The Nation Newspaper

Category: Business

  • Honeywell Flour Mills: not as profitable

    Honeywell Flour Mills: not as profitable

    Honeywell Flour Mills Plc’s outward performance showed modest growth in key performance indicators but the underlying indices showed a less profitable, highly geared and less liquid company.

    Audited report and accounts of Honeywell Flour Mills for the year ended March 31, 2012 indicated modest growth in sales and profitability as management reined in operating expenses and finance costs to counterbalance the visibly negative impact of high input costs.

    But while the mid-line cost-cutting strategies resulted in modest outward performance outlook, the company’s underlying fundamentals were not impressive. With decline in average profit-making capacity, productivity, overall cost-efficiency, negative working capital and lower liquidity as well as weakening financing structure, the beyond-the-surface balance sheet and profit and loss performances counteracted the modest outward growth, reflecting a largely weak overall performance assessment.

    However, the company’s expansive investments in new production capacity and technologies expanded the balance sheet. A double in long-term assets added a half to total assets. The company increased cash payouts by 15 per cent just as net assets improved by 11 per cent. But the increase in cash payout far above the net earnings growth impinged on future dividend sustainability rating. At current market consideration, the net book value of the company meanwhile, suggests undervaluation, opening up potential headroom for two-sided returns from expected consolidation of operational performance and related capital appreciation.

     

    Financing structure

     

    Honeywell Flour Mill relied substantially on bank loans to finance its expansion plan, reflecting the economic-wide financial leverage faced by growing companies as the capital market totters after a grueling recession. While total assets grew by 54 per cent, total liabilities doubled by 101 per cent; driven mainly by nearly a triple in bank loans. With these, the debt-to-equity ratio spiked from 39 per cent in 2011 to 93 per cent in 2012. The proportion of equity funds to total assets dropped from 52 per cent to 37 per cent. Current liabilities/total assets ratio stood at 44 per cent in 2012 as against 38 per cent in 2011. The proportion of long-term liabilities to total assets meanwhile, stood at 63 per cent in 2012 compared with 48 per cent in 2011.

    Total assets had increased from N29.14 billion to N44.94 billion. Fixed assets grew by 120 per cent to N27.71 billion as against N12.57 billion while current assets inched up from N15.67 billion to N16.33 billion. However, total liabilities doubled from N14 billion to N28.14 billion. Current liabilities grew by 78 per cent from N11 billion to N19.6 billion while long-term liabilities shot up by 185 per cent from N3 billion to N8.52 billion.

     

    Efficiency

     

    Average number of employees increased by 15 per cent from 656 persons in 2011 to 757 persons in 2012. Staff costs improved by 11 per cent to N882.8 million in 2012 compared with N795.29 billion in 2011, indicating average cost per head of N1.17 million in 2012 as against N1.21 million in 2011. Following same pattern, average pre-tax profit per head dropped from N5.36 million to N4.84 million. With high top-line cost, the overall cost efficiency reduced during the period. Total cost of business, excluding finance charges, amounted to about 91 per cent of total turnover in 2012 as against 89 per cent in 2011.

     

    Profitability

     

    Honeywell Flour Mills showed a two contrasting profit outlook- modest growing outward profit, loss figures and declining underlying profitability and returns. On the surface, total sales grew by 12 per cent while pre and post tax profits braced 7.8 per cent decline in gross profit to post 4.2 per cent and 8.4 per cent growth respectively. Beyond the surface, gross profit margin declined from 21 per cent to 17 per cent. Average pre-tax profit per unit of sale slipped from 10.3 per cent to 9.6 per cent. While actual cash payout showed 15 per cent increase, underlying returns on equity and total assets slipped from 16.5 per cent and 12.1 per cent in 2011 to 16.1 per cent and 8.2 per cent in 2012 respectively. This also reflected in dividend cover, which shifted from 2.38 times to 2.27 times.

    Group total sales had increased by 11.8 per cent from N34.06 billion to N38.07 billion. The group witnessed appreciable growths across its business segments. The main business segment of flour milling saw 9.8 per cent increase in sales from N27.56 billion to N30.26 billion. Noodles and pasta business improved sales from N6.5 billion to N7.8 billion. Cost of sales spiraled upward by 17 per cent to N31.5 billion as against N26.9 billion in previous year. Gross profit thus slipped from N7.12 billion to N6.57 billion. Total operating expenses dropped by 6.2 per cent to N3.11 billion as against N3.32 billion, driven mainly by reduction in distribution expenses from N2.27 billion to N1.88 billion. Administrative expenses increased from N1.05 billion to N1.27 billion.

    While non-core business incomes decreased slightly by 7.2 per cent, the company halved its interest expenses to boost the bottom-line performance. Non-core business income dropped from N823 million to N764 million. Interest expense however, dropped by 50 per cent from N1.12 billion to N559 million. With these, profit before tax inched up from N3.52 billion to N3.66 billion. A further slight decrease in taxes helped net profit after tax growth to 8.4 per cent at N2.70 billion in 2012 as against N2.49 billion in 2011.

    The company distributed N1.19 billion as cash dividends to shareholders for the 2012 business year, representing 44 per cent of net earnings. It had distributed N1.03 billion or 41 per cent f net earnings in 2011. Per share analysis showed basic net earnings per share of 34 kobo in 2012 as against 31 kobo in 2011. Dividend per share improved from 13 kobo in 2011 to 15 kobo in 2012. Net assets per share also improved from N1.91 in 2011 to N2.12 in 2012.

