financial year. What they probably did not know is that Stanbic IBTC is not the only bank that had its earnings slashed by tougher regulation and sanctions. Five other banks lost N312 million as fines paid to the Central Bank of Nigeria (CBN) for violating the Banks and Other Financial Institutions Act (BOFIA).

    GTBank, Zenith Bank, First City Monument Bank (FCMB), Access Bank, and Sterling Bank all came under the regulator’s hammer. They were fined varying amounts of money for various misdemeanours in 2014 financial year, including foreign exchange breaches, failure to obtain CBN’s approval for additions to investment in property, non-compliance with the recommendations of a financial services provider PriceWaterhouseCoopers, weaknesses noted in internal control, and Know Your Customer (KYC) procedures, among others. For the affected banks, it was a wake-up call of a sort that it is no longer business  as usual and that there are no sacred cows anymore.

    However, the penalties are likely to be the smallest the lenders will pay going forward. According to the Managing Director, Financial Reporting Council (FRC), Mr. Jim Obazee, the Council is already compiling cases against many banks that breached its reporting rules in their 2014 financial statements. The Council, he said, is investigating the banks to confirm whether their financial statements are in accordance with provisions of the International Financial Reporting Standards (IFRS), the Companies and Allied Matters Act (CAMA), the BOFIA and the FRC Nigeria Act. The FRC, he said, will look at the accuracy and reliability of the reports in their statements based on these Acts.

    Already, Zenith Bank, United Bank for Africa (UBA), GTBank and Union Bank have submitted their accounts to the Council for review. The penalty for each violation ranges from N5 million to N100 million. A bank will be sanctioned based on the number of infractions committed, including a jail term for offenders. “We are looking at how reliable, and how accurate the financial accounts are because they must be exact. Offenders will have their FRC registration numbers withdrawn, based on Section 41 of the FRC Act. That means they will not be able to work in Nigeria again,” Obazee said.

    The FRC chief said banks that fail to classify expenses, such as staff costs, auditors’ remuneration, interest on loans, and directors’ remuneration will be sanctioned. For him, a more significant message behind the financial pains banks have to bear is that the era of impunity is over.

    The same message came from CBN Governor Godwin Emefiele, who on assumption of office, said he will focus on managing factors that create liquidity shocks, promising zero tolerance for practices that undermine the health of financial institutions.

    He equally promised a gradual reduction of interest rates to a comparable level with other emerging markets; maintain exchange rate stability, strengthen financial system stability and improve banking supervision because policy adjustments have revealed loopholes and high level of governance indiscipline in the sector.

    However, violation of regulatory guidelines is not limited to Nigerian banks. Globally, these illicit activities include the 2008 Societe Generale’s $68.5 billion rogue trading, UBS’s $2.2 billion fraud trading in 2013, JP Morgan’s $6.2 billion London Whale scandal in 2013, and the Barclays’ London Interbank Offered Rate (LIBOR) fixing scandal. More recently, there is the Citigroup $7 billion settlement with U.S. authorities in July last year over mortgage scandal as well as the $9 billion BNP Paribas fine (July 2014) for illicit transactions from 2004 and 2012.

    Beyond the fines and promises to reduce interest rates, Nigerian banking regulators, like their global counterparts, are also paying more attention to how healthy the lenders are. The result of the last CBN liquidity stress test on the banking sector released last month jolted many people. The test conducted on 23 banks, showed that ‘six small banks’ Capital Adequacy Ratios (CARs) fell below regulatory threshold.  CAR is a ratio of a bank’s assets to its risks. CBN Deputy Governor, Financial System Stability, Dr. Joseph Nnanna said the unnamed ‘small banks’ CARs fell to 8.85 per cent, against stipulated 10 per cent for lenders operating only in Nigeria and 15 per cent for those with foreign subsidiaries.

    The test conducted using both the bottom-up and top-down approaches specified in the modified International Monetary Fund (IMF’s) stress test framework, captured the diverse nature of individual bank’s balance sheet and observed weaknesses.

    Although, the deputy governor defended the stability of the banking sector, the result of the test gave insight to the grave situation faced by lenders. For instance, majority of the banks, The Nation learnt, are grappling with low capital bases, long term bonds’ repayment, and depressed income margins. The poor cash flow from investments in power sector assets is also a major concern negatively impacting on banks’ capability to stay in business.

    CBN’s and other regulatory policies, including reduction on Commission on Turnover (CoT) fees, increase in contribution to the Asset Management Corporation of Nigeria (AMCON) and Nigeria Deposit Insurance Corporation (NDIC) levies and high Cash Reserve Ratios (CRRs) are also depleting banks’ profits.

