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Category: Issues

  • Enterprise: Will Heritage beat October 13 deadline?

    Enterprise: Will Heritage beat October 13 deadline?

    The sale of Enterprise Bank Limited entered the final stage when the Asset Management Corporation of Nigeria (AMCON) announced Heritage Bank Limited and Fidelity Bank Plc as preferred and reserved bidders respectively. Although Heritage Bank has paid the initial 20 per cent part payment and still has up till October 13 to make the final payment or Fidelity Bank steps in. COLLINS NWEZE reports on the unfolding opportunities and intrigues that greet the sale.

    The race for Enterprise Bank sale has been on for over a year. On Thursday, September 11, the Asset Management Corporation of Nigeria (AMCON) announced HBCL Investment Services Limited (HISL), sponsored by Heritage Banking Company Limited, as the preferred bidder for Enterprise Bank.

    The firm has up till October 13 to balance about N44.8 billion, representing 80 per cent of the N56 billion bid price.

    While the clock ticks for Heritage to pay up, Fidelity Bank Plc, the reserved bidder is patiently waiting to step in, should the payment arrangement fail.

    But Heritage Bank CEO, Ifie Sekibo assured stakeholders that the lender will beat the deadline. He is already planning the post-Enterprise Bank era, outlining strategies that would transform the new entity to a mega bank.

    He confirmed that the lender has already paid the 20 per cent or N11.2 billion of the N56 billion bid prices before the Share Purchase Agreement (SPA) was signed in Abuja about fortnight ago.

    The Heritage Bank boss confirmed that the bank had already paid the initial 20 per cent of the total bid price for Enterprise Bank pointing out that efforts were already in place to ensure the payment of the final 80 per cent within the time frame stipulated by AMCON.

    He said the lender is already working on the process it believes, will finally culminate in the acquisition of Enterprise Bank Limited to further drive its time-proven potentials of creating, preserving and transferring wealth among its teeming customers.

    “In line with AMCON’s requirements for the acquisition of Enterprise Bank Limited, HBCL Investment Services Limited (HISL) which is the special purpose vehicle sponsored by Heritage Bank Limited to bid for Enterprise Bank on Friday last week signed the Share Purchase Agreement (SPA).

    I am also aware that HISL has paid the initial 20 per cent as specified in the terms of the agreement. Efforts are ongoing to ensure that the balance 80 per cent is also paid in line with the terms, conditions and time frame specified by AMCON. This major step towards the acquisition of Enterprise Bank by HISL and by extension, Heritage Bank, fills us with great excitement. With this take over process going on smoothly, we are sure a more energized bank with improved capacity to create, preserve and transfer wealth will soon emerge,” he assured.

    Managing Director, CRC Credit Bureau, Tunde Popoola said the acquisition, when completed, would improve competition in the banking sector.

    He explained that in acquisition of this nature, there are different things that are involved including the winner’s ability to pay. He expressed optimism that Heritage will be able to muster the required fund and pay before the deadline expires.

    “Don’t forget that they bided on their own. They provided the value of the bid. Where you are bidding and you are providing amount you want to pay, it then means you have a way of sourcing for that fund. Otherwise, it does not make sense to bid for an amount you will not be able to pay,” he said.

    Popoola said the process has been transparent and winners know the timeline they will be given to pay. He however said the bank must pay without depleting its capital adequacy. “And as a banking institution, they must have the required money without impairing their capital adequacy. If they do not have the means to pay, and the time expires, there is already a reserved bidder,” he said.

    He said should Heritage fail to pay, the right to acquire Enterprise Bank will then go automatically to Fidelity Bank. “If they fail to pay, that goes back to the second bidder who will then pay its bid price. Whichever way it goes, I believe Enterprise Bank will be better for it and the economy will also be better for it because you will see a bank that will run fully with all the potentials,” he said.

     

    AMCON factor

    The AMCON and Heritage Bank Limited SPA will enable the latter acquire the entire issued and fully paid up ordinary shares of Enterprise Bank Limited.

    AMCON had in a statement endorsed by its Head, Corporate Communication, Kayode Lambo announced HBCL Investment Services Limited (HISL), sponsored by Heritage Banking Company Limited (Heritage Bank), as preferred bidder while Fidelity Bank Plc was named reserve bidder for the acquisition of the bridged lender.

    The AMCON spokesman said the bid process started with interest shown by 24 parties cutting across local and international boundaries. The emergence of HISL and Fidelity Bank as preferred and reserve bidders respectively, he said, resulted from a rigorous and competitive bidding process, which was coordinated for AMCON by Citigroup Global Markets Limited, Vetiva Capital Management Limited (Financial Advisers) and G. Elias & Co. (Legal Advisers).

     

    The controversy

    The AMCON has consistently defended the transparency of the deal. In July, it refuted newspaper report alleging that it interfered with the bid process to favour a particular local bank.

    In a statement, Lambo said the bid process leading to the sale of Enterprise Bank has not even reached the stage where any result would be sent to the Central Bank of Nigeria (CBN).

    It said this suspicion was aggravated when AMCON suddenly changed one of the rules for the sale of the Bank shortly after the final bids were submitted. This, according to the report, prompted the CBN Governor to order AMCON to conduct fresh final bids, based on some specific criteria that would be used to adjudge the bids submitted by the five contesting institutions.

    The apex bank is alleged to have seen the result of the final bid submitted by AMCON as inconclusive, with attempt to focus on criteria that would influence the outcome in favour of the particular bank.

    But in a reaction, AMCON said it wanted the public to know that after the advisers (Messrs Citibank and Vetiva) who it employed have concluded their work, AMCON’s management and board will consider the result before the approved buyers are officially sent to the CBN.

    “It is therefore premature for the report to say that AMCON interfered with the process, as the process is still on-going and no names have yet been officially sent to the AMCON board for consideration,” the statement said.

    “AMCON has not interfered in any way in the process that is still entirely in the hands of the advisers. When the advisers present their final report, which we expect within the next two weeks, regulatory approval will be required and sought,” the statement said.

     

    Rules of engagement

    AMCON commenced the sale of Enterprise Bank on September 22nd, last year when it formally invited interested buyers to express interests in acquiring its 100 per cent stake in the bank.

    The audited financial statement of the Enterprise Bank Group as at 31 December 2012, show that the Group’s Total Assets stood at N263.5 billion, Customer Deposits at N208.4 billion and Total Equity at N31.9 billion

    The invitation by AMOCN prompted interests from some Nigerian banks namely Diamond Bank Plc, Fidelity Bank Plc, Sterling Bank Plc, Stanbic IBTC Bank Plc, Standard Chartered Bank, Skye Bank, Heritage Bank Limited and other investment groups.

    Others include investors like Taunus Holdings, Sahara Energy, Obat Oil and about 12 private equity firms backed by experienced bankers as well as financial and investment analysts.

    AMCON said interested buyers should indicate their interest by submitting an Expression of Interest (EoI) with information such as the “description of acquiring entity or vehicle with evidence of registration or incorporation; ownership of the acquiring entity or vehicle; identifying all shareholders with a five per cent or more stake; strategic rationale for the acquisition of Enterprise Bank; relevant financial services industry experience and/or demonstrable evidence of ability to manage a bank of this nature.”

    Also, interested buyers were requested to submit evidence of financing capacity, while a consortium should “provide evidence of alliance/partnership/joint venture between members in the consortium, clearly indicating the lead member authorised to submit the EoIs.”

    The corporation had added: “Upon receipt and evaluation of the EoI, a shortlist of buyers, who in AMCON’s view are deemed to be fit and suitable from a regulatory perspective (amongst other things), will be prepared and will proceed to the first phase of the transaction.

    Analysts advised that the potential investor in the bank should have a disciplined board and management that adhere to sound corporate governance principles.

    Former Head of Research and Corporate Development, Consolidated Discounts Limited (CDL), Mr. Jimi Ogbobine, argued that tier two banks will benefit more by buying Enterprise Bank. He said the bank’s branch network remains a major strength that ambitious lenders can tap into.

    He explained that the legacy bad loans of Enterprise Bank have been bought by AMCON, adding that overall, the offer looks attractive.

    The Managing Director/Chief Executive Officer of Enterprise Bank Limited, Ahmed Kuru, said he was happy leaving behind, a better Enterprise Bank and a happier workforce. He added that he was convinced that customers will have the best deal at the conclusion of the process. “I am convinced our customers expect the best deal at the end of the day. So their expectation should be high,” he said.

    He explained that right from the beginning when he was appointed, it was very clear to him that AMCON, at certain point in time will divest from the bank.

     

    Bridged banks

    Enterprise Bank is wholly owned by AMCON. Other bridged banks owned by AMCON are Keystone and Mainstreet banks. The corporation had acquired the lenders in August 2011, after the intervention by the Nigeria Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN). Enterprise Bank was created from the ashes of the defunct Spring Bank, while Keystone Bank and Mainstreet Bank were created from the defunct Bank PHB and Afribank respectively.