     

    Liquidity

     

    The liquidity position of the company weakened considerably in 2012 with negative working capital and less financial coverage for probable risks. Current ratio, which indicates financial agility by relating current assets to relevant current liabilities, nearly halved from 1.42 times in 2011 to 0.83 times in 2012. The positive ratio of working capital to total sales of 13.7 per cent in 2011 reversed to -8.6 per cent in 2012. The proportion of debtors to creditors dropped from about 72 per cent in 2011 to 59 per cent in 2012.

     

    Governance and

    structures

     

    Honeywell Flour Mills Group consists of Honeywell Flour Mills Plc, the parent company and its wholly-owned subsidiary- Honeywell Superfine Foods Limited. A member of the Honeywell Group, a Nigerian conglomerate with widely diversified interests in manufacturing, oil and gas and financial services sectors, Honeywell Flour Mills became a public limited liability company in 2008 and its shares were quoted on the Nigerian Stock Exchange (NSE) in 2009. It currently has some 28,000 shareholders. However, latest shareholding analysis showed that three shareholders accounted for 88 per cent equity stake. Siloam Global Services Limited holds 75 per cent equity stake. First Bank of Nigeria holds a separate 7.0 per cent equity stake while it also jointly with BGL Securities Limited JSA holds 6.0 per cent equity stake.

    Dr. Oba Otudeko, who chairs the board of directors, holds 15.72 per cent equity stake through his 21 per cent indirect stake in Siloam while his son, Obafemi Otudeko, a non executive director, holds 7.2 per cent stake through 9.6 per cent indirect stake in Siloam. Obafemi is an executive director of Honeywell Group. The board and management remain stable. Mr. Folaranmi Odunayo still leads the executive management as executive vice chairman and chief executive officer.

    The company has complied largely with code of corporate governance and best practices with appropriate board committees and management structures to ensure effective oversight and decision-making.

     

    Analyst’s opinion

     

    Honeywell Flour Mills faces the tough challenge of blending the spiraling global input costs with the sluggish domestic purchasing power, without necessarily undermining returns to shareholders. Perhaps the greatest challenge to the company is the common industry issue of the Federal Government cassava initiative. Basically, government plans to 40 per cent substitution of cassava flour in wheat flour. Consequently, the government has increased duty level on wheat grain by 15 per cent, raising effective duty rate to 20 per cent. The Flour Mills Industry lobby group is engaging the government on the substitution, which may dramatically impinge on the industry performance if fully implemented under the current scenarios. Also, new fiscal measures on sugar import taking off January 1, 2013 will also likely have indirect slowdown impact on the industry. Import duty and levy on raw sugar will be 10 per cent and 50 per cent respectively while refined sugar will attract 20 per cent duty and 60 per cent levy.

    There is also obvious need to deleverage the company, possibly through equity issue, to stave off negative impact of existing and deferred finance costs.

    Meanwhile, Honeywell Flour Mills could mitigate adverse operating environment with synergies and scale from its expansion drive. Its mill expansion will add 62 per cent to production capacity from 1,610 metric tonnes to 2,610 metric tonnes per day. The state-of-the-art facility and other complements such as the 30,000 metric tonnes storage silos are expected to enhance the creativity and productivity of the company, two key attributes in a largely monotonous industry.

    Overall, there is still reasonable basis to be optimistic about the future outlook of the company, although the tough operating environment calls for cautious assumptions.

  • Want a job? Try Internet Marketing

    Want a job? Try Internet Marketing

    One of the good things to happen this century is the Internet, which has made the world a global village. Many things can be done on the Net, as it is fashionably referred to.

    The unemployed too can get a job on the Internet. How? By availing themselves of the opportunities in Internet marketing, writes AKINOLA AJIBADE

     

    THESE days, coming by a job is hard, no thanks to the economic recession. Millions of jobs were lost to the recession from which there seems to be no respite. Many governments are seeking to tackle unemployment through various policies, all to no avail.

    As there appears to be no answer to unemployment, people are looking for new areas to survive. One of such is internet marketing, a process whereby people use the internet to create jobs for themselves.

    Other jobs that can be done through the internet include website creation, content writing, updating of social media sites, promotion of online products/ services, Pay Per Click (PPC), targeted e-mail lists, among others. The jobs vary, offer different appeals as well as remuneration. Usually, people who provide these services are paid periodically, subject to the agreements they reached with their customers.

    Internet marketing has attracted attentions globally. In the developed economies, such as the United States and Europe, internet marketing has gained prominence as people veered into it to earn a living. Nigeria has joined the league of nations that leverage on internet marketing, among other ideas to create jobs, because of the growth in the use of Information and Communication Technology (ICT) in the country.

    Experts say internet marketing has the potential to create jobs for the large army of unemployed youths. They say millions of people surf the internet daily for one opportunity or the other, adding that the volume of traffic determine the earnings of people that create jobs for themselves on the internet.

    According to the experts, people who want to go into internet marketing must have at least secondary school certificate, adding that people with higher qualifications stand a better advantage. Other requirements include the ability to study and understand the technicalities of ICT facilities, good presentation of services/ products, network and time in surfing the internet.

    The General Manager, System Power Limited, Mr Steven Akinwale, said people who want to create jobs through internet marketing must have a laptop, desktop, modem, a mobile phone, among other tools, to do the job effectively.

    Akinwale said people can sit in the comfort of their homes and create jobs, adding that one does not need a big office to operate. However, he said getting clients or customers is not easy because one has to search for them online, stressing that this involves going through specialised websites that are on internet.

    Acording to him, people can go into content writing to survive once they have a good understanding of English language. He said content writing is into different stages, arguing that one can write on different topics as directed by the owners of the site.