    For instance, the CRR, which  is the minimum cash, as a percentage of customer deposits and notes that each commercial bank must keep with the CBN as reserve was harmonised at the CBN-led Monetary Policy Committee (MPC) meeting held on May 18th and 19th.

    The CRR was until the MPC meeting at 20 per cent for private sector deposits and 75 per cent for public sector deposits. But the committee decided to harmonise it at 31 per cent for private and public sector deposits.

    The CRR is meant to protect depositors and ensure banks have sufficient cash at all times to meet the day-to-day demands and cash withdrawals of their depositors. But in reality, it is a powerful monetary tool often used by central banks to control money supply in the economy.

    The MPC considered that the current discriminatory CRR on public and private sector deposits has not only constrained the policy space but could inspire moral hazard by private market participants. Consequently, it was recognised that while additional tightening measures may not be appropriate now to avoid overheating the economy, a harmonisation of the CRR was imperative to curb abuses and improve the efficacy of the monetary policy.

    The CRR adjustment removed over N2.7 trillion from CBN’s vaults and placed it in banks’ custody for on-lending to customers. But while the impact is expected not to be felt immediately, damages done to banks’ bottom line before the policy shift still abound. The funds were kept with the CBN at zero interest rate before this reversal.

    Equally affecting banks’ profits is the implementation of revised guide to bank charges. The CBN’s gradual phasing out of CoT by 2016 and the simultaneous introduction of interest on savings account have impacted banks’ gross earnings significantly.

    For instance, bank customers will from 2016 begin to enjoy free CoT on all their transactions. The policy, which  took effect on April 1, 2012 has seen the CoT gradually drop to N3 per mille in 2013. It was N2 per mille last year; N1 per mille this year and will be zero per mille next year.

    In 2013, the AMCON levy was also increased from 0.3 per cent of banks’ total assets to 0.5 per cent. Analyzing AMCON’s 2013 financial year audited results, an investment banking and financial services firm, Afrinvest (West Africa) Limited, said the “bad bank’s” levy on Deposit Money Banks (DMBs) increased by approximately 76 per cent from N54.6 billion in 2012 to N96 billion in 2013.

    Afrinvest estimates that AMCON’s levy on banks are expected to hit N143 billion by the end of 2014, further strengthening the Corporations’ cash flows in the years ahead but has invariably put pressure on the net earnings of banks. The firm advocates for a strategically cautious approach in rolling out these policies given the enormity of the tasks ahead. Besides, Emefiele’s proposed gradual reduction in interest rates may lead to the unintended consequence of exerting additional pressure on banks’ income derived on yielding assets. These hitches have moderated the industry’s gross earnings from 40.9 per cent in 2012 to 14.8 per cent last year.

    Analysis of banks’ performance showed that the impacts are mixed. While some showed resilience in the face of regulatory headwinds and tough economic environments, others felled like pack of cards. For instance, Stanbic IBTC Holding Company said its first quarter 2015 pre-tax profit fell 46 per cent to N4.81 billion against the same period last year.

    Stanbic did not give any reason for the decline in profit. It recorded a threefold increase in loan loss provisions to N3.9 billion against N1.2 billion last year, the major driver in the year-on-year reduction in earnings. Stanbic’s revenue performance was subdued as profit before provisions came in flat at N24.6 billion.

    Although non-interest income grew by six per cent year-on-year to N13.9 billion, this was more than offset by a nine per cent year-on-year decline in funding income to N10.7 billion due to margin compression, with all key headline items visibly below expectations.

    ikewise, Skye Bank’s fourth quarter 2014 results showed a pre-tax loss of N1.9 billion. Despite the pre-tax loss, Profit After Tax (PAT) came in positive at N4 billion but declined by 53 per cent year-on-year. A gain of N4.2 billion on the other comprehensive income line together with a tax credit of N1.7 billion were the drivers behind the positive PAT.

    Profit before provisions grew by 14 per cent year-on-year to N25.4 billion. The growth on this line was driven by a 33 per cent year-on-year growth in funding income. In contrast, non-interest income declined by four per cent year-on-year. However, the year-on-year growth in pre-provision profits was not enough to offset a 56 per cent year-on-year and 59 per cent year-on-year rise in loan loss provisions and operating expenses respectively. On a full year 2014 basis, Skye’s PBT and PAT declined by 47 per cent year-on-year and 32 per cent year-on-year respectively.

