The Nation Newspaper

Category: Business

  • Agents bicker over commissions, fees

    Agents bicker over commissions, fees

    A CRISIS is brewing between underwriters and insurance intermediaries over commissions and fees.

    The Nation gathered that they are quarelling over what should be their ‘’appropriate” commissions and fees.

    Investigation revealed that the intermediaries – brokers, loss adjusters, agents and risk surveyors – are not happy with their remuneration. It was also gathered that most of the intermediaries’ entitlements are not paid by underwriters.

    It was learnt that the brokers early this year took their complaints on group life commissions to the National Insurance Commission (NAICOM), demanding an increase.

    NAICOM asked them to agree on a fixed rate and get back to it.

    The Nigerian Insurers Association (NIA) and Nigerian Council of Registered Insurance Brokers (NCRIB) were mandated to use a single letter-head to inform NAICOM on the agreed rate.

    It was learnt that the parties’ efforts were unproductive as NIA shunned the meetings. The development compelled NAICOM to peg the commission at eight per cent and mandated the operators to comply.But this is not go down well with brokers.

    President, Risk Surveyors Association of Nigeria (RISAN), Jacob Adeosun, called for a resolution, adding that the inappropriate remuneration of surveyors would lead to exit of experienced practitioners from the industry.

    He noted that survey fees are not paid promptly by underwriters, stressing that the arrears of unpaid fees was capable of affecting the efficiency of surveyors’ service delivery.

    Chairman,Technical Committee of the NCRIB on Market Development and Restructuring Initiatives (MDRI), Siyan Oyebadejo, said poor remuneration of agents by underwriters is threatening the MDRI, a project which is meant to drive insurance penetration.

    He noted that unless something drastic was done, the initiative would fail to meet the industry’s expectations, adding that the committee had recommended to NAICOM, the need to increase the remuneration paid to agents who are the drivers of the initiative.

    He said it was worrisome that graduates engaged as agents were paid pittance, an amount, which could not move them around the market and win businesses, noting that the initiative would only succeed if the agents were well motivated.

  • NDIC advocates safe, stable financial sector

    NDIC advocates safe, stable financial sector

    The Nigeria Deposit Insurance Corporation (NDIC) has said the safety and stability of the financial sector cannot be compromised if the economy must improve.

    Speaking at the NDIC Day during the Lagos International Trade Fair, it’s Managing Director, Umaru Ibrahim, said the corporation would support the Central Bank of Nigeria (CBN) and other regulators to ensure that the financial system achieves the set objective of building a strong economy.

    He said the corporation was established by the Federal Government to insure deposit liabilities of licensed financial institutions.

    “The key mandate is to provide financial guarantee to depositors of the insured financial institutions in the event of failure to enhance confidence in the nation’s banking system. The corporation has contributed greatly to the various banking sectors in the country,” he said.

    The cumulative liquidation dividends of N77.38 billion, he said, had been paid to depositors whose claims were in excess of the insured amount in the 48 closed commercial banks as at last August 31. This is against N73.55 billion that was paid in the same period last year.

    Ibrahim said a total of N2.45 billion had been paid to depositors of the 103 closed microfinance banks as at August 31, this year while N2.25 billion was paid to insured depositors of the closed MfBs as at December last year.

    He said a cumulative liquidation dividend payment to shareholders of Alpha Merchant Bank, Nigeria Merchant Bank and Pan African Bank stood at N373.04 million, N620 million and N293 million during the period.

    The NDIC boss said deposit insurance has been facing low-level public awareness in most jurisdictions worldwide, adding that the corporation has mapped out some public awareness initiatives to sensitise the public about its activities.

    He said the theme of the fair “Promoting trade for sustainable economic transformation” was an indication of the government’s commitment to Vision 20: 2020.

    He said the safety, soundness and stability of the financial sector cannot be downplayed in the economy of any nation. He added that the key mandate of the corporation is to provide financial guarantee to depositors of the insured financial institutions in the event of failure to enhance public confidence in the nation’s banking system. “The NDIC has a crucial role to play towards the safety, soundness and stability of the financial system,” he said.