    As part of efforts to divest its shareholdings in the three banks by 2014, starting with Enterprise Bank, AMCON had appointed Citigroup Global Markets Limited (Citi) and Vetiva Capital Management Limited as Financial Advisers, as well as G. Elias & Company as Legal Adviser to the transaction.

    Enterprise Bank commenced operation in August, 2011, as a full-service commercial bank with a national banking license. The bank operates via a sizeable distribution network of over 160 branches spread across major markets and commercial centres in Nigeria, and with over 177 automated teller machines (ATMs), 57 Cash Centres and 2,000 point of sales (PoS) terminals.

     

  • Tackling expatriate quota abuse menace

    Tackling expatriate quota abuse menace

    The unbriddled influx of expatriate workers into the country is increasingly becoming worrisome. While it deprives qualified Nigerians opportunities to be gainfully employed, it also  promotes capital flight. TOBA AGBOOLA reports that all stakeholders must close rank and address the issue.

    The Federal Government, in an effort to ensure that the country keeps pace with the growing global competition in technology and economic development, had made provision for companies to hire expatriates to undertake jobs and responsibilities in areas where Nigerians lack the requisite skills and capacities, while making sure that Nigerians take up jobs they have competencies in.

    However, foreign companies have taken advantage of the weak policing and monitoring of this policy to bring as many of their nationals as possible under the guise that they will do the jobs  Nigerians lack capacity.

    The issue of expatriate quota abuse has become a major challenge to the government over the years. Some of the foreigners are alleged to have come into the country illegally having not gone through immigration processes.

    With this problem, experts have said   Federal Government’s effort to tackle unemployment may not yield the expected result if a major step is not taken to stop the abuse.

    Jobs and career experts said although there is advantage in allowing expatriates to handle some jobs in Nigeria but the undue abuse of that practice is now taking a toll on job seekers.

    According to them, foreigners now remain the preferred applicants in the labour market, with many of them now successfully claiming jobs that skilled and unskilled Nigerians should be doing.

    They pointed out that expatriate quota abuse is most noticeable in the manufacturing, oil and gas, and other sectors. They lamented that it has crept into other sectors of the nation’s economy, thereby compounding her unemployment woes.

    Some of the foreigners take advantage of Nigeria’s porous borders to make their way into the country, while others use official entry points under the guise of being expatriates with skills not available in Nigeria.

    The 1963 enabling Act of the Nigeria Immigration Service (NIS) made provision for the employment of foreigners in areas where Nigerians are lacking the required skills. The NIS is empowered to issue business permit and expatriate quota and to monitor the quota granted in order to ensure effective transfer of technology to Nigerians and eventually indigenise the position occupied by the expatriates.

    But since 1963 when the law was made, there has been no monitoring and there has been no technology transferred to Nigeria in whatever form.

    In fact, the law has been abused as foreigners can now be seen at construction sites, factories, auto-sale outlets, telecommunications and maritime companies doing semi-skilled and even menial jobs that should have been reserved for Nigerians in order to reduce unemployment in the country.

    Asians are more in this category of foreigners with questionable entry into the country and abuse of the expatriate quota regime. Many of them can be found in sales outlets as attendants.

    Decrying expatriate quota abuse and blaming it largely for the unemployment crisis ravaging the country, the Lagos Chamber of Commerce and Industry (LCCI), said it is concerned about the influx of foreigners and the unemployment challenges it produces.

    Its Director-General, Mr. Muda Yusuf, said the abuse is worse in the state where foreign workers have taken over jobs Nigerians have adequate competencies to do.

    He said the government needed to check the trend because many of the expatriates lacked the requisite qualifications to work in the country, adding it was even worse the foreign workers get higher wages.

    The LCCI boss lamented that government efforts at creating jobs would be in vain if the trend is allowed to continue unchecked.

    President, National Union of Civil Engineering, Construction, Furniture and Wood Workers (NUCECFWW) Comrade Amechi Asugwuni, said many foreigners, especially Asians and Chinese are in the country under the guise of being experts on the jobs that can be performed by Nigerians, which is against the Nigerian Content Development (NCD) Act.

    He said the implementation of the quota is not in tandem with the Nigerian Content Development Act, which states that Nigerians should be considered first in any employment before foreigners or expatriates.

    He said the union on several occasions, had urged the NIS and the Ministry of Labour and Productivity to establsih that there is actually the need for expatriates in any company before granting work permit to any foreigner, and that the government should step up efforts to check the influx of expatriates into the country.

    He explained that the Nigeria expatriate quota law be respected, while many of the companies should comply with the provisions of the Nigerian Content Development Act, as employment generation is one of the greatest problems facing the country.

    He said: “We call on the necessary organs of government to review the process of granting expatriate permit through proper synchronization as well as ensuring that expatriate quota are not abused.

    “We also demand for a properly reconstituted inter-ministerial department and agency committee that will co-opt labour unions in recommending and approving expatriate registration.

    The Executive Director, Human Resources, 7up Bottling Company Plc, Mr. Femi Mokikan,  gave reasons for the increasing number of expatriates in the country.

    He said: “I do not think there is any economy in the world that can say it does not use other nationalities. So, that one is not what anybody is talking about. I think the question people usually ask is; why should expatriates be taking on jobs that Nigerians can do?  I think our educational system in this country has not helped us too.

    “I am speaking as a Nigerian; I am also speaking as an employer of labour that is operating in an environment that is extremely competitive, an environment where technology changes as you blink your eyes. That is why such areas where we used to pride ourselves as being capable as Nigerians, we now have to ask ourselves, how well can Nigerians do this?

    “When investors bring in their money, they expect maximum returns. Even though it would cost a bit more, they would rather get an expatriate than a Nigerian who will give minimum returns. I think that is what is happening in the area of expatriates’ employment generally.”

    Minister of Labour and Productivity, Emeka Wogu, warned against the abuse of expatriate quota by employers, stating that it has become a source of concern for the government.

    Wogu who spoke at a forum organised by the Nigeria Employers Consultative Association (NECA), warned that the rights of Nigerian workers must be protected by their employers. He said: “The right of Nigerian workers to rise to any position in the workplace should be guaranteed and encouraged by all and sundry. This should minimise or alleviate the incessant grievances and conflicts in the workplace and should therefore curb the issue of impunity and abuse of rights by the expatriates.”

    The minister noted the importance of maintaining industrial harmony in the country curbing the menace of impunity and abuse of rights, adding that most protracted disputes and conflicts in the workplace stem from lack of mutual trust and understanding of shared interest.

    To tackle the challenge of expatriate quota abuse, technology transfer and sustainable indigenous skills and capacity development especially in the oil and gas industry, the Federal Government established the Nigerian Content Development and Monitoring Board (NCDMB), led by Engr. Ernest Nwapa.

    Two months into the establishment of the Board, Nwapa summoned a meeting of chief executive officers and managers of international oil companies (IOCs) to deliberate on how to streamline the guidelines for expatriate quota applications and deployment in the oil and gas industry.

    The meeting was a platform where the managers of oil firms were made to understand the guidelines for expatriate quota application and ensure full compliance with the provisions of the Nigerian Content Act.

    The meeting highlighted a section of the Act which gives the operator/project promoter room to retain a maximum of five percent of management positions, as may be approved by the Board, as expatriate positions to take care of investors’ interests.

    Nwapa also told them that the position of the government was that the guidelines were applicable to international operating companies and their service counterparts and warned that the Board would not take it lightly with any company that continued to use suppliers and contactors who flout these laws by bringing in expatriates without due approvals.

    The guidelines issued by NCDMB required that all companies applying for expatriate quotas must provide proof that the positions applied for have been advertised in at least four major Nigerian newspapers and two international newspapers, to establish that there is no qualified Nigerian that can do the job.

    Besides, those oil companies were also required to notify the NCDMB of the receipt of applications, planned interview dates, and results of the interviews for each vacancy advertised, as well as proof that no qualified Nigerian had been found fit to occupy the positions. Similar requirements are applicable on the extension of existing expatriate quotas operating companies in the industry with a warning that the Board would hold operators responsible for the failure or otherwise of their contractors to comply, and would not prequalify erring contractors and suppliers to continue providing services in the industry.

    Four years after the establishment of NCDMB, the Board through effective implementation of the Nigerian Content Act, has made many Nigerians become owners of midsized exploration and production companies, service companies, and crude marketing firms, with upstream assets outside Nigeria and competing effectively internationally.

    In IOCs, Nigerians are taking up challenging positions and responsibilities, which previously reserved for expatriates. Nigerians are handling fabrication and construction projects that were in the past five decades, were awarded to foreign firms and carried out overseas.