    However, Unity Bank Plc posted a 35.2 per cent rise in first quarter PBT to N4.26 billion against the same period last year. The middle tier bank did not give reasons for the higher earnings, but said revenue rose to N16.5 billion against N14.97 billion in the period ended March, 31.

    Also, Access Bank’s first quarter pre-tax profit rose 23 per cent to N16.5 billion from year ago, the top tier lender said. Access Bank also did not give a reason for the rise in pre-tax profit. Gross earnings rose by 18.5 per cent to N245.2 billion during the period ended March 31, it said.

    GTB’s unaudited financial results for the first quarter ended March 31 showed a 17 per cent growth in gross earnings to N79.02 billion, from N67.58 billion recorded in the comparative period of 2014, underpinned by strong growth in interest income and effective management of operating expenses and cost of risk.

    Its PBT was N32.65 billion, an increase of 17 per cent from N28.01 billion reported in first quarter of last year. The bank reported a first quarter 2015 PAT of N26.56 billion an increase of 15 per cent over the N23.11 billion reported in 2014.

    Likewise, Fidelity Bank’s first quarter 2015 PAT of N5 billion grew 27 per cent year-on-year, mainly due to a positive N956 million result on the other comprehensive income line. Excluding the latter, PAT was up by just six per cent year-on-year. PBT grew by the same rate. In terms of the contributions of the different revenue lines, non-interest income was the standout performer, with a strong 65 per cent year-on-year growth to N7.7 billion. Foreign exchange trading gains drove the strong non-interest income result.

    Zenith’s first quarter 2015 PAT grew strongly, by 27 per cent year-on-year to N28.7 billion, faster than 15 per cent PBT because of a significant positive result of N1.1 billion in other comprehensive income. The 15 per cent year-on-year PBT growth was driven by non-interest income which grew by a staggering 40 per cent to N31.9 billion. In contrast, funding income fell six per cent to N42.6 billion because interest expense of N38.8 billion grew much faster by 50 per cent year-on-year than interest income 14 per cent year-on-year. This is in spite of the fact that loan growth has visibly outpaced deposit growth in the last five quarters. This apparently anomaly can be explained by the fact Zenith saw its net interest margin fall to 6.2 per cent from over eight per cent.

    FBN Holdings (FBN) first quarter 2015 results showed that PAT came in flattish at N19.4 billion. PBT grew nine per cent year-on-year to N26.9 billion. The flattish performance on the PAT line was due to a 35 per cent year-on-year growth in income tax to N4.3 billion and a 47 per cent year-on-year growth in the loss reported on the comprehensive income line.

    Profit before provisions grew by 14 per cent year-on-year to N88.3 billion. The growth on this line was driven by a 51 per cent year-on-year growth in non-interest income. A 126 per cent year-on-year growth in foreign exchange gains to N9.7 billion was the primary driver behind the performance in non-interest income. In contrast, funding income grew marginally, by 1.3 per cent year-on-year.

    The marked growth on the non-interest income line completely offset a 138 per cent year-on-year increase in loan loss provisions and an 11 per cent year-on-year increase in operating expenses, and led to PBT growing by nine per cent year-on-year.

    peaking on the results, Skye Bank’s Group Managing Director/Chief Executive Officer, Timothy Oguntayo, said in spite of the challenging operating environment, the bank carefully grew its risk assets portfolio, attained a 15.7 per cent growth in deposits, supported customers in critical and productive sectors of the economy, and declared a fairly decent profit.

    Oguntayo said the recent acquisition of Mainstreet Bank Limited, which has resulted into a much larger franchise of over 450 branches, provides the bank with enhanced capacity to provide easier access to its teeming customers, and explore various opportunities in diverse segments of the economy.

    Likewise, Chief Executive Officer, Stanbic IBTC Holdings Plc, Mrs. Sola David-Borha, stated that the performance, despite the effect of declining crude oil prices on the operating environment, is evidence of the positive outcome of the group’s strategy of growing the client base across target and key market segments while maintaining a principled credit process.

    She said the future holds great promise for all stakeholders as the Stanbic IBTC Group continues to seek opportunities in high growth sectors of the economy to grow its business, while sticking with its business model anchored on the prudent management of resources. “We remain positive in 2015, despite the envisaged volatility in economic conditions, to deliver best-in-class services to our customers and provide value for our shareholders,” she stated.