    ‘’The NDIC expresses its profound appreciation to the Lagos Chamber of Commerce for its support and co-operation since 2008 when the participation in the Lagos International Trade Fair started, and also to the press which has continued to be partner in their progress,” he added.

  • NASS, Finance Ministry clash over gas revenue

    NASS, Finance Ministry clash over gas revenue

    The Federal Government has estimated that about N359.582 billion could be realised from the sale of gas next year.

    However, this information has not been relayed to the National Assembly, a situation that may result in another round of controversy between the executive and the legislature.

    In a document sighted by The Nation in the Budget Office, it was stated that in 2013, the government expects gas income of 30 per cent of Corporate Income Tax (CIT) with gas sales projected to generate N359.6 billion.

    In 2013, the government hopes to realise N161.057 billion from the Nigeria Liquified Natural Gas (NLNG) feedstock sales; N198.5 billion from upstream liquified gas ( broken down as ) N74.0 billion from liquified gas export and N124.5 billion from liquified gas domestic.

    The document indicated that in the new year, the government estimates to make N6.4 billion from rent, gas flared penalty and miscellaneous oil revenue broken down as rent, N0.880 billion, gas flared penalty, N2.480 billion and miscellaneous oil revenue N3.072 billion.

    All these figures are, however, absent in the Medium Term Expenditure Framework document in the public domain and the one submitted to the National Assembly.

    While the Budget Office of the Federation is insisting that it submitted the information needed to the National Assembly, the Legislature has accused the Ministry of Finance and the Budget Office of withholding information concerning gas revenue and external debts in the MTEF submitted to it.

    Speaker of the House of Representatives, Aminu Tambuwal, had earlier decried the exclusion of the gas receipts/revenue in the expenditure framework submitted to the Legislature at the 2013 budget presentation by President Goodluck Jonathan.

    He said: “The House of Representatives has observed two critical omissions on the MTEF namely: (i)  That the Revenue from gas, running into billions of  dollars, is not reflected, and (ii) External borrowing is similarly not reflected.”

    However, investigations confirmed what the Speaker said. There was no provision for gas receipts in the document presented to the National Assembly and the one in the public domaine.

    The Spokesman for the Budget Office of the Federation, Mr Afolabi Olajuwon, denied the Speaker’s claim. He also showed the reporter a sheet of paper containing the 2013-2015 fiscal framework containing gas receipts/revenue for the period.

    Olajuwon said the ministry and the Budget Office never withheld any information from the legislators, insisting that these information, particularly the gas receipts have always been included in every budget presented to the National Assembly.

    When contacted, spokesman for the House of Representatives Hon. Zakari Mohammed stated that the House of Representatives has “not yet” received these information from the either the ministry of finance or the budget office.

    In the public MTEF document, N6,506.34 trillion is expected to be generated from oil and gas deals in 2013.

  • Why Nigerian goods aren’t competitive, by LCCI

    Why Nigerian goods aren’t competitive, by LCCI

    High cost of funds, dumping of substandard products at ridiculous prices in the market, epileptic power and unethical practices in the distributive trade sector, are some of the factors that have made Nigerian goods uncompetitive, The Nation has learnt.

    Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf, who disclosed this in an interview with the paper, said the manufacturing sector is being saddled with numerous pressures, which are taking a great toll on the economy.

    “Although some manufacturers acknowledged the improvement in power supply, they lamented the outrageous tariff.There are concerns about weak commitment to the implementation of the policy of patronage of made-in-Nigeria products by the government ministries and agencies. We believe that stronger commitment to the policy of patronage of made- in-Nigeria products would have a tremendous impact on the industrial sector,” he said.

    The LCCI boss said the budget speech has no monetary policy content, stressing that it would have been useful for President Jonathan Goodluck to highlight the thrust of monetary policy as this is critical to the realisation of inclusive growth and fiscal consolidation.