    To show how worrisome the issue of expatriate influx and their takeover of jobs that Nigerians can competently handle, the members of Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, had about two years ago, directed that all its branches engage their managements over the unprecedented engagement of expatriates under various guises.

    The directive was given based on PENGASSAN’s discovery that oil companies have been undermining the Nigeria Content Act, where the number of expatriates working in Nigerian oil and gas sector was increasing by the day instead of decreasing.

    It said a report issued in October 2010, showed that expatriates constituted a third of the workforce in the oil and gas sector, which it said had increased by 2012.

    PENGASSAN lamented: “When a foreigner comes to a developing country such as Nigeria, he is called an expatriate irrespective of his professional standing, but when a Nigerian goes to Europe and America or a more developed country, he is called an immigrant. Immigrants are poorly paid. But expatriates enjoy unimaginable pay and dreamland privileges, which is very high even by the standard of their home country.”

    A report by the NCDMB showed that between January and March this year, out of 2,567 expatriate quota applications, only 1,032 were granted, while 1,113 were rejected.

    To determine the exact number of expatriates working in the country, the government is conducting a biometric data capture  of all the foreigners working in the country and as at the last count, 1,716 foreign workers have been captured.

    The Nigerian Petroleum Exchange Joint Qualification System live database, according to the report, currently has 20,587 individual records; 17 operator portal accounts (with only four active operators); and 5,480 service company portal accounts (with 888 active service companies).

    NCDMB said expatriates that work in the nation’s oil and gas industry are now required to undertake biometric registration. This is a requirement for obtaining expatriate quota approvals from the Board. The scheme started in July last year.

    In the power sector also, especially in the assets acquired or managed by Chinese, jobs such as tractor-driving, chefs and some menial jobs are done by the Chinese. For example, in Omotosho and Olorunsogo power plants, Chinese outnumber Nigerians and some of them carry out jobs that don’t require formal education and skills.

  • The many sides of cash-less banking

    The many sides of cash-less banking

    Cash-less banking comes with varied benefits, but grassroots campaign and enlightenment must be sustained to fully tap the opportunities it presents. The nationwide roll out on July 1, presented a huge opportunity for banks, regulators and other stakeholders to collaborate to achieve the desired objectives, writes COLLINS NWEZE.

    Michael Abiodun, a 32 year-old entrepreneur, spends a part of his business time in banking halls making payments to his suppliers of goods.

    During one of such visits to a bank in Central Lagos, a cashier who has been monitoring him for months, including his frequent visits to the banking hall, decided to tell him about electronic payments.

    “You don’t need to be physically here to pay your suppliers. You can do it at home, or even in your shops or through mobile phone,” the cashier told Abiodun.

    The use of Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, web payment, online transfers and even mobile money, are just getting popular in Nigeria, after years of relying heavily on cash for payment for goods and services. Although e-payment saves costs and time, just about four per cent of transactions done in Nigeria are carried out through the process.

    The figure was less than one per cent until January 2012 when the Central Bank of Nigeria (CBN) launched the cash-less banking initiative in Lagos. The ‘Cash-less Lagos’ as it is called, was later replicated in six other states and Federal Capital Territory last January. The nationwide implementation of the policy began on July 1.

    As electronic payments gain ground, the number of connected card readers has increased to about 158,000 from 5,000 before 2012, according to the CBN statistics. The value of transactions rose 26 per cent to N1.4 trillion ($8.5 billion) in the first half of last year from the position, a year ago.

    The CBN said it is targeting an increase to 375,000 readers by the end of next year. For him, improved e-payment would make monetary policy more efficient because of ease in which cash movement is monitored.

    The rise of online-shopping websites, such as Jumia and Konga.com, has also spurred Nigerians to consider electronic payments. The value of online retail transactions, estimated at N62 billion in 2011, may rise to N150 billion this year, according to Euromonitor International, a London-based researcher.

     

    ATMs gain ground

    ATMs withdrawals accounted for 93 per cent of electronic payments by volume in the first half of 2013, according to CBN data. Mobile money also hasn’t taken off in Nigeria, with phone payments accounting for just 3.7 per cent of all electronic transactions. The mobile money which allows mobile phones to be used to send and receive money, buy recharge cards, pay subscription fees for DStv, pay electricity bills, use of PoS terminals to pay for goods and services among others is under threat.

    The telecommunication companies (Telcos) and banks which are expected to drive the process are not doing so. Both sectors want to drive the mobile money business and have found it extremely difficult to work together.

    General Manager, IBM Africa, Taiwo Otiti, said the strategy being adopted by the key stakeholders is stifling the success of mobile money in the country.

    He said: “The approach we have taken in mobile money is the challenge. We have over 30 million unbanked, compared with over 100 million mobile phone users, the people who are unbanked, may have mobile phones, but how would you get them into the financial system. You must be able to get into his lifestyle for you to be able to get him subscribe to mobile money scheme. But many of the stakeholders are not doing that”.

    Otiti said the getting the mobile money scheme running requires both the payment and supply chain properly defined and implemented by the stakeholders. He said there is need for a paradigm shift that sees all the stakeholders working together. “The telcos can’t also do without the banks, so also are the banks. It is only by collaboration, will the mobile money project begin to deliver the needed results,” he said.

    The Executive Vice-Chairman of NCC, Eugene Juwah, said critical success factors for mobile payment in the country are the integrity and security of the end-to-end transition during a payment transaction process. He said the chain of transaction must be secured from initiation to authentication. Therefore, confidentiality and integrity of the data transition are critical factors in mobile payment.

    While mobile payments increased more than threefold in recent years, only N6 million was transacted using mobile money, compared with N57.2 billion ($352.5 million) on ATMs, and PoS.

    The central bank wants commercial lenders to drive growth rather than phone operators because they regulate the banks and not the telecommunication companies, Moghalu said.

    Even among Nigerians with ATM cards, cash still dominates daily business as connection and network difficulties and delays in transaction times get worse. There have been cases where consumers are debited twice for the same purchase.

    About 50 per cent of card-reader transactions also crash because of patchy radio and phone networks, Moghalu said. The CBN is trying to reduce failure to below 10 per cent over time, he said.

    Fixing botched transactions causes “quite a bit of frustration” because they can take months to resolve, Bisi Lamikanra, a partner and head of management consulting at KPMG Advisory Services, said adding that with these hitches, consumers typically rather withdraw cash from the ATM, even if they’re withdrawing it outside the shop. The start of chip-and-pin-card technology in 2010 helped lower incidents of ATM fraud by more than 90 per cent.

     

    Incentives for e-payment

    The Nigeria Interbank Settlement System (NIBSS) is encouraging the use of cards to pay for goods and services via PoS terminal. The agency, collaborating with banks is working out modalities that will ensure that bank customers that use their e-payment cards to pay for goods and services on PoS terminals and web platforms will now be rewarded with cash back of 50 kobo for every N100 spent.

    Chairman, Committee of E-Banking Industry Heads (CEBIH), Mr. Chuks Iku, the committee and  member-banks have partnered with NIBSS for an incentive scheme for members of the public. The scheme, he said, will allow cash back rewards to card holders for using their cards to make payments on alternate channels. “The objective is to encourage usage of cards on PoS and the Web,” he said.

    Banks are also taking steps that would ensure the security of customers’ transactions. The lenders are discussing with Microsoft Nigeria to extend security features in Microsoft XP being used by most Nigerian ATMs.

    With the expiration of the April 8 deadline set by Microsoft for users of Windows XP to migrate to Windows 8 Operating System (OS), there are fears that the ATMs of most of the lenders in the country may be vulnerable to fraud. Iku said Microsoft Nigeria had directed banks to migrate to the improved platform, which, he said would allow for enhanced banking benefits and security.

    The banker said despite failure to comply by some lenders, ATMs remain secured and safe for transactions. He however said non-compliant ATMs might not be able to carry out improved service delivery.

    “By upgrading, we are taken to a higher version, but that does not mean that the version that you have will not run. The ATMs are still working, and are not going to go down. “But the migration will only enhance the features of the ATMs. There is really no cause for alarm, the important thing is that we should do it quickly to ensure that our ATMs are in top performing levels,” he advised.

    General Manager Microsoft Nigeria, Kabelo Makwane said several banks have identified non-migration to the new technology as a priority for them and are taking steps to address the challenge. He said non-migration to the Windows 8 could open the banks up for potential security vulnerability and threats.

  • NDIC advises stakeholders on mobile money

    NDIC advises stakeholders on mobile money

    The Nigeria Deposit Insurance Corporation (NDIC) has urged stakeholders in the mobile money business to seek ways of extending the service to a larger percentage of the population.

    NDIC’s chief Umaru Ibrahim, who said this during a roundtable discussion on mobile money services in Lagos, noted that there are over 100 million mobile phone lines in the country.