    Managing Director of Fidelity Bank Plc, Nnamdi Okonkwo commenting on the results, said the lender built on the successes of the last financial year as it remains committed to delivering sustainable earnings and improved asset quality notwithstanding the headwinds witnessed in the industry, occasioned by the drop in the global oil prices. “As you have noticed, developments in the international markets presented some challenges to both the real sector and the financial sector of our economy,” he said.

    Head, Equities Market at Renaissance Capital (RenCap), Adesoji Solanke said lenders must be disciplined on the cost line and properly manage their impairment charges before they could deliver earnings growth. He said most banks’ managements acknowledged the current challenges and their initial focus will be on reducing the funding costs by continuous downward re-pricing of costly term deposits.

    Vetiva Capital Management analysts predicted that on an aggregate level, the banking industry 2014 gross earnings would take a potential $690 million annual hit, because of the CBN’s CRR policy alone. They said the impact will vary from bank to bank depending on how much public sector deposits on their books.

    Sterling Bank’s Executive Director, Strategy, Abubakar Suleiman said the cost of resolution for the 2009 banking crisis is something that will be with banks for a while but that should not stop them from aspiring to deliver good returns. “These are difficult times. A time when government and regulatory authorities are trying to stabilise prices, including exchange rates and interest rates, and the choices available to them are limited. And again, these are not policies that will be there forever. They will be applied in the best interest of the country, and when things stabilise, we expect some of these policies to be reversed and profitability will improve for the banks,” he said.

    According to him, the CBN cannot allow a certain level of liquidity in the system when there is pressure from the exchange rate. “And even the banks themselves are not better-off if liquidity is allowed in the system because what they gain in terms of interest income they may end up losing if there is significant devaluation or devaluation that is not managed properly. In my view, the CRR policy is something that must happen, and is not going to prevent any serious minded bank from returning decent Return on Equity,” he said.

    For Chairman, Progressive Shareholders Association, Boniface Okezie, contributions to AMCON and NDIC have become outrageous and are eating deeply into banks’ profits. He advised the banks to always make public by including in their annual reports, whatever payments they make to regulators. “Investors money can’t be used to fund regulators. This is not acceptable to us, and should be discouraged,” he said. Okezie said that funding of such regulatory bodies should be done by the Federal Government, and not quoted companies, to ensure objectivity and transparency.

    He said banks’ earnings have been badly depleted by the AMCON levy hike. He said he had earlier warned that the CBN is over regulating the sector. “The shareholders are being denied their take home pay.

    The policy changes are targeted at shareholders,”he said, adding that many banks now lack the needed fund to lend, which could have helped improve their earnings.

    An economist and shareholder based in Lagos, Gabriel Nnanna, said bank’s current performance is making many shareholders to have a rethink on investing in the sector. He said banks now have to drive low cost funds from Small and Medium Enterprises (SMEs) for them to remain profitable giving the declining margins in government deposits.

    “It is no longer profitable and wise to keep expensive funds mainly from government. I think forward thinking banks should go for cheaper funds to reduce their cost of funds and create better returns for shareholders,” he advised.

    For Solanke, the last two years have seen discussions around banks centred on monetary policy and the regulatory environment. He thinks the CBN could be creating an increasingly difficult operating environment, under which some banks cannot hope to deliver returns in excess of their cost of capital. His words: “I think that Nigerian banks are indeed, facing an uphill struggle to deliver 20 per cent plus returns, especially compared with their other African peers.

    “With the tough regulation, banks will be left with little choice but to pursue revenue growth by raising lending rates on their loan books.

    This is likely to come at the expense of either loan growth or asset quality. The larger, more liquid banks may prefer to accept lower loan growth, and instead increase their exposure to treasury assets, since the yields have risen slightly, and hence remain in attractive territory.

    “All in all, high earnings growth is likely to be challenging to achieve. It will become harder for some of the banks to deliver returns in excess of their cost of equity, especially some of the smaller banks.”

    On decline in banks’ profits, Obazee said while the CBN is ensuring regulatory compliance, the FRC is looking at general purpose financial statements, from where it determines whether a bank is in distress or not. He said the adoption of International Financial Reporting Standards (IFRS) in Nigeria has made reporting robust as banks must make full disclosures of their financial positions. Lenders, he insisted, must show how they arrive at their judgments and estimates.

    “The IFRS ensures we trace all the banks’ policies to the financial statements. A lot of malpractices have been cut down, because of full disclosures. If you are disclosing fully, there will be no room for financial manoeuvres. If your results are IFRS-based, there will be a lot of disclosures. Whatever judgment and estimates you make, must tally with estimates. With these disclosures, banks can no longer book profits that do not exist. Banks’ definition of assets has changed as everything has to be put on the table. The banks can no longer lie about their cash,” he explained.