    “This is even more so at a time when businesses are facing severe challenges with regard to access and cost of credit,” he said.

     

  • MfBs negotiate CoT with banks to cut costs

    MfBs negotiate CoT with banks to cut costs

    Microfinance banks (MfBs) are negotiating with banks for a concessionary Commission on Turnover (CoT) to enable them reduce the rising cost of operations.

    Managing Director, Seed Capital Microfinance Bank, Gbenga Komolafe, made this known during a meeting organised for MfBs by Sterling Bank Plc in Lagos.

    He said some of the banks that had granted concessions on turnover for the MfBs reneged on the agreement, thereby raising the cost of operation for the subsector. He said merged and acquired banks were the worst affected because the new owners denied having anything to do with the concession.

    “We have seen this happened in several cases, especially in merged and acquired banks. They have always denied there were concessions at any time before the merger or acquisitions,” he said.

    Komolafe said some of the banks that retained the concession usually give COT target to MfBs, which is usually above their financial capabilities.

    Managing Director, Sterling Bank Plc, Yemi Adeola, said commercial banks and MfBs could always agree on things that will reduce their cost of operations including CoT slash.

    He said his bank is proactively positioning its key customers in the subsector to benefit from the N220 billion intervention funds from the Central Bank of Nigeria (CBN) expected to be launched this week.

    Other opportunities that the MfBs can key into include the N5 billion small business development funds, $4 million renewable energy project, and another $200 million provided by Ford Foundation to enable MfBs increase their market penetration.

    He said banks concentrate on big customers, not understanding that 50 to 60 per cent of finance in the economy usually comes from the Small and Medium Scale Enterprises (SMEs). He said unless banks refocus on SMEs, the economy will not grow.

    Noting that massive investment is needed to run a bank, the Sterling Bank boss said the lender is committed to channel some of its products and services as well as dedicate competent staff to meet the business needs of MfBs.

    He said the MfBs need enabler, in terms of commercial bank to be able to access the funds and other intervention funds from the apex bank to the subsector. He said there is also a N600 billion agricultural development fund, which the bank has given opportunities for several customers to benefit from.

    Chief Finance Officer, Sterling Bank, Abubakar Suleiman, said the bank believes in strategic partnership and is partnering with some MfBs in relation to electronic business, agricultural finance among others. “We identify with the brand promise of MfBs and believe there is need to leverage on technology to increase their retail penetration and enable their customers enjoy electronic banking facilities,” he said.

    Consequently, he said the bank will be assisting the MfBs on co-branded card issuance, e-payment inflows, global teller, Automated Teller Machine (ATM) deployment and mobile banking. Such services, he said, would enable the bank increase customer patronage, enhance deposits, revenue and boost efficiency through automation of operations.

    He said the bank has increased its exposure to the agricultural sector and will continue to do that going forward.

    Managing Director, Support Microfinance Bank, Sunny Akahmiorkhor, said the step taken by the bank is commendable. He said the process of achieving intervention funds from the CBN has been hectic for the susbsector, adding that the move by Sterling Bank to mediate between the MfBs and CBN on the intervention funds will address such hitches.

  • Mansard Insurance posts N1.22b profit

    Mansard Insurance Plc has recorded an all time high profit of after tax (PAT) of N1.22 billion in the last three quarters of the year.

    The risk bearing firm disclosed this in a statemnt, adding that the amount is about 98 per cent higher than its PAT in the corresponding period in 2011.

    According to the company, its gross premium written rose by 22 per cent from N8.26 billion in 2011 to N10.05 billion in 2012 while profitability rose by 98 per cent in the last three quarters of the year.

    The statement also noted that the company’s net insurance premium revenue rose by 22 per cent to N3.55 billion from N2.92 billion recorded in the corresponding period in 2011. Also the firm’s investment and other operating income rose by 91 per cent to N1.26 billion in the period under review from N662 million recorded in a similar period in 2011.