    “There are a lot of website owners online who are looking for people to write for them on different topics. There are many high paying clients who want articles or blog posts on their sites. Others pay people to create information for the products they are selling online.Website owners that are in Europe and other developed economies pay in dollars. The fees ranged from $500 to $1000 depending on the nature of the work. Some pay less; that is why it is important to have ICT facilities to function well in this kind of business,“ he said.

    He said there are hundreds of graduates who are writing for website owners to earn a living, adding that the figure will increase because of the surging interest on internet use in the country.

    Akinwale identifed updating of social media sites as another employment opportunity on the internet.

    He said: “Besides my job as information technology engineer, I update social media sites for people. When I write website content for someone, I always offer to create and update a Facebook and Twitter page for them for an additional fee. Lots of people know they should have a social media presence, but they don’t really know how to get started or keep it updated.

    “Most of the time, the websites I create are for myself. I use them for my own businesses. In addition, I set up sites for small businesses that want online presence.

    “Though one must have electrical and electronics background to do this, people from different backgrounds have taken time to study this area and are doing well today.”

    He said there are thousands of social media sites that need activation, adding they are looking for people who can update their sites for them.

    For Mr Sunday Adeoye, his online business has been rewarding him bountifully. A graduate of Ogun State University, he said he had put endless search for jobs endlessly behind him since he started working as an internet marketer.

    “I promote online products and services. A lot of the money I make as a marketing professional comes from being an affiliate of various companies. That means the company pays me a commission. Three of the programmes that pay the most consistently for me are Google Adsense, Amazon, and TangoWire. Besides, I sell books online and get paid,“ he said.

    Adeoye said he had trained many people on how to be self-employed, especially in internet marketing.

    He advised people to write on national/ global issues and post them on blogs to foster growth, adding that search engines, such as Google and Adsense, are ready to pay the writer once there is a huge traffic on the websites or blogs where the article is posted. This, he said, can be done on a part-time basis. “This is where the issue of Pay Per Click comes in. The more people click on the website to read the article, the more the remunerations accruing to the owner of the work,” he added.

    Similarly, the Managing Director, New Horizons Computer Learning Centres, Mr Tim Akano, said job opportunities are waiting to be exploited on the internet. Akano said google boasts of millions of websites, which people can go through to locate opportunities. He said beyond marketing products or services online for companies in Europe, people could create and market their products on the internet. He said the universities are turning out over 100,000 graduates every year, arguing that it is high time people sat down, think and create jobs for themselves.

    He said background in sciences is not compulsory when it comes to maximising opportunities in the ICT industry.

    “What people need to do is to get a little knowledge of ICT processes. With that, one can do a whole lot of things for himself and survive. The issue of internet marketing is broad and relative, depending on what people are interested in offering on the internet. Globally, the ICT industry has the potential to create millions of jobs for people without much stress,” he said.

  • CBN reviews policy on agric sector funding

    The Central Bank of Nigeria (CBN) has reviewed rules for lending to the agricultural sector of the economy. The apex bank The Nation learnt, took the decision after reports from banks and discount houses indicated that lending to the subsector remains a high-risk, which should be followed with caution.

    In a circular to all deposit money banks and other stakeholders in the agric funding chain released at the weekend, the CBN said agricultural lending accounts for approximately 1.4 per cent of formal lending, and has been on the decline since 2006 because of the perceived risk of the sector. This situation, it said, was because banks have limited understanding of and lack of confidence in the sector.

    To reduce the inherent risk in the level, the apex bank advised that going forward, lenders should conduct environment and social risk analysis and assessment of agricultural clients and activities before extending loans to them. The lenders, by this rule, are also expected to ensure that identified risks are adequately monitored and managed while adhering to local environmental and social laws.

    The CBN also wants lenders to be consistent with Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) agenda, ensuring that, they finance the manufacture and distribution of improved and high seeds; lending to indigenous seed companies and importers of seed varieties and ensuring that farmers are able to procure seeds directly from seed manufacturers by availing them adequate credit.

    Also, with support from industry stakeholders, banks are to establish agricultural value chain research development fund that produce high quality research on the needs of the sector. Lenders are also to encourage and finance providers of storage facilities for seeds, produce and other value-added products provided that they take into consideration energy efficiency issues.

    The apex bank said it is collaborating with local banks for the institution of principles that will assist them in the identification and management of complex environment and social risks associated with the provision of financial products and services to the agriculture sector.

    It is also meant to provide additional sector-specific guidance to supplement the Nigerian Sustainable Banking Principles Guidance Note and ensure that banks adopt relevant international standards and best practices in the management of environment and social risk.

    The principles will equally position agriculture as an attractive, rewarding and sustainable business opportunity given the large proportion of the population that depends on agriculture as a source of livelihood. “It is clear that agriculture is a practical means of reducing poverty, unemployment, food insecurity, whilst providing raw materials for industries and export in the medium to long term,” it said.

     

     

     

  • Customs seizes N600m goods in Owerri

    The Federal Operations Unit (FOU) Zone ‘C’ of the Nigeria Custom Service has seized goods worth over N600million in Owerri.

    The seizure was part of measures to check smuggling and other illegal activities in the zone.

    The Comptroller of the Zone, Mohammed Biu, said his officers and men made 15 seizures, worth N600million in September.

    He said they were able to clamp down on smugglers because of the dedicated officers in the zone, who do not cut corners nor compromise standards.

    Mohammed said since his resumption at the command two months ago, he has focused on closing linkages.