    He said: “According to Enhancing Financial Innovation and Access (EFiNA) survey, the rural population is 71 per cent, while 76.2 per cent of the population remains unbanked. Mobile phone ownership is 55.6 per cent in the rural areas.”

    He said effective rendering of mobile banking financial services could be a key mechanism in achieving the objective of National Financial Inclusion Strategy (NFIS) based on the huge success recorded by Kenya, Uganda and South Africa in enhancing financial inclusion through mobile financial services.

    Ibrahim said mobile banking subscribers would soon get deposit insurance coverage, with each subscriber guaranteed up to N200,000, or N500,000 as applicable to Microfinance Banks/Primary Mortgage Banks and Deposit Money Banks(DMBs), in the event of bank failure.

    He explained that if a bank fails, the insured mobile account can be transferred to another sound bank, to further engender public confidence in the system and promote financial stability.

    According to him, the framework for extending deposit insurance to individual customers of mobile payment services is being finalised.

    He explained that mobile payment is operated under financial regulation and performed from, or through a mobile device.

    “It is a convenient, secure and affordable way to send money to friends and family, using mobile phones and/or other electronic devices like internet facilities,” he disclosed.

    Ibrahim stressed that with mobile money; all economic agents can transfer funds to any recipient in the country and outside the country, as well as pay for their goods and services, using their mobile phones and other electronic devices.

    “Mobile phones, in particular, are an attractive way to promote financial inclusion given their extensive use by the population and global reach. Mobile phones can serve as a virtual bank card, point of sale terminal (PoS), Automated Teller Machine (ATMs) or internet banking terminal. The confluence of banking technologies with mobile telephony leads to wider penetration and holds new promise of financial inclusion for the minority of the unbanked,” he emphasised.

    He said the Central Bank of Nigeria (CBN) issued a regulatory framework for the operation of mobile payments services in Nigeria in 2009, adding that the apex bank has also granted licences to 21 mobile money operators.

  • CBN urges MDAs to deploy e-channels in remittances

    THE Central Bank of Nigeria (CBN) has asked Ministries, Departments and Agencies (MDAs) to adopt e-payment channels for their transactions.

    Salaries, pensions and supplies and taxes are to be paid through the electronic channels. The policy applies to organisations with over 50 employees.

    In a circular, the apex bank said the process would reduce time and transaction costs, minimise leakages in government revenue receipts, provide reliable audit systems, and make it comply with global payment standards. The policy is also expected to ensure confidentiality of transactions.

    CBN said, henceforth, payment instructions and associated schedules are no longer to be transmitted to banks by organisations in the public and private sectors through unsecured channels, such as paper-based mandates, flash drives, compact discs and email attachments.

    The transactions, the financial services regulator said, must be routed through bank-approved electronic platforms, which transmits the instruction to debit a payer’s account and credit that of a beneficiary, mobile account, electronic wallet or other electronic channels.

    It will include the ability of a payer to monitor and obtain electronic feedback on the status of any payment, without depending on any third party, manual or semi-manual means.

    Draft guidelines that will ratify the policy have been sent to commercial banks and payment service providers. The exercise is in line with the CBN Act, 2007, Section 47, Sub Section 2(2d).

    It said the policy aligns with the National Payment Systems Vision 2020 (NPSV) aimed at ensuring the availability of safe and effective mechanisms for making and receiving various payments from any location and at any time.

    The CBN said all public and private sector organisations, which relates with employees, pensioners, suppliers, taxpayers and others, are considered as stakeholders required working for the success of the policy.

  • Foreign reserves to hit $41b

    Foreign exchange reserve, which stood at $39.57 billion on September 10, is expected to hit $41 billion by the end of this month, Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, has said.

    At the FDC Breakfast Meeting at the Lagos Business School, he said the slow replenishment of the reserves would continue until they reach $41 billion by month-end.

    Analyses of the reserves based on data from the Central Bank of Nigeria showed that the reserves have risen by over $2.4 billion in the last 10 weeks. The reserves which were at $37.2 billion on June 24 rose to $3.84 billion on July 17.

    Rewane said average oil prices of Nigerian crude remained above $104 per barrel while the positive impact on oil revenue will be felt in October. The United States own to less than two per cent, of exports, compared to seven per cent in 2011.

    Dwindling Nigerian shipments to the U.S. imply that disruptions to Nigeria’s oil supplies are unlikely to trigger oil price rallies. Nigeria imports about 50 per cent of its refined products from the US.

    He said oil revenues forecast in second quarter is $12 billion as against first quarter revenue of approximately $11 billion adding that accruals from oil form major part of the reserves. The reserves will cover 8.2 months of import cover

    Analysing financial sector credit, he said the average opening credit position of the banking system was N358.75 billion in July, about 0.66 per cent lower than June figure. Inflation crept up by 0.2 per cent to 8.2 per cent, the fourth consecutive monthly increase.

    He said the Monetary Policy Committee (MPC) left the monetary policy instruments and stance unchanged in July even as the naira appreciated at the interbank market to N161.85/ dollar but depreciated at the parallel market to N168/ dollar.

    Also, banking earnings were flat and lower than first quarter because of the cumulative impact of the Cash Reserve Ratio (CRR) hike. Also, average corporate earnings for lenders declined by 1.53 per cent in second quarter and stock prices decreased by 3.16 per cent.

  • CBN may keep 12% interest rate as MPC meets tomorrow

    CBN may keep 12% interest rate as MPC meets tomorrow

    The Central Bank of Nigeria (CBN) is expected to keep the interest rate unchanged at 12 per cent as the Monetary Policy Committee (MPC) meets tomorrow and next.

    If the MPC keeps the rate unchanged, it will be the 18th time in a row, it is taking such stance in an effort to control inflation and support the naira.

    This week’s MPC meeting will be the second chaired by the new CBN Governor, Godwin Emefiele, and will be closely watched by foreign investors and analysts.

    The former managing director of Zenith Bank, struck a dovish tone on rates two days after taking office in June, saying he would seek a gradual reduction in borrowing costs, which have been stuck at 12 per cent since late 2011.

    That is much higher than the 5.75 per cent in South Africa, which Nigeria overtook to become Africa’s largest economy earlier this year, and 8.50 per cent in Kenya.

    Inflation  rose to a 10-month high of 8.5 per cent in August, closer to the CBN’s upper limit of nine per cent, after rising for five straight months this year on higher food prices and excess liquidity.

    “Higher risk premiums and fiscal profligacy related to the election will keep pressure on the currency and price growth and Emefiele and his team will not want to exacerbate that by loosening policy too aggressively,” said Matthew Searle, sub-Saharan Africa Analyst at Business Monitor International.

    Also, an Economist at Vetiva Capital, Adedayo Idowu, said with the compression in fixed-income yields, as short-tenor maturities head south below the 10 per cent levels, the risks of negative real rates on Nigerian assets will again resurface.

    Meanwhile analysts at Renaissance Capital (RenCap), an investment and research firm,  have pre-dicted interest rate cuts by December next year to allow credit growth and boost real sector production.

    Global Chief Economist at RenCap Charles Robertson said in the “Sub Saharan Africa Macro Strategy” released on Monday,  that such step would allow interest rate move from high single digit, to mid-teens.

    “Post-elections, we expect interest rate cuts in the second-half of 2015, which we think will allow year-on-year credit growth to pick up from current high single-digits to the mid-teens. This is positive for equities and the banks.

    “Equally, it should give a lift to the consumer, as the effect of any pre-election wage hikes dissipates. We believe expansionary fiscal policy in 2015 is unlikely, due to capacity constraints and a desire to keep debt levels low,” he said.

    He said the 2015 elections, though very near, should not distract investors. “Yes, elections are almost upon us in February, 2015, but we do not think that should detract from Nigeria’s otherwise solid macro credentials – especially given our view that the electoral process and outcome will be relatively stable,” he said.

    Robertson explained that Nigeria is well ahead of the other countries under its coverage, given its improving external reserves position  which cover nine to 10 months imports,  and a small fiscal deficit of one to  two per cent of GDP.

    He said a recovery in the oil sector has led to stronger growth, which has been upwardly revised to 6.3 per cent and 6.5 per cent in 2014  and 2015, against prior forecasts of 5.7 per cent and 5.6 per cent.

    He said: “We prefer Nigerian banks to Kenyan banks on a valuation basis. Admittedly, the operating environment in Nigeria is tougher against other key Sub-Saharan Africa markets and this has led to a lower sector-wide Return on Equity.

    “The good news is, we see a recovery from December 2015, when we expect Nigeria’s monetary policy to ease, which is banks-positive.”

