The Nation Newspaper

Category: Business

  • IFRS: Non-compliant firms’ accounts may be rejected

    The financial reports of quoted manufacturing companies whose accounts for the year ending December 31, 2012 do not contain basic provisions of the International Financial Reporting Standard rick being rejected, the Financial Reporting Council (FRC) has said.

    FRCis charged with enjoying accounting rules, and ensuring that other regulating bodies comply with their own regulations.

    Speaking to The Nation in Lagos, FRC’s technical resource person Uwadiae Oduware said impairment test on assets, consolidation of entities bought, consolidation of investments where investor has less than 50 per cent control, loans obtained at below market rate, among other, are expected to be included in the financial statements.

    Accounting reports that do not contain these stand the risk of being rejected, he added.

    Oduware said firms are deemed not to have complied with IFRS when their financial reports lack these basic elements.

    He said: “The deadline for the adoption of IFRS for manufacturing companies was December 31, 2012. Though there is no punishment for erring firms, FRC may reject financial statements that do not reflect basic provision of IFRS to serve as deterrent to others. Impairment test is not optional for any entity reporting on the basis of IFRS.”

    He said firms are not only required to carry out impairment test or review of their assets at the end of every financial year, but they must include it in their financial reports.

    He said Impairment of Assets known as IAS 36 is well spelt out in IFRS guidelines, stressing that firms that failed to carry out the test have violated IFRS rules.

    Mr Oduware said: “When a company buys assets, it must estimate the usefulness of such assets vis-à-vis its lifespan. For instance, if the assets are expected to last five years, and could not last that period due to certain problems or changes, the assets must be reviewed to know the extent of impairment or depreciation.

    “If a firm has a property close to the lagoon, and concluded that the property will last for 25 years. But due to flood, among other natural disasters, the economic life of the property has reduced. Based on this, the owner of the property is expected to carry out an impairment test on the asset to know the level of depreciation. This must be reflected in the financial statement of the company, as part of requirements for complying with IFRS.”

    He said many entities are looking for ways of avoiding this requirement because of its cost implications, stressing that the development will have grave consequence on the company.

    Oduware also said firms that failed to consolidate their entities before preparing their financial reports have breached IFRS rules.

    He added that firms are required to consolidate investments where investor has less than 50 per cent control to ensure transparency, adding that financial institutions are guilty of this misconduct. He said such actions would not be tolerated under IFRS implementation.

    Former President, Manufacturing Association of Nigeria (MAN), Alhaji Bashir Borodo said IFRS is still the most realistic antidote to problems relating to compilation and production of financial reports.

    He said the IFRS option is a more viable and error-free system, when compared with what obtained in the past. He said manufacturing companies have no choice than to comply with IFRS.

    “Ultimately, this is the way to go in Nigeria, not minding the fact the country is lacking technical expertise to execute the IFRS. The reason is because the idea will check financial malpractices,” he added.

  • Nigerian, Zambian banks target $1b power projects

    A Nigerian investment bank will partner Zambia’s largest distributor of power in the financing and development of six new hydroelectric power stations worth over $1 billion in Zambia, an industry official has told Reuters.

    Managing Director, Corporate Development at Zambia’s Cop-perbelt Energy Corporation (CEC) Michael Tarney said the six projects have capacity of over 800 megawatts (MW).

    Tarney spoke after the signing of an agreement for the joint development of power projects by CEC and the Nigerian company.

    “We are immediately looking at the $150 million Kabompo gorge hydro power project in north-western Zambia and the five Luapula river projects estimated to cost $1 billion.

    “The Kabompo project was moving well with financial close expected to be reached this year. The Luapula projects have a combined capacity of 800 MW and this year we are doing feasibility studies but I think we should be starting construction maybe 2013 to 2014,” he said.

    Analysts said the relationship with Africa Finance Corporation (AFC) should boost CEC’s chances of winning the bid for units of a Nigerian state power company lined up for privatisation, Tarney said.

    Nigeria plans a multi-billion dollar privatisation of its power sector to improve efficiency and had split the distribution network of Power Holding Company of Nigeria (PHCN) into 11 different units worth about $100 million each. “The relationship with AFC whose shareholders include the Nigerian government means we have a local partner,” he said.