  • Outdoor advertising: Challenges and prospect

    Outdoor advertising: Challenges and prospect

    CONTINUOUSLY, rationalizing advertising spend on media, taxes the various conventional media vehicles on the critical issue of relevance and value-addition. For advertising media products and services providers at times like this, value-focused marketing is imperative. To the extent that insight on intricacies peculiar to various media vehicles will help marketing efforts by media platform, it beneficial to learn from on experienced professionals. The following is an excerpt of a paper on the value of outdoor advert media, challenges and prospects for practitioners by the President of Outdoor Advertising Association of Nigeria (OAAN), Mr. Charles Chijide, at a seminar. We at MC&A DIGEST see this is a good piece for our readers in the business of outdoor advertising. Happy reading:

    Characteristically, out of home advertising is focused on engaging the target audience when they are out of their homes (in other words, when they are on the move). The role outdoor advert media are challenged to play bestows on them so much responsibility which has necessitated a lot of aggression, creativity, persuasion and target audience engagement abilities. It is also very obtrusive in nature, ranking the highest need for a measure of OPPORTUNITY TO SEE, among advert media vehicle options. For well over 50 years, dedicated practitioners have consistently deployed this unique media vehicle for the development of advertising in our local market. From a humble beginning when the conventional billboards and posters were all there was to date, a lot has happened to up the standard and quality of services delivered by this sub sector. We now have global standard digital display panels in Nigeria. Today, we can boast of well over 100 different outdoor media formats displaying across the country.

    In all, the growth indices evidenced upon outdoor advertising business and practice are open to common perception. As mentioned earlier, there is a clear manifestation of local presence of global and innovative outdoor advertising products in Nigeria and a huge upscale in the level of professionalism in the quality of service delivery within the industry today. Today, the business and service of outdoor advertising is handled by trained professionals and focused entrepreneurs. Gone are the days when outdoor advertising service was delivered by the barely literate and artisans. The leadership of OAAN has invested so much in improving the image perception of outdoor advertising practice in Nigeria. Our National association is now a registered member of the world outdoor advertising body, FEPE. Among our goals is enabling practitioners and personnel of our registered corporate members access to global practice standards, new learning and insight and the opportunity of interacting with global practitioners through international workshops and seminars. I can tell you outdoor advertising growth potentials in this market are enormous.

    However, so much needs to bring to fore, as very essential learning for aspiring practitioners and the ordinary Nigerian, to enable a good appreciation of the challenges investors and practitioners face, in their quest for survival as practitioners and the optimization of returns on investment, for the entrepreneurs and investors in outdoor advertising practice. To put the revelations that will follow in perspective, let us look at the practice standard in developed economies.

    Globally, outdoor advertising service delivery and business operations face similar constraints, as a result of its nature. And put briefly, the constraints are:

    (1) Space

    (2) Statutory regulations

    On space, for instance, at least 1,500 cities and communities prohibit the construction of new billboards. The States of Vermont, Hawaii, Maine and Alaska in the same US, prohibits all billboards. In Brazil, the City of Sao Paulo, in 2007, banned all billboards within the city. In South Africa, there is an operating manual known as South African Manual For Outdoor Advertising Control (SAMOAC), compiled and published by the Department of Environmental Affairs and Tourism Directorate in 1998. This document is a 124 page manual put together based on a pains-taking research project – just for the definition of outdoor advertising, the extent and impact of outdoor advertising and its impact on environmental beautification and tourism. Nobody or group of people engage in any form of outdoor advertising in South Africa without express referral to the contents of this document. I like to read this quote from the forward from SAMOAC:

    “Outdoor advertising and information transfer fulfills an essential function in modern society. It directs guides and informs as to locality, product, activity or service and contributes to economic growth in general. However, if outdoor advertising is not controlled properly it could have a very real impact on tourism resources and the human living environment, as was experienced in countries such as the United States of America. Most advertisements are aimed at the road user and may therefore also impact on the road environment. Control measures are therefore needed to ensure that road environments will be conducive to safe and pleasant driving.”

    The portion I just read captures the reasons for statutory regulations on outdoor advertising, world over. To a great extent, the need for environmental protection is a good reason for government intervention in billboards erection and outdoor advertising generally – such as is contained in SAMAOC. Take our local environment, for example, the landscape and skyline in major cities and busy towns across Nigeria suffered all sorts of “pollution” from billboard structures due to indiscriminate erection. Billboard cluster resulted in menace, such that outdoor advertising made no since due to the abuse owing from indiscriminate erection of boards.

    The other part of government control on outdoor advertising has to do with rates and levies due government agencies and department for the use of permitted outdoor space (also worldwide). Such payments are statutory and ordinarily come through as permits for display of advert messages and use of public space. In properly structured society such levies are collected directly by the municipal or local government councils with jurisdiction over the geographic space billboards are erected and the advert message displays.

    World over, the two areas of government intervention stated above remain the key consideration for every outdoor service provider. So as investors or practitioners, managing the incidences of these key components will go a long way to determine the extent of any outdoor advertising business. However, if we add “…in Nigeria” to the topic of this paper, the theme of this forum changes dramatically, immediately because of the peculiarities of the Nigerian market. In other words, localizing the challenges facing outdoor advertising, throws up so many oddities that also require the attention of practitioners and entrepreneurs driven by success.

    As we know, any business concern that does not yield adequate returns on investors’ interest and compensate her human resource is not a successful business. So< return on investment will remain the most important measure of success. In the face of that, let us run through the peculiar challenges facing outdoor business in Nigeria, as follows:

    1. Government policies/ regulation: in addition to global standards of statutory intervention, the local scenario is one of seeming confusion among governments and their agencies. For instance, state governments have technically usurped the local governments’ right to outdoor advert levies through their agencies. But because this arrangement is not harmonized properly in some quarters, outdoor advert agencies find themselves subjected to dual level payment – one to the state government agency and the other to the local government who insists to be paid. This all add up to multiple taxation of some sort, and doubles the cost of such corporate bodies’ operations.