  • Furore over allocation of land for aircraft hangar

    Furore over allocation of land for aircraft hangar

    The alleged refusal government, through Federal Airports Authority of Nigeria (FAAN) to allocate land for the building of aircraft maintenance hangar in some airports, is causing. Some domestic carriers,  including Arik Air and start up carrier, Air Peace, allege that FAAN’s refusal to allocate land at the Lagos Airport could stall the growth and development of the sector, writes KELVIN OSA-OKUNBOR.

    There has been persistent clamour for an aircraft maintenance centre for the repair  of aircraft in Nigeria. Proponents of the move which has been on for over a decade, believe that Maintenance Repair Overhaul ( MRO) organisations, the industry terminology for aircraft hangars, would save Nigeria huge foreign exchange that goes into fixing airplanes abroad.

    To them, the millions of dollars spent by domestic airlines to fix their aircraft in Ethiopia, South Africa, Morocco, Turkey, Germany, Spain, United Kingdom and the US as well as other parts of Eastern Europe, could be retained at home, if there were state-of-the-art aircraft repair centres. Besides, experts say that the  project would  generate jobs for thousands of Nigerian aviation professionals, including aircraft engineers and avionics experts.

    Worried by this trend and determined to reverse same, some indigenous carriers, including Arik Air,  Air Peace among others, applied to FAAN for land around airports nationwide for the construction of aircraft hangars.

    The operators argued that establishing an aircraft maintenance hangar in Lagos, for instance, could make Nigeria an aviation hub for West and Central Africa. But the request, according to the operators, is yet to be granted.

    The Deputy Managing Director of Arik Air, Captain Ado Sanusi, expressed dismay over FAAN’s refusal to grant the request, saying Arik Air is partnering with Lufthansa Technik of Germany to set up a major aircraft repair centre that will fix aircraft for domestic and foreign carriers in Nigeria, West and Central Africa.

    He said the company applied for land at the Lagos Airport three years ago, which the authority is yet to grant.

    Sanusi said: “There is no doubt that we have the need for maintenance, repair and overhaul (MRO) facility in Nigeria. Arik made a request to FAAN three years ago for a parcel of land at the Lagos International Airport. He said Arik went further to sign  an agreement with Lufthansa Technik to build the MRO that will cater for Boeing B737-700 and other wide body aircraft not only for Arik, but for other airlines both in Nigeria and overseas.

    “Suffice to say that this will even generate revenue for the government through the Nigerian Civil Aviation Authority (NCAA), Nigerian Customs Service and others. However, this has been put on hold until Arik gets final approval for allocation of land at the Lagos airport. Everything has been done; we are just waiting for final approval from FAAN. It has been on hold for the past three years,” Sanusi said.

    Also speaking, the Chairman and Chief Executive Officer of Air Peace, Mr. Allen Onyema, accused officials of FAAN of frustrating efforts by indigenous operators and other investors to set up aircraft maintenance centres around the airport due to non allocation of land. He said: “There are many ways government can assist domestic airlines. If government cannot build an aircraft maintenance hangar in Nigeria, it should assist any operator willing to invest in that area by securing a large parcel of land around any airport in the country.

    “Such a project will create more jobs for Nigerians. Civil servants should change their ways and stop frustrating private enterprise through unnecessary bureaucracy. For over one year, Air Peace has applied to FAAN to allocate it land to build an aircraft maintenance facility, but the authority has not granted the allocation. If FAAN has allocated Air Peace land at any airport, the project since the past one year, would have been completed before we start our flight operations. If they have done so, many banks, given my integrity and track record, would have funded the project because they know that I am credit worthy.

    “If we build an aircraft maintenance centre in Nigeria, our country would become a hub where African countries would fly in their aircraft for repairs. That would generate huge money for Nigeria and Nigerians. People say aviation does not generate enough money, that is not correct, Ethiopia as a country is generating huge foreign exchange from its airline  and aircraft maintenance centre in Addis Ababa. Both projects are the mainstay of its economy. Why can’t we replicate the Ethiopian model right away in Nigeria? That would create massive jobs.”

    Onyema pointed out that having an aircraft maintenance hangar in Nigeria will assure safety while also bringing investment into the country. He said FAAN should help the country, as he is tired of begging for land. “The airport authority should serve the people of Nigeria, and not  lord it over the people. You pay FAAN for offices, you cannot get the offices you paid for. The airport authority should create facilities for people. This country belongs to all of us. Some people do not own the country. There is sufficient land around the airports; they do not want to give it to serious people who can invest to develop the industry,” he complained.

    He, therefore, called on the Minister of Aviation, Chief Osita Chidoka, to direct FAAN to allocate land to committed investors in the aviation sector to enable them set up aircraft maintenance facility. “If FAAN is sceptical about our capacity to utilise the land, they should ask for our feasibility and bankable evidence on how we intend to develop the facility,”he  said, adding, “We have banks that can finance the projects. The new minister should talk to FAAN to release land and we are ready to give evidence of finance.”

    Onyemainsisted that it is not good for airlines to be carrying out aircraft maintenance at the ramp. He said even the Air Force hangar where some domestic airlines repair their aircraft is not big  enough. Besides, there are airlines that want to have their own hangar.

    The Nation learnt that more than 13 years ago, efforts by some individuals in partnership with American firms to set up the National Hangar Project christened Aircraft on Ground (AOG),  at the Murtala Muhammed International Airport, did not materialise.

    Investigations reveal that FAAN, in the last few years, allocated some parcels of land to some fixed based/charter jet operators, including Executive Jets/Quints Aviation Centre, Evergreen Apple Nigeria Aviation for aircraft repair centres, which operate at the international wing of the Lagos Airport. Also, rotary wing operator, Caverton Helicopters was recently allocated land at the airside of the Lagos Airport where it is currently building its hangar  and simulator centre for West Africa.

    Former Secretary General of African Airlines Association( AFRAA), Mr. Nick Fadugba disclosed that a study on the construction of maintenance hangar facilities has been in the pipeline for close to 10 years. He wondered what happened to the study. He said Nigeria needs a maintenance facility urgently, as there is no serious aviation nation in the world without a MRO facility. According to him, until Nigeria is able to tap into this, the nation cannot be taken as being serious in the aviation business.

    An expert who pleaded not to named, called on  FAAN to make land available for operators willing to build aircraft hangars. He said: “As a matter of conscious policy, FAAN must give land to the airlines to build maintenance hangar. We should encourage them. You have to provide land for them at their operational base, which is Lagos.

    When you travel abroad you see maintenance hangars all over the place. But when you want to build one here they say you should pay a lot of money. It is ridiculous. In America they give land freely  to build maintenance hangar. This is because it promotes safety.

    “The airlines should be given land because that is what it is meant for. And not when you want to give, you give them small land that they cannot expand. I am saying this because for the future of Nigeria that is where we should go. You need to give more land; you must give the land out. It is at the airside that the aeroplane is. FAAN should not say it has a master plan and therefore, will not accommodate maintenance hangar for airlines at the airside of the airport.

    “What is the master plan for? In the olden days, government gave out a large place for Nigeria Airways to build a maintenance hangar; not that there are many airlines; government should give land to them to build hangar. Building hangar is a massive investment so you have to encourage them to build the facility and the airlines don’t have to pay anything. To promote safety, the aircraft will come and land there for maintenance. The hangar is very, very important. Without it we will still have safety challenges.”

    The Executive Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison,  also argued that until Nigeria establishes its own MRO facility, domestic carriers will continue to incur more operational costs to repair their aircraft abroad. Meggison said hangars have the capacity to create jobs and retain money that indigenous carriers spent on the repairs of their aircraft abroad. Capt. Meggisson, who is also President, JedAir, said the setting up of the facility would assist in the training of professionals in the country, including aircraft engineers.

    But FAAN has denied allegations that it was frustrating efforts by some local carriers to build aircraft maintenance hangers in the country by refusing to allocate land to them. FANN’s General Manager, Corporate Communications, Mr. Yakubu Dati, said the allegation of non allocation of land to the operators to build aircraft hangars is not true.

    Dati told The Nation that the authority is not aware of any plan to deny operators land at the airport for the building of aircraft maintenance hangar. He said: “I am not aware that FAAN is not willing to allocate land to operators to build aircraft maintenance hangar at the airport.”

  • Long road to Calabar Port dredging

    Long road to Calabar Port dredging

    The Federal Government’s approval for the dredging of the Calabar Port access channel is causing a stir in the maritime industry. With billions of naira sunk in the project with nothing to show for it, many are wondering whether the project has not become a conduit for siphoning public funds.  Maritime Correspondent OLUWAKEMI DAUDA examines the issue. 

    President Goodluck Jonathan’s approval of the capital dredging of the 84-nautical mile Calabar Port access channel is giving many in the maritime industry the goose pimples.

    While some applauded the move, apparently because of the project’s capacity to boost the economy of Cross River State and the nation, others were apprehensive because it has been abandoned by contractors for years despite the billions of naira sunk into it.