    Mansard stated that its profit before tax rose by 68 per cent to N1.37 billion from N811 million in the same period last year. The company’s total asset stood at N29.86 billion up from N24.69 billion in 2011, an increase of 21 per cent within the reviewed period

    The company’s Chief Clients Officer, Tosin Runsewe, said: “Our result as at the end of September 2012 validates our leadership position within the industry and shows that we remain on track towards achieving our strategic goal for the year.

    “These achievements are as a result of improving underwriting performance, impressive sustainable growth in investment, and greater focus on cost optimisation without compromising excellent service delivery to our esteemed customers and gains made from the expansion of our retail distribution network.”

    She said with this position, the company expects to meet stakeholders’ expectations by the end of the year.

    Chief Financial Officer, Rashidat Adebisi, noted that the improved indices during the period under review further affirmed the company’s strategic intent of building a robust and diversified retail sales force focusing on the vastly underserved Nigerian retail market.

    The company stated that although insurance receivables rose by 59 per cent to N2.64 billion in the third quarter of the year and also from N1.66 billion in December 2011, it actually fell by 11 per cent when compared to its position as at the end of June 2012 figure of N2.97 billion which was indicative of the payment cycle for very large institutional clients.

  • Annual report: Firms opt for e-report, notice

    Annual report: Firms opt for e-report, notice

    Several companies might send their 2012 annual reports and accounts in electronic copies to shareholders as companies seek to cut costs of shareholders’ relations.

    Quoted companies and Securities and Exchange Commission (SEC) are seeking regulatory changes to pave way for unfettered take-off of electronic-reporting scheme.

    Companies had used their last annual general meetings to sensitize shareholders and seek necessary consents, prior to take-off of the e-reporting initiative.

    Shareholders of companies under the UAC of Nigeria (UACN) Group including UAC of Nigeria, CAP Plc, and UACN Property Development Company (UPDC) had at the yearly general meetings of the companies considered amendments to the articles of association of the companies to enable the companies send annual reports and accounts and other notices through compact disc, electronic mail or web publication in addition to existing option of hard printed copy.

    Cadbury Nigeria had earlier notified that it would now distribute its audited reports and accounts and other related documents in soft electronic format rather than in paper form.

    The company said the decision to use compact disc to distribute information to shareholders was part of its desire to ensure the sustainability of environment and align with international best practice.

    According to the company, to ensure fairness and equity, shareholders will be given the option of requesting for a paper copy of these documents by exception, if they determine that they do not want to receive same in a CD format.

    Nestle Nigeria has also said it was introducing electronic delivery of annual reports and other corporate documents to ensure quick and effective access to information.

    At its last general meeting, Nestle Nigeria provided shareholders with an electronic mandate form, which would legally allow the company to send soft edition of its reports online through email address or compact disc. Nestle Nigeria’s shareholders would also be able to download all the reports from web address to be provided by the company.

    The Securities and Exchange Commission (SEC) has requested the National Assembly to amend the Companies and Allied Matters Act (CAMA) 1990 to allow electronic shares issuance, dematerialization, electronic bonus and dividends among other initiatives.

    SEC has sought for amendments to section 117 of CAMA, which gives companies the general powers to issue shares and section 125, which makes provisions relating to allotment of shares and issuance of share certificates to allow electronic issuance and allotment.

    According to SEC, these amendments would allow companies to electronically issue shares through CSCS accounts, which would enhance the dematerialisation of paper share certificates.

    SEC called for general review of sections 114 to 165 of CAMA.

    The apex capital market regulator also wanted the legislators to amend section 220 of CAMA, which provides for service either by giving the member personally or sending it to him by post or to his registered address to provide for service of notices electronically in the first instance where a member has provided an email address as a means of communication and the definition of registered address should include an electronic address.

    “Sections 83 and 84 should recognise the use of electronic registers as a mandatory backup and provide for a location of that register securely on independent servers or disks not in the premises of the company or the registrar,” SEC stated.