    2. Quality of human resource – outdoor advertising practice is still evolving from the days of old when it was lacking in adequately educated practitioners. But to mention, the industry will be better serviced by a continuous growth in the number of adequately educated practitioners. The good thing is that the trend is growing and the situation is looking better. We like to emphasize, from the standpoint of OAAN that our focus is on achieving high level of professionalism in the industry. We therefore encourage corporate bodies’ consideration for staff training and retraining, and the engagement of highly educated personnel at entry level.

    3. Corporate organizational structure – there is the need to cut cost of operation by considering the concept virtual office and outsourcing. The traditional office setting as we knew it in the 1960s through to the 80s is no longer practicable in today’s business environment. Infusion of technology, sharper focus and competences on the basis of comparative advantage will make better meaning in cost-efficient business management today.

    4. Financial discipline among business owners – business ownership and financial discipline is not one of our strong points in this environment. A lot of small and medium size businesses in this economy are organized around “the owners” so much so that there is no clear distinction between the personal finances of the owner and that of the business. Such practice leads to financial impropriety, indebtedness and business failure.

    5. Clients’ commitment to payment terms and pattern – clearly, not all that glitter is gold in real sense. You would be shocked to know how much is owed to outdoor advertising companies on account of these magnificent and spectacular displays you see in Lagos and Abuja, by the clients. As a result of clients’ indebtedness, most of the agencies are reeling in crippling debt that are threatening their survival. Coupled with the huge investment on those hoardings, the impressive digital display panels, payment to government agencies and cost of operations, debt management is one of the major concerns for any investor in this market. We at OAAN are working towards an acceptable financial management system between our member-companies and their clients that will support healthy business relationship.

    6. Industry practice – underhand dealings and compromises for selfish reasons. This is straightforward. We know of unwholesome practice by some service providers, especially those non-OAAN members. In order to make quick gains, the y compromise industry ethical and practice standard to get businesses. Their most potent tool is outdoor advert rates. They drop rates so badly the unsuspecting client shuns standard practitioners, not considering the dangers of unprofessional service delivery. What happens most times with such arrangement is substandard service delivery, abandoned hoardings and disappointment. So, we implore all those intending to practice in this market to uphold set industry standards.

    7. Innovation, research and strategic planning – lastly, the outdoor advertising practice will do better with research and strategic planning. As in all professionally driven business venture, the need for deep market and consumer insights is the bedrock for success. We must at all times be able to tell what the trends are at the market place, gauge extent of efficiency and effectiveness, understand the target audience expectation, traits and habits. Outdoor advertising businesses must begin to look at introducing more of strategic planning and research for greater effectiveness and ultimate market performance.

    In rounding up, the ingredients for successful business management are globally same – diligence and commitment. As we say in business management thinking global and acting local is the only difference in the small details you find from market to market. Therefore, investors and practitioners must begin to widen their scope in quest for innovative business thinking. Outdoor advertising business is the fastest growing among the three conventional advert media options today. It is also the most resilient to change in the ‘new media world’ driven by digital media. In the new direction, practitioners and investors in outdoor advertising must be challenges by innovative thinking, training and retraining, exposure and new business ideas, to drive success.

  • Firm completes acquisition of OML 30

    Firm completes acquisition of OML 30

    Shoreline Natural Resources Limited, a special purpose private Nigerian company formed between a subsidiary of Heritage Oil Plc and a local Nigerian partner, Shoreline Power Company Limited, has successfully completed the acquisition of a 45% participating interest in a producing oil mining lease in Nigeria (“OML 30”), together with a 45% interest in other assets under the joint operating agreement for OML 30 (the “Acquisition Assets”), for a total cash consideration of US$850 million, net of costs (the “Acquisition”).

    The remaining 55% participating interest is held by the Nigerian Petroleum Development Company (“NPDC”), a subsidiary of Nigerian National Petroleum Corporation (“NNPC”). Completion of the Acquisition (“Completion”) was effective as of November 1, 2012.

    OML 30 is located onshore in the delta region, less than 50 kilometres east of Warri in Southern Nigeria.

    The licence covers 1,097 square kilometres and includes eight producing fields with oil and gas contained in numerous stacked reservoirs, and the Acquisition Assets include a 45% interest in the segment of the Trans Forcados pipeline between the Eriemu Manifold and the Forcados River Manifold.

    Following completion of this acquisition, the operatorship of OML 30 will transfer from Shell to NPDC. NPDC is a proven oil field operator in Nigeria and has the full confidence of Shoreline Natural Resources to work as its partner to develop OML 30 to unlock its full potential.

    Standard Bank and J.P. Morgan provided instrumental support in financing the acquisition consideration for OML 30, and Standard Bank has been mandated by Shoreline Natural Resources to arrange a long-term lending facility to refinance the acquisition facility.

    According to Mr. Kola Karim, Director, Shoreline Natural Resources, “We are very glad to have received the consent of the Federal Government of Nigeria through the Ministry of Petroleum Resources to finalize the completion of the OML 30 acquisition. At a time when the Nigerian Government is promoting indigenous participation in the oil and gas sector we are happy to be part of this move.”

    Echoing similar sentiments, an upbeat Dr. Ladi Bada, Managing Director of Shoreline Natural Resources added that “We are happy to be participating in the development of OML 30 along with our partners NPDC. It is an exciting opportunity with significant upside. We are confident that in collaboration with the operator we will increase value for all the stakeholders, local communities and the nation at large.”