    AFC Chief Executive Officer Andrew Alli said he was happy to find CEC as a potential partner. According to him, the power privatisation in the country offered an opportunity for huge investment by CEC and AFCoutside Zambia.

  • Funding stalls SEC’s complaints framework

    THE Securities and Exchange Commission (SEC) has said the much-expected launching of the complaints framework by the commission will likely take longer than expected this year.

    Speaking with The Nation yesterday, the spokesperson of the commission Mr Obi Adindu said: “There are a lot of impinging variables that will delay the launching of the complaint framework. A major one is the zero allocation for the commission in the 2013 budget.

    “According to clause 10 of the budget, the commission is not allowed to spend any internally or externally generated fund.’’

    For the input and enlightenment of stakeholders, he said they can have as much input as possible in the framework since it’s meant to work for the development of the capital market.

    However, some shareholders said for the launching to be effective, investors’ input are paramount.

    The SEC was, therefore, urged to carry the investors along.

    Last year, the apex market regulator and market operators moved to introduce a harmonised complaint management framework to address complaint regime.

    Zonal Coordinator, Independent Shareholders Association of Nigeria (ISAN), Mr Sunny Nwosu, said the commission has done any effective awareness campaign and as such, shareholders were not aware of the initiative.

    Nwosu said: “Investors should be involved in the scheme of things because they are the major actors in the market and knows where the shoe pinches.”

    He added that some investors lost confidence and interest in the market because of SEC’s inability to ensure speedy resolution of their complaints.

    He however urged the commission to ensure good publicity and investor education for its policies.

    Specifically, President, Progressive Shareholders Association of Nigeria, Mr Boniface Okezie, said the policy would not change investors’ perception of the market caused by the nationalisation of some banks

    He said: “The commission should be proactive in its regulation and ensure investor protection to bring positive change in the market.”

    Managing Director of Compass Securities Limited and the President of the Association of Stockbrokers of Nigeria (ASHON), Mr Emeka Madubuike, said the initiative would foster market transparency, investor protection, market integrity and high ethical standard.

    Madubuike said it would boost investors’ confidence and make the market their preferred destination.

    He noted that, “the state of complaints’ handling is far short of what is required in the market when compared with other emerging and developed markets”.

  • Analysts pick banking stocks for 2013 returns

    Investment analysts at FSDH Securities have said relatively low prices, good dividend outlook and emerging financing opportunities that may boost banks’ incomes stand banking stocks in good stead as toasts of investors this year.

    In its Banking Industry Review and Outlook made available to The Nation on Monday, FSDH Securities said the balance sheet position and operations of banks as well as their relative stock market valuations point to the attractiveness of banking stocks.

    According to the report, the drivers of investment in banking stocks in early 2013 would include good dividend payment expected from the 2012 business year and attractive valuation of banking stocks as banks are still trading at low multiples.

    Banks have common financial year, ending December 31. Early audited report and accounts for the year ended December 31, 2012 are expected in late February or early March. Quoted companies are expected to file in their audited reports not later than three months after their year-end, according to the best practice rules of the Nigerian Stock Exchange (NSE).

    Analysts at FSDH said emerging financing opportunities in the economy, especially in power, transportation, agriculture, wholesale and retail trade, and oil and gas sectors, should drive banks’ earnings going forward.

    “The economic reform in the country presents a huge opportunity for the banks operating in the country. The Central Bank of Nigeria and other regulators in the financial market have taken proactive steps to implement a number of policies to make banks focus on their core banking business, develop specialisation and safeguard the Nigerian banking system,” the report highlighted.

    Investment pundits noted that banking sector’s robust balance sheet, after the bad loans purchase by Asset Management Corporation of Nigeria (AMCON) has strengthened the capacity of banks to increase their risk assets in the near-to-medium term, a major plank for expected future growth.

    According to the report, banks need to grow their risk assets to earn more income going forward, especially given the comfortable capital base of banks as the industry’s average capital adequacy ratio is above the minimum regulatory requirement.

    Analysts, however, said that banks need to put in place additional strategies to reduce their cost to income ratio adding that in spite of the comfortable capital base, banks could do more with additional tier two funding.