    But other analysts insist that the CBN should be more interested in the overall impact of its policies on the economy than banks’ returns.

    This is because banks’ earnings could decline, but the overall impact of the regulation on the economy is equally important as the regulator needs to continually ensure that the financial system is safe and stable at all times.

     

  • Heritage Bank CEO to speak at CBN’s cashless Card Expo

    Heritage Bank CEO to speak at CBN’s cashless Card Expo

    The Managing Director/Chief Executive, Heritage Bank Limited, Mr. Ifie Sekibo will speak on ‘Innovation in Financial Services Delivery’ at this year’s Cashless Card Expo of Central Bank of Nigeria (CBN).

    This event is scheduled to hold from  June 23 to 25 in Lagos.  Among other things, the expo features various awards for outstanding payment cards and services, in a bid to recognise and reward banks and financial services efforts at promoting the cashless policy.

    In addition to the presentation by Sekibo, Heritage Bank has been nominated for two of the Cashless Expo Award categories namely, “Best Co-branded Card of the year” and “Best Industry innovation of the year”.

    Since it commenced operations in 2013, the bank has distinguished itself through innovative banking services, offering unique customer satisfaction and unparalleled comfort and convenience to existing and new customers.

    Two months after it commenced operation, the lender introduced zero Commission on Turnover (CoT), with no hidden charges for its customers.

    “The nomination of the Bank for “Best Co-branded Card of the year” and “Best Industry innovation of the year” awards at this year’s CBN’s Cashless Expo is in recognition of the various industry setting innovative e-payment cards and channels introduced by the bank since it commenced operations in 2013,” Sekibo said in a statement.

    Some of the products include e-Piggy Card which is for collecting change at merchants; 7411 Smart Travel Tourist Card, which enables visiting tourists in Nigeria to carry out card transactions easily; Mainasara Women and Youth Card, a scheme card to support women and youth development; Vineland Microfinance Bank Card, for customers of Vineland MfB to carry out transactions.

     

  • Sterling Bank supports educational sector

    Sterling Bank supports educational sector

    As part of its “enriching lives” initiatives and in fulfillment of its promise to make the 2015 Children’s Day most memorable, Sterling Bank last week donated two sets of books ‘Funds and My Little Money Book’ to the Lagos State Government for distribution to pupils and students of public schools in the state just as it announced its sponsorship of the Nigerian Bar Association’s conference on Business Law (NBA-SBL).

    The theme of the conference holding this month in Lagos is ‘Regulators as Catalysts for Economic Growth’.

    The first edition of the books were published in 2014 and distributed to public and private schools in Nigeria during the Financial Literacy Week. This year, the bank published a revised version which was also distributed during the Financial Literacy Week and used by its team of volunteer staff to teach in selected schools in Lagos and Port Harcourt. It would be recalled that Sterling Bank was given an Award last year by the Lagos State Government for its support in the sector

    Receiving the books, a senior staff in the Ministry of Education commended the Bank for its continuous support towards the successful hosting of the Children’s Day event organized by the state government and implored other financial institutions in the state to emulate the exemplary role of the bank.

    Apart from the books donated, the Bank celebrated the Children’s Day with lucky pupils/students in their various schools in fulfillment of one of the features of its “I Can Save” product and promoted a social media campaign encouraging parents to post “selfies” taken with their children; following which followers/ fans were encouraged to vote and the top three posts were awarded prizes. A “selfie” is a photograph taken of oneself with a smartphone or webcam and shared via social media.

    The bank’s Group Head, Strategy & Communications, Mr. Shina Atilola said in a statement that the lender’s sponsorship of the NBA-SBL conference was in line with its strategic focus on value adding events especially those focused on education and learning.

    His words: “At Sterling Bank, we are passionate about avenues that would add value for learning in all areas and that are why we are investing heavily in the area of education.

     

    To

  • CBN’s income falls from N209.6b to N35.4b

    CBN’s income falls from N209.6b to N35.4b

    The Central Bank of Nigeria (CBN) has released its audited financial statements for 2013 and 2014 which showed that its net income dropped from N209.6 billion in 2013 to N35.4 billion in 2014.

    The report said 80 per cent of the income has since been remitted to the Federal Government of Nigeria in accordance with the Fiscal Responsibility Act while the balance of 20 per cent was also transferred to the reserves within the bank.