  • NDIC boss advocates financial stability

    NDIC boss advocates financial stability

    FROM the Managing Director of the Nigeria Deposit Insurance Corporation, (NDIC), Alhaji Umaru Ibrahim, has come a blessed assurance that the nation’s banking sub-sector is moving in the right track as such, old and prospective investors need not despair.

    The NDIC boss made this declaration over the weekend during the NDIC special day at the Lagos International Trade Fair.

    According to Ibrahim, who was represented by Suleiman Olarewaju, said the safety, soundness and stability of the financial sector cannot be downplayed in the economy of any nation.

    At the risk of sounding immodest, he said the NDIC, established by the Federal Government in 1989, with a mandate to provide financial guarantee to depositors of the insured financial institutions in the events of failure, has helped to restore public confidence in the nation’s banking system.

    Expatiating, he said, “The Corporation despite the daunting challenges in the financial market had paid cumulative insured deposits of N6.682 billion to depositors 48 depositors’ money banks (DMBs) in-liquidations as at 31st December, 2011. In addition, a cumulative liquidation dividend of N77.384 billion had been paid to depositors whose claims were in excess of the insured amount in the 48 closed DMBs as at 31st August 2012 as against N73.553 billion that was paid during that same period last year.”

    Specifically, he said, the cumulative sum of N2.45billion had been paid to depositors’ of the 103 closed Microfinance Banks (MFBs) as at 31st August 2012, an increase against the sum of N2.25 billion that was paid to the insured depositors’ of the closed (MFBs) as at last year.

    Besides, he said, the NDIC paid cumulative liquidation dividend payment to shareholders of Alpha Merchant Bank, Nigeria Merchant Bank and pan African Bank, Nigeria Merchant Bank and Pan African Bank (in-liquidation) worth N373.04 million.

    “We have also drawn public attention to the fact as knowledge based scheme, deposit insurance has been facing low level public awareness in most jurisdiction worldwide. In that regard, the NDIC has mapped out a number of public awareness initiative, including the participation in this year trade fair aimed at sensitizing the banking public and other stakeholders.”

  • Experts laud investment potentials of wonder plant

    AT a time the country is desirous of creating additional streams of income, the immense economic potential of the commercial plant, Jatropha Curcas, popularly known as the wonder plant, needs to be explored, experts have argued.

    Firing the first salvo was Acting Rector, Osun State College of Technology (OSCOTECH), Esa-Oke, Dr. Augustus Oke, who holds the view that the wonder plant can solve the country’s economic and environmental challenges.

    Speaking at the First Regional Conference on Biofuel for Local Economic Development with the theme, “Tilling the Soil of Opportunities in Agricultural Biotechnology for Local Economic Development,” Dr. Oke said the plant has the potential of creating a viable cleaner and environment-friendly alternative source of energy for the country, as well as solve the country’s other economic challenges, such as unemployment.

    Highlighting the wonders and unique attributes of Jatropha, Dr. Oke who spoke on “The Importance of Local Technology Research to the Development of Agricultural Biotechnology of Biofuel Production” explained that alongside its ability to absorb carbon and its rich seeds which contain extractable biodiesel, the waste from the plant can also be used as organic fertilizer to enrich the soil.

    He further informed that this extractor, which was developed with about 85% raw materials available in Nigeria, is easily maintainable locally and can produce at a capacity of 2-5 tonnes per week, depending on the available raw materials.

    In a lecture titled: “Prosperity from Climatic Change through Carbon Credit Financing from the Cultivation of Jatropha,” Mrs. Tinuola Thompson-Ajayi, National President, Professional Women Bankers of Nigeria, spoke on the market advantages of cultivating Jatropha, stressing that “Jatropha is a money plant. I think it’s a money tree; every aspect of it you touch brings out money.”

    Echoing similar views, Dr. Moses Awodun, an expert researcher in Jatropha plant from the Federal University of Technology, Akure (FUTA), said the wonder plant has been shown to be a highly viable alternative source of energy which has become a household name in places like Brazil and Mexico.

    Expatiating, Dr. Awodun informed the audience that Jatropha is a soil-enhancing crop that aids food cropping, and that there is an increasing demand for Jatropha seeds locally and internationally.

  • NNPC/Chevron lift communities with N1.3 bn

    ITSEKIRI communities may have begun to reap the rewards of being good host communities to some of the multinationals and corporate bodies operating in their neighbourhoods, what with the different largesse that have come their way in recent times.

    One hundred infrastructural projects worth over N1.3billion were bequeathed to these communities recently, courtesy of NNPC/Chevron Joint Venture in Delta state.

    The projects were executed by Itsekiri Regional Development Committee (IRDC) funded by the NNPC/Chevron Joint Venture in line with the Global Memorandum of Understanding (GMoU) between the committee and the joint venture.

    The projects were housing and training centre aimed at taking care of the shortfall of modern accommodation and skill acquisition centre in the communities.

    In his remarks at Ureju – one of the benefitting communities, Chief Ayiri Emami, Itsekiri RDC chairman, commended the NNPC/Chevron Joint venture for collaborating with the leaders of Itsekiri communities to bring better life to the people. “Chevron has been a very reliable partner and majority of the development taking place in our communities are due to the Global Memorandum of Understanding we signed with the NNPC/Chevron Joint Venture.

    Emami, who stated that IRDC cherishes its partnership with Chevron, said the committee will continue to work with the oil company and its NNPC partner to consolidate and enhance the implementation of the GMoU and its benefits.