  • New policy on cement coming

    New policy on cement coming

    The Federal Government will review the Backward Integration Policy in the cement sector with a view to consolidating on the tremendous success so far recorded, the Minister of Trade and Investment, Olusegun Aganga, has said.

    Aganga, who spoke during a meeting with stakeholders in the cement industry in Abuja, yesterday said a new cement policy would be unveiled soon.

    In attendance at the meeting were, Managing Director/CEO, Lafarge Cement WAPCO   Nigeria Plc, Joseph Hudson; Chairman, BUA Group, Alhaji Abdulsamad Rabiu; Group Managing Director, Flour Mills Plc, Chief Emmanuel Ukpabi ;  Chairman  Ibeto Group, Chief Cletus Ibeto and Group Representative, Dangote Industries Limited, Isa Tata Yusuf.

    The Minister said: “Following the tremendous success recorded through the introduction and rigorous implementation of the Backward Integration Policy in the cement industry, we are planning to review the entire policy to consolidate on the gains so far recorded. We have achieved everything we set for ourselves 10 years ago when the Backward Integration Policy was introduced. We want to thank all stakeholders and investors in the sector for the success story recorded so far.

    “However, we want to take the next step as part of our strategy on the way forward. We are forming a group of people that will look at the cement policy in detail and come up with the policy response that we need to have in place to take that next step that will make us a major exporter and user of cement.

    “In 2002, the major priority of the country’s Backward Integration Policy was about cement production from limestone. I am delighted to say that after 10 years of implementation of BIP, the good news is that we started with 2 million tons capacity, but today, we have about 28 million tons capacity of cement,  investment of about $6billion; which provides direct and indirect employment for about 2 million people. And because of what we have done together, we have been able to save about N210billion in foreign exchange per year.

    “For the first time ever, this ministry did not issue any import licence in 2012. This is a remarkable achievement  and a major economic success for our country. However, we want to carry out a deeper review of the cement sector to ensure that it is more competitive not just locally but internationally because we are at a point where we should be thinking about exporting some of our products.

    “This means that we need to look at the overall structure including the current pricing, availability, affordability, in addition to developing an export strategy for the sector.”

    Aganga said that the ministry would work with all the stakeholders in the sector to ensure its sustainable growth and development.

    He said, “At the end of the day, this is one of the sectors that Nigeria should, and will be rightly known for as one of the greatest contributors to the Gross Domestic Product of the country. This is the key message that I want to pass across in terms of where we are today and what our plans are in terms of where we want to be going forward. I want to carry everyone along in terms of what we are looking at and incorporate your inputs into what we are planning to do so that at the end of the day, it will be a win-win situation for all the manufacturers, consumers and the Nigerian economy at large.

    “Hopefully, before the end of this week, the committee will be set up. There is no industrial policy that has been as successful as the BIP in the cement industry. So, we have a duty to make sure that we  protect the sector and continue to see it grow.”

  • Oil price falls as uncertainty hits energy markets

    Oil price falls as uncertainty hits energy markets

    • .1m bpd greenfield refinery for Ogun

    Oil prices fell yesterday following uncertainty about future action from the U.S. Federal Reserve and data showing the U.S. unemployment rate unchanged.

    Benchmark crude for February delivery fell 43 cents to $92.66 per barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract closed up 17 cents at $93.09 a barrel on the Nymex on Friday after the U.S. Energy Department’s Energy Information Administration reported a much bigger drop in the nation’s crude supplies than analysts expected.

    Separately, crude stocks fell by about 12 million barrels for the week ending December 28, according to the American Petroleum Institute.

    Monday’s decline in oil prices follows the release of a transcript of the Federal Reserve’s December meeting showing that policymakers disagreed over how long to keep a bond-purchase program in place.

    Traders inferred the Federal might shorten the program, which could send U.S. interest rates, and therefore the dollar, higher. That in turn would hurt the price of oil. Oil, which is priced in dollars, tends to fall as the dollar strengthens and makes crude more expensive for investors holding foreign currencies.

    Meanwhile, a 100,000 barrels per day greenfield refinery is to be built in Ipokia, Ogun State.