    The apex bank also said the accounts were prepared using the International Financial Reporting Standards (IFRS) format and that both financial statements had been approved by its Board in accordance with the provisions of the CBN Act 2007.

    The IFRS, one of the frameworks internationally recognised and accepted, mandates adopters of the framework to prepare consolidated financial statements.

    The IFRS requirement implies that the financial statement of the CBN be consolidated with those of investee entities, namely Nigeria Export-Import Bank, Abuja Securities and Commodities Exchange, Bank of Industry, Bank of Agriculture, Nigeria Interbank Settlement System, National Economic Reconstruction Fund, Financial Markets Dealers Quotation, African Finance Corporation and Agricultural Credit Guarantee Fund.

    Thus, the bank now has full IFRS-compliant financial statements for the years ended December 31, 2013 and December 31, 2014, respectively. Hitherto, the bank’s financial statements had been prepared under the CBN framework.

    “Meanwhile, the adoption of IFRS by the CBN or any central bank the world over is not without difficulties in view of a number of challenges that include the non-profit-oriented mandates of central banks in their roles of price and financial system stability and economic growth that could be contradicted by the application of some of these IFRS standards, which are for direct profit-motivated commercial entities. Another challenge is the statutory constraints on the central banks,” the CBN said.

    This explains why very few central banks have adopted the IFRS. Many of the central banks which claim IFRS adoption did so partially within statutory constraints. The CBN was however able to work around these challenges to conclude a successful adoption of the IFRS.

    It is worthy of note that the CBN has been able to conclude IFRS adoption within a period of two years as global experience indicated that many of the IFRS adopting central or reserve banks took longer periods of time to conclude IFRS adoption.

  • Wanted: Stricter measures to stem illegal tobacco trade

    Wanted: Stricter measures to stem illegal tobacco trade

    Nigeria loses $200 million yearly to illicit tobacco trade. As the world marks the yearly World No Tobacco Day (WNTD) on Sunday, May 31, with the theme ‘Stop Illicit Tobacco Trade’, stakeholders in the tobacco business are pushing for more stringent measures to halt the illegal trade and save Nigeria from financial haemorrhage caused by tax evasion, unemployment and public health. They call on anti-tobacco campaign groups to step up their game against illicit traders in the tobacco business, writes ADEDEJI ADEMIGBUJI.

    Abubakar Yaya Yaro (not real names) has been in tobacco trading since the days of Nigerian Tobacco Company. This was  long before the British American Tobacco Nigeria (BATN), started operations in the country.

    Yaro, an indigene of Benue State, from a humble background, had his fortune turned around by the tobacco business. Despite not having access to western education, Yaro who, has four wives and 30 children, was able to have 20 of his children in various universities, polytechnics and technical educational institutions across the country. Ten others are enrolled in some of the best private secondary schools in Abuja.

    Yaro is one of the key distributors of tobacco products, but last year, about 30 customs officers stormed his residence in Abuja. Eye witnesses thought the officers had come to pay homage, but the manner they drove through the streets brandishing their guns left no one in doubt that the officers were there for something serious. Yaro is believed to be connected to a network of illegal tobacco trading. Pronto, the 60-year-old man was whisked away to answer queries on alleged importation of illegal tobacco products worth $60 million and tax evasion among others.

    The officers, according to a witness, acted on a tip-off from some traders of the product whose businesses are being affected by Yaro’s illegal distribution network. Besides illegal importation, Yaro’s alleged involvement in illegal labelling of approved brands is one of the reasons why customs turned the heat on him, leading to his eventual arrest.

    Illegal tobacco trading is not new in Nigeria. A 2005 study by the World Health Organisation (WHO) estimated that more than 30 per cent of cigarettes smoked in Nigeria are smuggled. Amore recent (2012) publication by the World Custom Journal, however, claimed that the volume has dropped to less than 10 per cent. The  BATN estimated that the economy lost a whopping $200 million yearly to illegal trade in tobacco.

    Investigation by an online news portal reveals that the products are smuggled under an adopted approach whereby dealers move illicit shipments of tobacco across Nigeria’s porous land borders using car trunks. Also, few months ago, the Consumer Protection Council raised an alarm over importation of a brand of cigarettes, Esse, into the country for Nigerian consumer- considered to be illegal.  Apparently Nigerians were already consuming cigarettes from the future; cigarettes in circulation in July and August 2014 had a manufacture date of September 2014.