    The Minister of Transport, Senator Idris Umar, who broke the news to  Southsouth and Southeast traditional rulers, led by Edmund Daukoru, the Amanyanabo of Nembe, in Bayelsa State, in his office, said the delay in the work had impacted negatively on the economic activities of Cross River State and the country. “The Tinapa Resort, Calabar has been a little bit dormant because of the non-functionality of the channel.

    At last, the matter has been concluded and President Jonathan has graciously approved that work should commence at the channel. The remaining part of the channel that has not been dredged will now be dredged and the Calabar Channel Management Company will take charge of the capital and maintenance,” Umar said.

    The Managing Director, Nigerian Ports Authority (NPA), Habib Abdulahi also disclosed in Cross River State that the Federal Government has awarded the contract for the dredging of the port. Abdulahi made the announcement when he paid a courtesy visit to the Acting Governor of the state, Mr Efiok Cobham, at the Government House, Calabar as part of his familiarisation tour of ports across the country. His words: “I am very happy and eager to inform you that Mr. President has approved the capital and maintenance dredging of the Calabar Port.” Abdullahi promised that the dredging would begin before the end of the year but it would be done in phases.

    Umar and Abdullahi werehowever, silent on why previous attempts to dredge the channel failed and why those who handled the project have not been brought to book.

     

    History of the port

     

    The history of Calabar Port can be traced to the pre-medieval merchants’ ventures of the 15th century to the present day. It served as an important focus of trade with the outside world in the Eastern states and natural port for the northern states of Nigeria. The old port was privately administered and operated by various shipping companies amongst whom were M/S Palm line Agencies Limited and Elder Dempster Agencies until December 1969 when the Federal Government took over the inadequate Calabar Port facilities from the erstwhile operators and vested it on the Nigerian Ports Authority.

    The development, modernisation and expansion of the Calabar Port was embarked upon under the Third National Development Plan 1975 –1980 in order to make the Port facilities cope with the ever increasing demand of the country’s economy. The current port complex was commissioned in June, 1979 and consists of the following major operational areas: A total land area of 38 hectares, four quays each measuring about 215metres long and 40metres wide. The four quays were also divided into six operational berths.

    The port also has two warehouses measuring 150 metres by 40 metre  and 175 metres by 40 metres Its operational area was divided into two concessioned terminals. Terminal A consisting of two berths was concessioned to Messrs Intels Nigeria Limited, while Terminal B consisting of four berths was concessioned to Messrs ECM Terminal Limited.

    Previous dredging

     

    The first contract was awarded in 1996 by Gen. Sani Abacha, former Head of State  at N3 billion, while the second was awarded at $56 million, by President Olusegun Obasanjo in 2006.

    Before the latest move, $56 million (about N8.9 billion) had been spent on the 84kiliometres port channel without result. The dredging project began in July 2006 and lasted for 64 weeks. The channel is expected to be used by vessels with 30,000 Gross Registered Tonnage since the metre depth of the channel would be 9.5 metres minimum.

    The contract was awarded to Messrs Jan de Nul and Van Oord. The entire length of the channel was divided between the two firms.

    While Van Oord was paid $26 million to dredge the first 44 kilometres, Jan de Nul got $30million to dredge the last 40kilometers of the water channel. The Federal Government told the two firms to scoop out 25 million cubic metres of sand to achieve an overall draft of eight metres to enable big vessels sail to the port. The two dredging companies started work on October 19, 2006 and demobilised from the location in December.

    There are worries that the project was badly conceived in the first place because the two companies knew that the volume of sand in the channel far exceeded the 25 million cubic metres estimated in the contract agreement. The firms were said to have hurriedly left the site after they met the specified volume, leaving behind over 12 nautical miles untouched and without buoys on the dredged part. In the absence of buoys, excavated sand quickly filled the dredged portion and rendered initial effort useless.

    The incessant failure of the contract for the dredging of the 84-nautical mile Calabar Sea Port channel has crippled the smooth navigation of ships and operation of port for almost 20 years.

    About three years ago, another attempt was made by awarding LCM the contract, but  a controversy arose and the foreign firm which participated in the bidding process, protested and petitioned the NPA and accused it of favouritism. The foreign firm accused NPA of giving out the job to the company because of its interest in contravention of the Public Procurement Act. The company claimed it submitted the lowest bid for the project and therefore, had the most competitive bid, which ought to have been considered as the winning bid.

    But the NPA later defended its action, saying the completion period and the fuel price quoted by the foreign company was not realistic. It said the company quoted $765\Mt, while the prevailing rate was in excess of $1000. “This will lead to the claims of variation and price adjustment even before the signing of the contract agreement,” said the NPA in response to enquiries on the contract by the Federal Ministry of Transport.

    Efforts to dredge the port access channel since 1996 have repeatedly hit the rock, costing the nation over N96 billion. The port has been perennially plagued by shallow channel, making freight cost to the port expensive.

     

    Fresh concerns by Chief Anenih

     

    The Chairman, Board of Director of the NPA, Chief Tony Anenih, last year, sent a strong-worded petition to the Minister of Transport, querying the rationale behind the award of the contract for the dredging of the channel to the company belonging to a serving Senator by NPA’s Managing Director, Habib Abdullahi. The NPA chairman called for the reappraisal of the contract and questioned the basis for choosing the consortium to manage the company.

    “The purpose of this letter is to respectfully draw the attention of the Honourable Minister to the Joint Venture Agreement, which was made on January 25, 2013, between the NPA and the Consortium lead (sic) by Niger Global Engineering and Technical Company Limited. The said agreement created a partnership arrangement between NPA and the Consortium and gave the Consortium the right to operate a Joint Venture Company, Calabar Channel Management Company Limited, where NPA holds 60 per cent equity and the Consortium 40 per cent.

    “The circumstances that led to this Joint Venture Agreement and the terms need reappraisal in view of the fact that as at the time the Agreement was signed, there were no reference records of the Consortium on the basis of which it was selected to manage the proposed Company,” Anenih wrote in the letter to Umar.

    Anenih lamented that despite the fact that the approval given by the Minister of Justice for the contract was conditional, officials of the NPA and the Federal Ministry of Transport “decided to engage in selective compliance by amending some parts and ignoring some other parts of the Draft Agreement, particularly those provisions that tend to give absolute control of the finance and management of the Joint Venture Company to the consortium rather than the Board of Directors of the Calabar Channel Management Company Limited.

    “The consortium has no reference whatsoever of previous jobs done. They were completely alien to the Calabar channel project and did not even take part in the bids of 2010 and the later procurement process. The consortium was not prequalified and did not pass through the selection process like other companies. It therefore, follows that the Presidential approval for the appointment of the consortium, led by Niger Global Engineering and Technical Company Limited to enter into a joint venture with NPA, which culminated in the agreement to form Calabar Channel, was obtained without following due process,” Anenih said.

    It was the fourth controversial attempt at making Calabar River navigable. Three years ago, the Bureau of Public Procurement (BPP) cancelled the entire process following protests over NPA’s attempt to award the contract to itself through the Lagos Channel Management (LCM). But the Public Relations Officer of the company, Mr. Rotimi Oyekan, said the company has the capacity to discharge its responsibility. He said LCM has 14 dredgers and vessels used to remove wrecks including special dredgers that can do the Key Walls.

    On controversies surrounding the award of the Calabar Port dredging contracts to his company by NPA, Oyekan said the contract was advertised and LCM bided for it and won the contract. “We have an independent body for the contracts. We bided like others but the advantage we have is that we have been in the system and so, people can see what we are doing. We bided for a lot of contracts which we didn’t win. Even the Calabar dredging contract that is having problems now, we won at the initial stage, but NPA was criticised for awarding the contract to a company in which it had interest and the contract was given to another company. Today, we all know what happened next,” Oyekan said.

     

    Stakeholders call for probe

     

    At a retreat for members of the maritime reporters in Abuja last year, a call went out to government to institute a probe into the Calabar port dredging contract. The forum advised that a fresh contract must not be awarded until an explanation was given on the previous one.

    Other stakeholders who spoke with the paper said there is need for the government to probe those that took over N96billion from the government without much to show for it. The feeling of industry operators is that if N96 billion was judiciously invested in dredging the Calabar port, the channel will not remain shallow and difficult for big vessels to approach.

    The President, Association of Nigeria Licensed Customs Agents (ANLCA), Prince Olayiwola Shittu said the contractors who took money from the government and failed to do the project to specifications have questions to answer.