    The project followed the successful completion of a joint venture financing agreement with Eton Group, Eton Finance Private Ltd of Singapore and Eton’s subsidiary, Niger Delta Refinery and Petrochemicals Company Ltd.

    Under the agreement, Eton Group is to finance the refinery with a total of N304.2b ($1.95b) in the joint venture funding with both companies working together to realize the goals of the project.

    At the signing ceremony held in Abuja, the Executive Chairman of Badagry Petroleum Refinery , Alh. Razak Awayewaserere signed on behalf of his company while Alan Rennie, the Managing Director of Niger Delta Petrochemicals Company, who is also a Director of Eton Finance Private Ltd signed for Eton Group.

    According to Alh. Awayewaserere who explained that the project received Approval in principle in 1993, financial and administrative formalities would be concluded within four months after which the project would move to the next phase of Feed, approval, fabrication and construction.

  • Freight Forwarders okay new Customs Act

    Freight Forwarders okay new Customs Act

    The National Association of Government Approved Freight Forwarders (NAGAFF) has expressed support for the amended Customs &Excise Management Act (CEMA) by the senate.

    It however rejeted calls to dump CEMA.

    NAGAFF said such calls for the rejection of the CEMA by some interest group in the maritime sector is only self-serving.

    National President of NAGAFF, Eugene Nweke, described the submission attributed to some interests in maritime sector adainst as not only mischievous but self-serving. He said the passage of the bill by the House of Representatives followed an extensive public hearing conducted and all the stakeholders in maritime sector were given unfettered opportunity to air their views both in oral submission and in written , thus wondering while sudden volt face by so-called stakeholders.

    He counseled the interest group to allow the Act to pass and be put to use in maritime sector for at least for five years to observe it potency after which they can call for its review.

    According to him, “in Nigeria today, anybody and everybody can chose to come under any guise or group to make pronouncements because the freedom of expression guarantees that. The CEMA clearly sets out how to democratize the board of customs. I think it should be put to test for five years after which if there are issues it can be taken care of.”

    On granting six month extension to four contracted firms engaged to undertake destinations inspection of imports to Nigeria; he said government need not extend the contract because men of the Nigeria Customs Service have been adequately trained to perform the task.

    In his words, “the Nigeria Customs Service (NSC) has undergone tremendous improvement lately that bringing these expatriates to take over the job of Customs is as good as rendering over 10,000 young Nigerians currently recruited by the Service in preparation for this type of service delivery amount to idleness.

  • ‘High cost hampers production’

    The Vice Chancellor, Federal University of Technology, Professor Biyi Daramola said the nation was experiencing deindustrialization because the cost of production has become too expensive.

    Speaking with The Nation, Daramola said manufacturing companies are facing many challenges, including high cost of energy, a heavy tax burden close to the levels and precarious transportation infrastructure, and these costs accumulate along the entire production chain.

    He said the inflation is high driven increasing costs of inputs – from imported capital goods, to local raw materials, energy and transport. He said increased cost of production has made the market uncompetitive.

    According to him, the nation is yet to reap from the production efficiencies, pointing the finger at costly and un-reliable electricity supply, narrow and poorly maintained roads, dysfunctional railways, high cost of credit, and others.

    He said the government’s initiatives should focus on boosting production, especially in industry, the sector hardest hit by the current crisis. What needs to be done, he said, is to identify in which areas key to industry and the economy to act, and to determine in which sectors it will be difficult to develop competitiveness. This includes implementing policies “to favour some sectors, but requiring something in return: targets, timeframes and results,” he said.

    Achieving these, he said, will reduce costs and encourage efficiencies that will dramatically improve the competitiveness of goods and services produced in the country. Of course this goes hand in hand with investment in infrastructure like roads, energy, and agriculture.

    Speaking with The Nation,the President, Association of Micro Entrepreneurs of Nigeria (AMEN), Saviour Iche said small manufacturers are not seeing seeing growth and this is why the sector is experiencing sluggish job creation.

    With the challenge is poor power supply, Iche said output from factory production has not risen.

    The downward movement goes against the trend of the 80s, where factory output as a portion of the economy increased.

    He indicated that several factors affected manufacturing, including falling factory investment and policies which is not supporting higher small manufacturing sector productivity.