    Concerned stakeholders say the CPC circular should trigger an alarm about the illicit trade in tobacco products, which is a global business worth over $50 billion yearly. “The link is obvious. While Esse might be a brand legitimately imported into the country by Black Horse Tobacco Company, this episode with the fake date of manufactureindicates how far those who flood markets with illicit products will go. First, they manufacture under conditions which our Standards Organisation of Nigeria (SON) know nothing about and are not in a position to approve of.  Next, they deliberately cheat the country of revenue by avoiding import duties and then they undercut the local manufacturers who employ thousands of Nigerians and pay their taxes reportedly in the tune of N20billion  and counting,” said a concerned stakeholder, Olugbenga Olugbenga Adanikin.

    According to Euromonitor, a global market intelligence publication and some health experts, illegal tobacco trading affects demand and supply of the legal tobacco companies and poses danger to the health of Nigerians as a result of consumption of illegal imported products.

    “The tobacco market (particularly cigarettes, which accounts for most volume sales) saw a weaker increase in 2013 than it did in 2012, as it recovered from the fuel price crisis of 2012, when pack prices increased for the first time in five years.

    “Nevertheless, the volume growth in 2013 was actually slightly weaker than the growth over the review period, as demand for cigarettes has largely stabilised. The steady increase in demand was due to a decrease in illicit trade and a mild increase in consumption, primarily due to the increasing population, urbanisation and Westernisation. Smokers are also increasingly choosing higher-priced cigarette brands, helping to drive relatively strong growth in value terms. The proposed National Tobacco Control Bill is expected to have a small impact on sales, particularly through a restriction on the sale of single sticks. However, if prices are raised due to an increase in taxation, this will inevitably fuel another large rise in illicit trade given Nigeria’s porous borders,” Euromonitor stated.

    On the consumption of illegal imported tobacco products, a research by Nicotine & Tobacco Research, described illicit tobacco trade as a critical public health issue because lower prices enable greater consumption and more damage to health and simultaneously decrease the money available for state-funded health care.

    “The public health significance of increased consumption of a substance with known health hazards is unarguable, but almost nothing is known about the relative health risks of smoking tobacco obtained illicitly. Illicit tobacco can be adulterated by producers and sellers to increase weight and therefore profits, grown using techniques that elevate concentrations of heavy metals and other toxic substances, or simply mishandled in ways that increase the potential for damage to consumers’ health. Furthermore, the perceptions of illicit tobacco consumers seem to be in direct opposition to these health harms,” the research stated.

    Also, SON underscores the dangers of illicit tobacco trading to the Nigerian economy, public health among others. According to the agency, “illicit tobacco trading is a threat to local industries, drains national income through evasion of taxes, duties; drain on foreign exchange (used in smuggling). Proceeds are a threat to national security and combating illicit trade in tobacco products and destruction of seized products can be a very costly process that creates considerable waste to regulators. Also, consumers have little recourse as illicit products mostly do not offer warranties and money back guarantees,” SON said.

    SON said further that the negative impact of illicit marketing of tobacco products could be devastating as it promotes social vices negative social values via deployment of proceeds and promotes unemployment, adding that such products are a threat to safety of lives and property “Most times they do not meet quality and safety requirements, pose health and safety risk. Life-threatening and destruction of seized products pose serious environmental risk to society,” said SON.

    Meanwhile, the Head of Regulatory Affairs, grim West Africa, Mr. Sola Dosumu, painted a bigger picture of the economic impact of smuggling on manufacturing industries, governments and distributors when he said the  tobacco sector across the globe loses a total of £17 billion yearly to smuggling, while Nigeria loses $200 million yearly to illicit tobacco trade.

    He gave the breakdown as follows: “Governments lose £12 billion yearly in terms of revenue, tobacco manufacturers lose £3 billion annually and other stakeholders in the trade lose £2 billion yearly to smuggling across the world.” He noted that illicit cigarettes worth approximately $10 million were seized and destroyed by regulatory agencies in Nigeria between 2008 and 2013. He added that the major reason illicit trade exists is the economic opportunity it offers for the smuggler and illicit vendor to make money and also for the consumer to save money.

    BATN said further that as a legal operator illicit trade means different things especially as it undermines brand value of approved brands if it is counterfeited.  “A counterfeit (imitation) of a genuine brand of a product. It is apparent that the intention is to defraud both the consumers, government and brand owners of their money/revenue/return on investment. Locally produced and consumed goods for which no excise duty (tax on tobacco products) is paid.

    Products intended for duty free sales, but which end up in local markets. Genuine products brought into the country and declared for personal use but which are in excess of the custom allowance.