    “There is nothing bad if the government re-awards the contract. But the previous contractors must be made to tell Nigerians what happened and how the money was spent and on what so that people will not start to see it as avenue to siphoning public funds. Was the contract executed to specifications and if no, NPA and the BPE must tell us what they have done to sanction the companies and if yes, the same NPA must tell us how come the channel is not navigable? Were there some shady dealings? Who are those involved apart from the contractors? Officials of the NPA and the Transport Ministry who handled the contract details must also tell Nigerians what happened and why the huge sum could not improve the depth of the channel and boost the economy of the state and the country,” Shittu said.

    Also, the President of Nigerian Indigenous Ship-owners Association (NISA), Chief Isaac Jolapamo acknowledged the effort of the federal government to dredge the ports to attract bigger vessels. He however, urged the government to ensure that the contract is executed so that it would not be seen as a political statement.

     

    Investors groan

     

    Despite the huge amount of money spent on the port, its channel remains shallow, and investors at the port have continued to count their losses. For instance, in 2012, the Commercial Manager of ECM Terminals, a subsidiary of Ecomarine Group, which is the concessionaire in charge of Terminal B of Calabar Port, Ukemeabasi Udoh, said despite the huge investment in new equipments, information technology, human capital development, etc, the operator handled only 384 vessels between 2006 and 2011. He said this is owing to the fact that not many shippers would want to do business in the area.

    Beside ECM Terminals, other companies whose business fortunes are being threatened include General Electric, TINAPA Business Resort, and Calabar Free Trade Zone. Others are Intel Services, Cocoa Industries Ltd and many others.

    In 2012, Dr Shamsudeen Usman, erstwhile National Planning Minister, accompanied by the policy monitoring committee of the National Council on Privatisation (NCP), visited the Calabar Port and adjoining facilities on a fact-finding mission to assess the challenges confronting concessionaires such as Shorelines Logistics owned by Addax Petroleum, Intel Services and others.

    The delegation decried the shallow nature of the port and the negative consequences on businesses in the area. The companies told the Minister that the approach of the Calabar channel is 6.4 metres at high tide and 5.4 metres at low tide whereas the concession agreement stipulated that the federal government would take the draft to 9.5 metres, a promise the Bureau of Public Enterprises (BPE) had confirmed would be achieved on start of business. But several years after, the condition of the draft remained unchanged.

     

    Roles of the Senate and House   of Representatives

     

    The House of Representatives had previously directed its Committee on Marine Transport to investigate the contract for the dredging of the Calabar channel and the Port Harcourt port. Members of the committee were given three weeks to submit their findings to the House, but Nigerians are worried that the issues in their findings remained undisclosed till date.

    The resolution of the House followed a motion by one of its members, Hon. Kingsley Chinda. The motion was unanimously adopted when it was put to vote by Speaker of the House of Representatives, Hon. Aminu Tambuwal. Titled ‘Failed Contract for Dredging of the Calabar channel and Port Harcourt ports’, the motion gave an insight into the failure of the projects.

    In the motion, Chinda alleged that poor quality work was done in respect of the dredging of the Calabar channel in Cross River. The legislator also alleged the non-dredging and scooping of the Port Harcourt wharf.

    A maritime lawyer, Mr. Dipo Alaka, who spoke with The Nation, said both the Senate and House of Representatives members have serious role to play in the execution of the new contract awarded by the Federal Government. The upper legislative House, Alaka said, should demand for the terms of the contract and ensure that it is done within the time frame.

    Worried by the way the dredging was handled in the past, the National Assembly, it would be recalled, refused to provide funds for dredging of the channel in 2010. NPA had included the project in its 2010 budget and had gone ahead to advertise for the capital and maintenance dredging of the approaches to the port. However, the Senate and House of representatives committee on marine transport expunged it from the budget.

    The legislators had complained that NPA always include Calabar channel dredging in its budget yearly. In 2008 and 2009, for instance, the authority received N6billion and N7 billion, respectively but never used it. This is why stakeholders are insisting that legislators should ensure that money budgeted for the dredging of the channel this year is judiciously spent and the job seen to be executed so that fund that ought to be used to battle insecurity and provide jobs for the youth does not go down the drain in the guise of dredging the Calabar channel.

  • The great national carrier debate

    The great national carrier debate

    Should Nigeria have a national carrier? Yes, say some aviation experts; no, others argue, citing the liquidation of Nigeria Airways in May 2003. As it were, the national carriers of other countries have taken over the local aviation business, leaving domestic airlines with virtually nothing. MUYIWA LUCAS examines the arguments for and against creating a national carrier.

    The wide-bodied Boeing aircraft took off from the Murtala Muhammed International Airport (MMIA) in Ikeja, Lagos. It shot powerfully into the night sky with 100 passengers on board. Addis Ababa, the home country of the Airline was the first port of call. On the tail of this elegant bird is the legend: Ethiopian Airlines. Set up in the early 1990s, the airline has grown into an enviable global aviation brand.

    But, it is not the only foreign national carrier that has found the Nigerian route a veritable source of revenue because of the huge passenger traffic. Others such as British Airways, Virgin Atlantic Airline (another British airline), Royal Dutch KLM, Delta Airline, South African Airways, Emirates Airline, are exploiting the huge potential of the aviation market.

    The liquidation of the Nigeria Airways opened the door for these airlines to come in. The Nigeria Airways crashed because of  mismanagement, inefficiency, corruption and greed. Since then, the country’s airline industry has been on a steady decline. This, perhaps, among other factors, led to the clamour for the re-establishment of a national carrier.

    The agitation reached a crescendo during the tenure of the former Aviation Minister, Princess Stella Oduah, who hinted of setting up another national carrier. Princess Oduah  promised that the dream would be actualised   during President Goodluck Jonathan’s tenure.

    Princess  Oduah explained that the country would have three national flag carriers that will be owned by all Nigerians, run and managed efficiently by professionals to get the commercial and economic benefits from it, if the market potentials of the country is well harnessed. This would provide the country a second chance to restore the lost position it held in international aviation fostered in the days of the now liquidated Nigeria Airways.

    Although the dream did not come to fruition during Oduah’s  tenure, for the umpteenth time, the calls have found their way back into the consciousness of the public. And the reasons appear quite compelling considering that both national pride and economics are at stake. For instance, the several Bilateral Air Service Agreements (BASA) and ‘Open Skies’ policy agreement inspired by the United States (US) government favours national carriers and offers countries with well developed and efficiently managed international airlines, including a national carrier- a lucrative source of revenue. However, the absence of a national carrier has resulted in the designation of some privately-owned indigenous airlines as ‘national carriers’ for taking advantage of BASA and other international aviation agreements and policies.

    These airlines include Bellview, Arik Air, Virgin Nigeria, and Air Nigeria. Sadly, of these four airlines, only Arik Air is still operating. Bellview after its 2005 air crash in Lisa village, Ifo, Ogun state, has not been able to continue in business, though it metamorphosed into First Nation Airline. Virgin Nigeria, an airline formed in partnership with British business mogul, Richard Branson, has become history as a result of Federal Government’s policy reversals. Air Nigeria, coming from the ashes of the defunct Virgin Atlantic, has also been grounded less than one year after it was bought by the business mogul, Mr. Jimoh Ibrahim. Ibrahim, while announcing the stoppage of the airline’s operation, had promised to return the airline as a more viable entity in nine months. However, two years after, Air Nigeria is yet to return to the skies.

    The argument has, however, been that existing domestic airlines should be strengthened and made national flag carriers, instead of the government establishing any airline under any form or guise. Experts have warned of a repeat of the incidents around the defunct Virgin Nigeria Airways (VNA) agreement, which was also touted as a national carrier. This initiative of designating private airlines seems not to have achieved the purpose of a national carrier. A number of reasons account for this. For instance, lack of adequate funding remains a major constraint for airlines, making operational efficiency impossible for their.

    Yakubu Dati, General Manager, corporate communications, Federal Airports Authority of Nigeria (FAAN), argues that though financial or operational problems are not peculiar to private airlines, the situation has been further compounded by the capital-intensive nature of the business. Therefore, he says if for any reason, a private airline which was serving as a national carrier collapses, the government would lose a lot of revenue from operating its lucrative international routes which are covered by various bilateral agreements.

    Besides, he reckons that the government would be left with two choices of either pumping in money to the private airline to resuscitate it, or set up its own airline to fill the vacuum, in the event of such designated private airline collapsing. Hence, he says, various national governments have been involved in aviation for decades. Dati’s argument may not be faulted going by experiences in some Western markets, where state-owned and private–owned airlines do fail or run into financial turbulence. Examples include Alitalia, the Italian state-owned airline which failed; Luftansa, which has had financial problems in the past, American Airlines; North West airlines which went under.

    “The economic collapse of several indigenous airlines and wobbly finances of many existing ones again re-emphasise the need for a national carrier. The issue is not if there is a need for a national carrier, but what form it should take. The former aviation minister, Princess Oduah, made it very clear that she wants a vibrant aviation industry in Nigeria. She was not only talking about recreating a national carrier; she reiterated plan by the Aviation ministry to look into the problems hampering the growth of private indigenous airlines in the country and see how to assist them. Because the industry can only be vibrant in the country if there are several strong players, not just one or two,” Dati said.