    He said industries are not in decelerating decline and some have continue to shy away from committing resources struggling to manage declining confidence in the economy.

    tors it will be difficult to develop competitiveness. This includes implementing policies “to favour some sectors, but requiring something in return: targets, timeframes and results,” he said.

    Achieving these, he said, will reduce costs and encourage efficiencies that will dramatically improve the competitiveness of goods and services produced in the country. Of course this goes hand in hand with investment in infrastructure like roads, energy, and agriculture.

    Speaking with The Nation,the President,Association of Micro Entrepreneurs of Nigeria(AMEN), Saviour Iche said small manufacturers are not seeing seeing growth and this is why the sector is experiencing sluggish job creation.

    With the challenge is poor power supply, Iche said output from factory production has not risen .

    The downward movement goes against the trend of the 80s , where factory output as a portion of the economy increased.

    He indicated that several factors affected manufacturing, including falling factory investment and policies which is not supporting higher small manufacturing sector productivity.

    He said industries are not in decelerating decline and some have continue to shy away from committing resources struggling to manage declining confidence in the economy.

  • ITF to open skill centres

    The Industrial Training Fund, ITF is to establish 37 Industrial Skill Training centres in the six geo political zones of the country.

    The Director-General, Prof. LongmasWapmuk disclosed this during a press briefing in Abuja, assuring that the agency has also planned to train 37,000 youths in different skill acquisition.

    He said: “The decision to embark on the establishment of the centres was part of the funds’ efforts at addressing the obvious shortage of skilled manpower acquisition in the country.

    “ITF was established to promote and encourage the acquisition of skills in industry and commerce sectors of the nation’s economy with the view of generating a pool of sufficient indigenous trained manpower to meet the needs of the private and public sectors of the economy.

    “The centres when opened will enhance Apprenticeship Scheme as well as the training of young entrants and other skill workers thereby reduce over dependence on government.

    “The fund had earlier established three centres in Ikeja, Kano and Jos, ITF is collaborating with ITEE, Singapore establishing a model skill training centre in Abuja, the centre in Abuja is to embark on the training of candidates on technology, electrical/electronics, ICT, Mechatronics and Culinary.

    “The agency is also floating a skilled manpower development programme initiated under a collaborative association with the Nigeria Employers’ consultative Association, NECA. The project, he said, is tagged: “Technical Skills Development Project TSDP,” he stated.

    He added that agency is also developing job specification documents, while at the moment 110 staff of the Dangote Cement Group are being trained in a long-term programme.

    The agency is also coordinating and sponsoring a National Industrial Skills Development Programme, NISDP, which has taken off in 10 states of the federation. Under the first phase of this programme, 10,000 youths are already being trained while a total of 30,000 young Nigerians are expected to be trained in diverse trade in the nation’s economic sectors as identified.

  • Naira weakens on corporate demand

    The naira depreciated for a second day as demand for dollars increased after the end of Christmas and New Year festivities.

    According to Bloomberg report, the currency weakened 0.2 per cent to 157.0375 a dollar and had lost 0.4 per cent last week. “We expect to see a build-up in demand for foreign exchange as businesses resume” operations, analysts at Lagos- based Cowry Asset Management Ltd., led by Edgar Ebinum, said. “We expect to see pressure on the naira.”

    The Central Bank of Nigeria, which sells dollars to lenders to stabilise the naira, resumed twice-weekly foreign-currency auctions yesterday after a break since December 19. It sold $150 million, compared with $300 million disbursed at the previous sale, it said in an e-mailed statement.

    Yields on the nation’s $500 million of Eurobonds due January 2021 slid two basis points, or 0.02 percentage point, to 3.906 per cent. The rate on 10-year naira debt fell 15 basis points to 11.52 per cent, according to January 4 prices compiled on the Financial Markets Dealers Association website.

    Central bank policy makers left the benchmark interest rate unchanged at 12 percent last year. Nigeria’s inflation rate rose for a second month in November to 12.3 per cent from 11.7 percent, the National Bureau of Statistics said Dec. 17. Ghana’s cedi weakened 0.1 per cent to 1.8975 per dollar in Accra, the capital. It depreciated 16 per cent last year, the most since 2008.