    “Illicit trade is attractive because it provides cheaper alternatives to genuinely priced products. Illicit operators can afford to offer their fake products at well below market prices because they are evading applicable taxes, are not investing in research and development for safer products, neither are they affected by the huge costs of running a genuine business. Most times, they have no addresses, it’s almost impossible to track and trace the product source in the event of a manufacturing defect. If not tackled, illicit trade has the ability to take over the legal industry impacted by its activities,” said BATN.

    As a result of the dangers posed by illicit trade, the world marks world tobacco day on May 31 and the tobacco industry is prepared to address the challenges of illicit trade while the anti-tobacco groups are expected to look beyond fighting against legal tobacco business concerns and focus on the more pressing issues of illegal trade.

    This new commitment reflects on the theme for this year’s World No Tobacco Day: ‘Stop illicit trade of tobacco products’.

    “Every year, on May 31, WHO and partners mark World No Tobacco Day (WNTD), highlighting the health risks associated with tobacco use and advocating for effective policies to reduce tobacco consumption. For the World No Tobacco Day, we are calling on countries to work together to end the illicit trade of tobacco products. From many angles, the illicit trade of tobacco products is a major global concern, including health, legal and economic, governance and corruption. The illicit tobacco market may account for as much as one in every 10 cigarettes consumed globally, according to studies, including information supplied by the global customs community. The European Commission estimates that illicit trade in cigarettes costs the EU and their member states over 10 billion euro yearly in lost tax and customs revenue.

    “Illicit trade is not a problem just in high-income countries; almost all countries throughout the world are subject to illicit trade in some form or another. In response to the threat posed by illicit tobacco trade, the international community negotiated and adopted in November 2012 the Protocol to Eliminate Illicit Trade in Tobacco Products, the first protocol to the WHO FCTC,” WHO said.

    The organisation said the goals of the WNTD campaign is to raise awareness on the harm to people’s health caused by the illicit trade in tobacco products, especially the youth and low-income groups, due to the increased accessibility and affordability of these products due to their lower costs.

    Part of the goals is also to show how health care gains and programmes, tobacco control policies, like increased tax and prices, pictorial health warnings and other measures are undermined by the illicit trade in tobacco products.

    “Illicit tobacco products hook young people into tobacco experimentation and use because they are more affordable. Such illicit products also mislead young tobacco users by not displaying health warnings and sometimes involving children in illegal selling activities. Illicit trade takes tax revenue away from the Government, which could have otherwise been spent on the provision of public services, instead directing such funds into the hands of criminals.

    “Illicit trade strengthens corruption and weakens good governance,” WHO said.

    Also, the BATN stated in an email interview with The Nation Nigeria tobacco industry is actively involved in the campaign and fight against illicit trade of tobacco products not only in Nigeria but across West Africa. “BAT made a decision to invest in Nigeria in 2000 and in 2001; a Memorandum of Understanding (MoU) was signed with the Federal Government of Nigeria with a responsibility to reduce illicit trade which had an 80 per cent share of the market at the time of signing the MoU.

    “The illicit products did not meet specific standards set by the Government and contributed to loss in taxes. To ensure our responsibility is fully met, we have a dedicated unit internally focused on Anti-Illicit Trade (AIT).  We also work closely in collaboration and have MoUs with government agencies to create awareness against the ills of illicit trade, provide predictive intelligence on plans to smuggle products; demonstrate how its denies governments of revenue in excess of £12billion yearly; the consumer the right to genuine products and robs brand owners who have invested a lot of money behind their brands, their identity.  We also support capacity building for members of these organisations in training their staff to identify, monitor and fight illicit trade successfully.  We believe that the only way to eradicate illicit trade is if we join forces with government agencies, brand owners, consumers and with our neighbouring countries to stop the influx of these fake goods,” said BATN.

    On how it will deepen the global campaign in Nigeria, the company said: “In our industry, we believe that we should market and sell our products in a responsible manner and that our products should not be accessible in any way or form to children or persons under the legally acceptable age. This means that we do not sell, communicate, market or dialogue in any way with persons under the age of 18 years in Nigeria. We also campaign that all our business partners agree to these terms before they do business with us. All communication material to be used for dialogue with adult smokers should be mature in look and feel and not appeal in any way to children. We believe that in fighting illicit trade tobacco products would remain a product of choice for the adult consumer and would not be easily accessible to children. We therefore strongly believe and advocate for a robust campaign on illicit trade as it will clearly prevent youth access and ensure that legal, regulated products which can be tracked and taxed are available for the adult consumers who have made a choice to smoke.”