    Papa Olomus Amofor Ejomobu, the head of Ureju community, said his community was very grateful to IRDC and Chevron for the block of flats built in the community. He said the project will go a long way to solving the problem of lack of modern accommodation in Ureju. Some of the communities which benefitted from the housing projects are Jakpa, Gbokoda, Egoro, Aja Amita, Bateren, Omadino, Ebrohimi, Deghele, Kolokolo, Madangho, Ijaghala and Obaghoro.

    The skill acquisition centre is located in Warri. The projects were executed by indigenous Itsekiri contractors.

    Chief Solomon Ogba, NDDC Commissioner and the Secretary of PDP in Delta State, said he was impressed with the ‘level’ of Chevron’s investments and support to the development of Itsekiri communities.

    He added that his participation in the commissioning event has made him to fully appreciate the efforts being made by the NNPC/Chevron Joint Venture to develop communities close to it operations.

    While addressing the communities, Chevron’s General Manager, Policy, Government and Public Affairs, Mr. Deji Haastrup, commended IRDC and other stakeholders whose efforts led to the successful completion of the projects.

    He said the execution and commissioning of the projects restate the fact the GMoU has continued to meet its objectives of making communities play a leadership role in their own development, and ensuring huge empowerment and capacity building opportunities for their people.

    “I salute the leadership of the RDC for its unyielding resolve in fulfilling the objectives of the Global Memorandum of Understanding which we signed in 2005. I believe the 100 housing and training centre projects we are commissioning today and those we had earlier commissioned are significant efforts towards realizsing the Millennium Development Goals (MDGs) and addressing the need for comfortable shelter and training centre in our communities,” Chevron’s PGPA GM added.

  • Japan: An economy on fast lane

    Japan: An economy on fast lane

    Nigeria has a lot to learn from Japan’s fast-paced economy with GDP growth rate of $5,855 trillion and per capital income of $34,300 among other promising socio-economic outlook. Bukola Afolabi, just back from Tokyo, its equally famous capital and one of the world’s acclaimed cities, provides useful insights on what makes Japanese economy tick

    WHILE the jury is still out as to the impropriety or otherwise of the Hiroshima bombing, Japan, one of the epicentres of the Second World War holocaust, like the proverbial Phoenix, has since risen from the ashes to become the world’s third leading economy coming after China and USA.

    It is anybody’s guess how Japan, largely devastated by the events of the Second World War is today one of the world’s leading economies. The lofty heights attained by the country not only speak to the ingenuity but to the sincerity of purpose which are the trademark of the average Japanese.

    During a recent visit to Tokyo, the capital, our correspondent had a first-hand view of how things work in the city famous for its breathtaking skyscrapers which dots the landscape vis-à-vis its out-of-this world technology, to mention but a few.

    Japan’s enduring legacies

    In a country of 126.97milion people, the country’s Gross Domestic Products (GDP) is estimated to be $5,855 trillion while GDP per capital is $34,300 according to 2011 estimate.

    Unlike Nigeria where there are no industries, the ratio of industries in Japan is 22.5% while services are 71.6%.

    In Japan, unemployment rate is as low as 9.1% and inflation is as low as 4% unlike Nigeria where soaring inflation has rendered naira and the economy worsted.

    Nigeria is ranked 30th in the world in terms of GDP (PPP) as of 2011, and its emergent, though currently underperforming manufacturing sector is the third-largest on the continent, producing a large proportion of goods and services for the West African region.

    Previously hindered by years of mismanagement, economic reforms of the past decade have put the country back on track towards achieving its full economic potential. Nigerian GDP at purchasing power parity more than doubled from $170.7 billion in 2005 to $413.4 billion in 2011, although estimates of the size of the informal sector (which is not included in official figures) put the actual numbers closer to $520 billion. Correspondingly, the GDP per capita doubled from $1200 per person in 2005 to an estimated $2,600 per person in 2011 (again, with the inclusion of the informal sector, it is estimated that GDP per capita hovers around $3,500 per person).

    While Nigeria literally lives in darkness on account of the perpetual power outage, Japan enjoys 936.6bilion kilowatts of electricity generation.

    Unlike the ‘dead’ Nigerian railway system, Japan railing system operates underground and generatesY5million (N10million) daily

    All these data accounts for the economic growth Japan has enjoyed in recent times. Though regarded as the most expensive country in the world, an average citizen leads a comfortable lifestyle.

    The country has over 99% literacy rate.

    But what really makes Japanese economy tick? You may tend to ask.

    Statistics indicates that Japan economy thrives on two major industries: automobile and electronics industries. These are the twin pillars that have sustained Japanese economic growth since the 1970s.

    Though in 2011, Japan experienced a devastating earthquake, yet Honda, one of the major brands of Japanese cars registered a ¥215 billion profit for the fiscal year ending March 31, 2012.

    Also, small family-run businesses have also contributed to the growth of the Japanese economy, helping it become the second largest in the world at its height. Japan also relies mostly on raw materials such as oil, foodstuffs and wood.

    Investigation by The Nation revealed that Japanese cars, electronic devices and computers are exported to countries like China, USA, South Korea, Taiwan, Hong Kong, Singapore, Thailand, Germany and Africa, especially Nigeria.

    Nigeria/Japan economy: A comparative analysis

    Comparing Nigeria and Japan’s economy, in a manner of speaking is like comparing sour grapes.

    Japan’s foreign reserves are estimated to be $1.06trillion compared to Nigeria’s which is far lesser. Its foreign debt is $2.719trillion yet the economy is booming.

    Japan’s exportation has now made it the 5th largest importer and exporter in the world.

    Investigations revealed that exports have had a historical significance to the Japanese economy. Japan imports raw materials and pays for them by processing the raw materials, thus adding value to them before exporting the output.