    He listed some of the gaps that having a national carrier would fill to include stopping the financial hemorrhage from the loss of revenue by government from the lucrative international routes covered by BASA, and also positioning the country to benefit from the ‘Open Skies’ regime with the US- an agreement that has remained lopsided due to the lack of a strong national carrier and other strong Nigerian airlines plying international routes.

    The Chief Consultant and Chief Executive Officer (CEO), Belujane Konzult, a firm of aviation consultants, Mr. Chris Aligbe, said a national carrier is an old concept where the government owns 100 per cent or majority equity in an airline, thus making it to control it in terms of policy formulation, implementation and management as was the case with the liquidated Nigeria Airways. Aligbe said rather than embark on a national carrier journey, the concept of a national flag carrier should be adopted. Therefore, he explained that there should be a distinction between a national carrier and a national flag carrier.

    For him, the defunct VNA arrangement did not represent a national flag carrier as Nigerians were made to believe because the Virgin Group, owned by Mr. Branson owned 49 per cent equity in the airline, managing, supplying equipment and doing everything else to run the airline, and in the long run, the remaining 51 per cent equity held by Nigerians did not make any meaning. He said to have an efficient national flag carrier, a model in the form of that operated by the Ethiopian Airways and Kenyan Airways, are a perfect example of national flag carriers. This is because the government’s equity in Kenya Airways, for instance, is about 23 per cent, KLM, as foreign technical partner to the airline, has 26 per cent equity, while the balnace is owned by the citizens.

    Also, British Airways (BA) is owned almost 100 per cent by the British citizens, and therefore it fills the gap of a national carrier or entity by being designated as the national flag carrier; and because it is owned by the nationals, the equity can be traded on. This is a sharp contrast from Virgin Atlantic Airline (VAA), owned by Mr. Branson, who holds a controlling share of 71 per cent, while Singapore Airline holds about 29 per cent of the VAA share. By implication, it means that until an airline gets to that point that it is substantially owned by the country’s citizens, then it cannot be designated as a national flag carrier.

    “This is why VAA is called a British flag carrier and not a national flag carrier because of the ownership structure; its shares are not in the open market,” Aligbe explained. The same, he said, was applicable to Arik Air, which is  owned by an individual. At best, the airline for now can only pass for a Nigerian flag carrier, and not a national flag carrier since it is not owned by the citizens. Experts in the industry explained that the designation of an airline as a national flag carrier is of tremendous benefit, especially when it flies on the international route. This is because the status bestows a ‘sovereign cover’ on the airline, which is required as an international operator, because with that, the extent of meting out a shabby treatment for the airline is reduced.

    Stakeholders in the industry have also called for caution should government finally bow to the national carrier pressure. They advised that in whatever form, government must not have more than 10 per cent equity in the national carrier. This equity, they suggested, should be managed by the ministry of finance incorporated or the aviation ministry, while the remaining 90 per cent equity should be taken by technical partners, Nigerian citizens, individual or corporate bodies. Aligbe is of the opinion that this strategic model, if adopted, has immense benefit for the country and the local industry. One of these is that the airfare regime will become competitive, which will lead to other factors like improved service delivery. It will also reduce capital flight, which is very huge in the airline sector.

    The former assistant secretary, Airline Operators of Nigeria (AON), Alhaji Mohammed Tukur, however said rather than government establishing a national carrier, the problems of the industry should be addressed. For him, government should find a way of ensuring that domestic operators are on sound footing by deliberately putting in place policies that will protect them. Tukur, like Olumide Ohunayo, an aviation consultant, is livid that government signed blindly the open skies agreement, which he reckons has further crippled the domestic operators. Ohunayo and Tukur both castigated the open skies agreement signed by the country, saying it was done at a time when the country did not have airlines that were capable of operating efficiently. Besides, it has remained a great disservice to the domestic carriers considering that foreign airlines now fly to multiple points in the country.

    For instance, on November 6, last year, the Ethiopian Civil Aviation Authority (ECAA) and the Federal Ministry of Aviation were said to have signed a memorandum of understanding (MoU) to increase the number of weekly flights between the two countries. In the MoU, Ethiopian Airlines would fly 31 weekly flights to Nigeria from a previous 18. The airline, which serves 76 international destinations, including 45 in Africa was said to have been given the nod to operate a frequency of seven passenger flights and three cargo flights a week into the ancient city of Kano. Ethiopian Airline flies into Abuja, Lagos, and Enugu. Though the MoU also stated that one Nigerian airline would be allowed to fly the same frequency of flights to Ethiopia, no Nigerian airline plies that route.

    Tukur said there should have been an alliance between domestic and foreign airlines for local flight connections upon arrival in Lagos or Abuja, to other destinations, as this would invariably grow the capacity of domestic airline operators. “But we opened our skies and allowed foreign airlines to take over everything, and for this reason, foreign airlines don’t look at domestic airlines as partners. America will never allow such a thing in their country,” he said.

    Indeed, Ohunayo observed that countries the world over have protected their carriers by not engaging in reckless slots allocation, frequencies and most importantly commercial agreements. For instance, the South Africans have refused to sign the open skies with the Americans, same with Russia, China, Hong Kong, Mexico and some other countries. Brazil, he explained, though signed the open skies pact, the full implementation is scheduled for 2015. For China it’s the American labour unions, not the Chinese that are resisting the open skies agreement because of perceived job losses and cheap wages that will accompany the agreement. Japan, India, Australia, Switzerland and EU with bigger economy and obviously stronger industry, signed the open skies after Nigeria did, using strong negotiating tactics that ensured commercial valves were sealed for their carriers.

    The Philippines government through its central bank introduced financial instruments that made transfer of ticket sales less flexible; the foreign airlines grumbled and reduced frequencies while on the other hand San Miguel Inc is adding a $1 billion investment to its flag carrier, Philippines Airlines, for the purchase of a sizeable number of aircrafts. Philippine is a CAT- 2 certified country, and has flight restriction into Europe, yet it was able to protect its flag carrier to attract such investment.

    To remedy the situation, experts say that instead of forming another national carrier, which will end up as a failed project, domestic airlines should be positioned to be in international alliances.Tukur warns that the country is enclosed by airlines that have grown larger than their national size because they have gone into alliances and have become transnational airlines, such as Air France. “So we have moved from national airline to transnational, yet, in their own countries, they are the national flag carriers, but because of the arrangement they, they have so enlarged their size; the economy of scales that arise from this are incredible,” Tukur said.

    For instance, he explained that due to their large fleet size and expanded operational base, these airlines do not pay the same price for aviation fuel, as they get very considerable concession on price. This is because they are able to approach the multinational oil producers and marketers and negotiate at with them aviation fuel price and what they pay, taking advantage of their huge fleet size that are juicy for the oil marketers. Ethiopian Airline, Kenyan Airline, South African Airline, are all members of alliances, and this has exploded their market through alliance relationships, huge booking networks, insurance premium, amongst others. “Our own airlines are disadvantaged in this area and they cry everyday. That is why our people here will continue to have high cost of operation,” Tukur said.

    This submission may not be faulted. Statistics from the Belujane Konzult boss show that up to 40 per cent of the passengers flying on the Lagos-London route are going beyond the place and only 60 per cent stop in London. Of this, BA carried 96, 000 passengers in 2012, Arik carried 60, 000, and VAA carried slightly over 70, 000 passengers. Therefore, because Arik Air cannot fly from London to another country, it loses out significantly in terms of revenue; hence, the need for Nigerian airlines to expand their operations because once they can fly beyond point to point, then its good for them.

    The government, it is further suggested, should enforce the “Fly Nigeria Act” starting from its officials to ensure that at least, money coming from government should go to Nigerian airlines. Government officials must use indigenous airlines going to their destination. To ensure corporate bodies and multinationals fly indigenous airlines, it is being advocated that the use of an indigenous airline should be made tax deductible. This means that it is only when such companies comply with the fly Nigeria act that their expenditure on travels should be free of tax, otherwise, the company must be made to pay tax on travel expenditure.

    “The government money is sovereign money that belongs to all Nigerians so it should be spent to help Nigerian airlines; it’s like the local content agenda, so that we would not be encouraging capital flight. Corporate bodies will not be forced but when it comes to tax relief, then their compliance with the fly Nigeria act should be used and if they are found guilty, then they should not be granted any of such,” Aligbe canvassed.

    The search for a national carrier may be gathering momentum. But the question is; Do we really need a national carrier at this stage when our domestic carriers are almost in comatose, begging for viable policies to bring them back solidly on their feet?