    SEC also called for amendment of section 379 on dividends to allow for electronic payment of dividends and subsequently full automation of dividend payment after expiration of a grace period.

  • High interest rate impinges corporate returns

    High interest rate impinges corporate returns

    High costs of funds and lack of access to amenable capital are adversely impacting on earnings potential and returns of several companies, reports have shown.

    Latest operational reports by several non-financial companies showed that companies were constrained by their inability to source new equity capital due to the meltdown at the capital market while recourse to high-interest bank loans depressed probable returns to shareholders.

    Operational reports for the third quarter ended September 30, 2012 showed that while companies struggled with relatively sluggish top-line, jumpy finance costs further encumbered the bottom-line performance, in worst cases pushing companies into the red.

    In many instances, interest expense saw the highest growth rate within the profit and loss items as companies continued to grapple with investors’ apathy in the primary equity market.

    For instance, RT Briscoe’s interest expense jumped to N858.98 million in 2012 as against N527.91 million in comparable period of 2011, an increase of 63 per cent. However, the automobile-led conglomerate’s net profit grew by 33 per cent to N163.94 million in 2012 as against N121.15 million.

    UAC of Nigeria paid N1.89 billion as interest expense in 2012 as against N1.21 billion in 2011. Profit before tax meanwhile, rose from N4.46 billion to N5.83 billion. The conglomerate’s turnover had increased from N43.50 billion to N47.53 billion.

    Total Nigeria Plc also saw a spike in finance costs from N674.30 million in 2011 to N985.68 million in 2012. A 128 per cent growth in interest expense contributed to significant loss suffered by Tantalizers Nigeria. With sluggish top-line, a double in finance costs from N12.58 million to N28.75 million saw Tantalizers with net loss of N242.66 million in 2012 as against modest profit of N28.63 million in corresponding period of 2011. Livestock Feeds also reported that its finance costs increased to N70 million in 2012 as against N44 million in 2011.

    Managing director, Financial Derivatives Company (FDC), Mr. Bismarck Rewane, expressed concerns about the negative impact of high interest rate on corporate returns and general stock market performance.

    According to him, as the Central Bank of Nigeria (CBN) meets next Monday, it is under pressure to ease interest rates.

    He said while the reduction in interest rates could trigger a rally for companies’ shares, a hold on interest rates will be a damper.

    Economist and securities advisor, Sterling Capital Markets, Mr. Sewa Wusu, said high interest expense was a major disincentive to corporate returns.

    “Basically, high interest rate is a disincentive to corporate profitability. It erodes corporate returns in that part of the profitability is used to service interest rate. Corporate firms cannot leverage effectively under a higher interest rate environment,” Wusu said.

    He noted that the huge interest expenses by companies could affect shareholders’ returns and create twin negative impact that could reverberate on the stock market.

    Analysts said investors’ apathy to new equity investments has undermined companies’ ability to raise funds as large-stake fund managers and investors opted for more secure and predictable bond market.

    They noted that companies would be mindful of the escalating costs of funds and future financing while deciding on possible cash payouts to shareholders.

    Chairman, Tantalizers Plc, Dr Jaiye Oyedotun, in a prepared report reviewing the operations of the company had noted that the company could not maximise the potential of its franchise package due to inability of investors to access required capital.

    Accoridng to him, the company’s roll-out plan fell short of plan in 2011, which underlined the difficulty in funds sourcing from the banks and also constrained the company’s ability to achieve its revenue target.

    He outlined that both the marketing programmes and refurbishment plan of the company were constrained by paucity of funds.

  • Activist seeks speedy trial of ex-NAICOM chiefs

    Activist seeks speedy trial of ex-NAICOM chiefs

    A human rights activist, Austin Agu, has demanded speedy trial of the former Commissioner for Insurance, Emmanuel Chukwulozie and the Deputy Commissioner for Insurance (Finance and Administration) five years after they were charged to court.

    In a statement, Agu said a situation where those accused of fraud and misapplication of funds are denied the opportunity to continue with their lives for upward of five years without any serious prosecution does not speak well of the justice system.

    The Economic and Financial Crimes Commission (EFCC), acting on petitions filed by the former Minister of State for Finance, Dr Nenadi Usman, initiated the trial of the top officers of National Insurance Commission (NAICOM) following their suspension by the Federal Government.

    Chukwulozie and Mrs. Ogungbe were accused of spending N170 million without any budget.

    He said the case against the officers was instituted in 2007, adding that since then, care has not been taken to diligently prosecute it. Each time the case comes up in court for hearing, it is adjourned for flimsy reasons, he said.

    Agu said the accused had been suffering untold hardships, because of the poor prosecution of the case.

    He appealed to the courty to discharge and acquit the officers if the prosecution is not ready to go on withthe case.

    “I have followed this fraud case with keen interest since it was instituted by the EFCC over five years ago. Each time the case is called up, the prosecution would fail to produce a key witness or ask for adjournment on flimsy excuses,” he said.

    “While this has continued, the accused have been suffering in silence having been denied their means of livelihood. They should be allowed to go and continue with their lives, look for fresh jobs and run their respective families and business if the government job is no longer there for them,” he said.

    Agu further noted that government runs the risk of being accused of carrying out vendetta should it continue with the trial of the accused without any serious attempts to prove them guilty and therefore called for speedily trial of the accused.

    “Government may be accused of vendetta against the accused if after five years the case is still on without any form of seriousness on the part of the prosecution. I therefore, appeal to the Federal Government and the judiciary to please let the officers go and continue with their lives if nothing is found against them instead of tormenting them for no reason,” he said.

  • Domestic debt market will pay private sector, says DG

    Domestic debt market will pay private sector, says DG

    Private sector operators seeking long-term funding will get better opportunities in the domestic debt market, which is dominated by the Federal Government, Director-General, Debt Management Office (DMO), Dr Abraham Nwankwo, has said.

    The domestic debt market is an alternative source of borrowing for the government and organised private sector. Such debts are in form of bonds, Treasury Bills (TBs), debentures, loans among other instruments.

    Speaking on the Federal Government’s decision to borrow $7.9billion during a television interview, Nwankwo said the government was gradually retreating from the local debt market to give more space for private operators to access funds to grow the economy.

    He said: “After exiting the debt owed the Paris Club and London Club of Creditors few years ago, we saw the need to develop the domestic debt market so that private sector would be issuing debt instruments to develop the economy. We use the advantage of the market to fund the budget deficit. But now, the government is retreating to give private sector wider opportunities to operate.  The government is strategically withdrawn from the market, you can see it in the declining of the government burrowing domestically in the past three years.”

    He added: “In 2003, there was no long-term market for long-term funding. But with the establishment of DMO in 2005, the government has been having the opportunity of accessing long-term funding of 20 years tenor. This is unlike a gestation period of 12 months, usually given by the banks.”

    According to him, Nigeria debt has grown primarily for reasons not known to many Nigerians.

    “It is true that we exited the obvious components of our debts – that is debts owed the Paris and London Clubs. But we have not exited the debt owed the African Development Fund (AfDB), World Bank among others. Thereafter, we have to continue burrowing to pursue developmental agenda. I challenge any expert to go and look at the balance sheets of most developed economies. They are still borrowing empirically and historically. Debt is continuous. As at September 31, 2012, the foreign debts were $6.2 billion, while the domestic debts were N6.3billion. The debts are sustainable,” he said.

    The DMO’s boss allayed the fears that the government’s plans to borrow $7.9 billion would further affect the economy, stressing that the loans would be taken at concessionary rates from the World Bank and AfDB windows.

    “Prior to 2008, the nation’s debts were unsustainable because we could not pay the interests, and the principals on the debts. But the $7.9 billion debts Nigeria is planning to take would be sustainable. The reason is because the interests are  going to be very low. Some of the loans are going to the health, education, employment generations, among other areas germane to the growth of the economy,” he said.