    In recent years, Japan has been the top export market for 15 trading nations worldwide.

    Commenting on Japan’s automobile and electronics industries, Fujimoto Takahiro, a professor at the University of Tokyo who studies the tradition of craftsmanship (monozukuri) in Japanese industry, draws a distinction between two major approaches to manufacturing.

    “Both are assembly industries, and on the surface both may seem to be plagued by the same six hardships but in fact there are significant differences between them. First is the “modular” approach, typified in recent years by the electronics industry. In this approach, personal computers and flat-screen televisions are produced by assembling key components like display screens and CPUs. The second “integral” approach, best represented these days by the automobile industry, involves assembling tens of thousands parts in an optimal way to ensure a smooth and comfortable ride,” he said.

    He continued, “With the modular approach, a corporation needs to come up with the concept for an original new product, including its design, and gather together the key components from around the world. It then has to assemble the product in low-cost regions and export the finished product. Japan has failed to adapt successfully to this kind of multi-stage process, and this weakness has led to the collapse of its electronics industry. Its automobile companies are much more resilient. This may be because their emphasis on teamwork makes them well-suited to the integral approach, in which development and production sites work in tandem to hone product development, and production plants make continual improvements to quality.”

    Expatiating, he said: “The Japanese automobile industry has thus shown its distinctive brand of resilience. Even so, some people are asking whether the industry’s recipe for success will continue to be effective as electric vehicles and other new forms of mobility emerge. My view is that although new market players will make competition more intense, the automotive industry is unlikely to collapse in the same way as the Japanese electronics industry.”

    Automobile brand like Toyota has also contributed immensely to the growth of the country’s economy. Toyota is one of the top leading automotive brands in the world. In the annual ranking of top 100 global brands by BusinessWeek and Interbrand in 2008, Toyota figured in the sixth position.

    According to the survey, Toyota’s brand value has increased by 6%, to reach $34.1 billion in 2008. In addition, it is the highest ranking automotive brand name in the world. It is ranked well ahead of its competitors like Mercedes, BMW, Honda, Ford, Hyundai, Porsche and Nissan.

    While brands like Ford has been faced with a number of troubles, including a failure to meet its goals for SUV mileage gains or to exploit its well-regarded Escape hybrid, subsequently, the brand value of Ford fell by 12%, to $7.9 billion in 2008. Toyota’s luxury car, Lexus, also has an independent ranking in the top 100 global brands. The brand value of Lexus was around $3.6 billion, with a ranking of 90.

    Compared with Nigeria where GSM is the order of the day, Japan’s telecommunication industry is based on CDMA where no SIM cards are used.

    Though the country is known to be a major producer of cars, however, to own a car in the country is not as easy as one may think.

    “Before a car is sold, the prospective buyer must have ensured that a space where the car would be parked has already been bought and paid for,” says Nakamura, a car dealer in Tokyo.

    He added, “So if you don’t have a permanent parking space either in your house or any other place, the car will not be sold to you. This is to curb traffic and indiscriminate parking.”

    A run of bad fortune

    The tsunami, which affected Japan in 2011, had a great effect on its economy. “Japan lost much of its electricity generation when it shut down nearly all its nuclear power plants after the earthquake. The economy shrank .5% in 2011 as manufacturing slowed due to the crisis,” says Fujimoto.

    However, recent data indicates that the economy is back on track.

    On Japan’s importation and exportation, a study stated, “The belief in the need to promote exports is part of Japan’s self-image as a “processing nation.” Today, Japan plays a competitive role in international trade, although it still maintains protectionist policies in numerous industries, particularly in agriculture.”

    Minuses

    It is, however, instructive to note that there are still few industries in Japan due to the high cost of labour. Many of the manufacturing companies have moved their factories to nearby Asian countries where labour is very cheap. This account for the reason some Japanese cars are manufactured outside Japan.

    The success of Japan economy could also be attributed to its workforce.

    In the view of Mr Hatayama who owns a financial firm in Tokyo, many Japanese works till they get old, up to 70years old.

    “In spite of the fact that government raised the retirement age from 60 to 65, yet many people still work beyond that age. Many of them feel bored staying at home so they prefer to work till they get old.”

    For instance, there is an agency in Japan which places older workers into jobs all over the city. Its oldest client is 80 years old. The client retired at 75 but came back last year because he was bored at home and wanted some cash. The agency boss (who is 74 years old himself) says they have no upper limit. “Our clients work until they disappear naturally,” he said.

    Visitor-friendly

    Like other citizens who study abroad, many Japanese are scholars outside their country yet few of them understand English.

    So any visitor who speaks English to them is always treated with respect. They are very polite, shy, friendly and accommodating.

    Security conscious

    Japan is also largely a wireless society and to curb crime, closed circuit cameras (CCTVs) are installed at every nook and crannies in around pubs, public places like supermarkets, car parks, recreation centres, banks, and many other places.

    Fat pay checks

    That average Japanese earns good salary is not an understatement. According to Kiyato Nagamoto, who works for an accounting firm, he said, “An average Japanese, whether educated or not earn Yen250, 000 (N500, 000) monthly. So in local parlance, average Japanese is a rich man.”

    A Nigerian resident in Japan desirous of bringing somebody from home to work as a maid in Japan, should be ready to cough out Y180,000 (N360,000) monthly.

    Coins and more coins

    Probably, the Governor of Central Bank of Nigeria, Sanusi Lamido Sanusi took a cue from Japan economy when he recently declared the intention of the apex bank to introduce coins into the Nigerian currency. This is because in Japan, their currency is denominated in fractions such that spending coins is unavoidable.

    As high as Y500 is denominated in coins while the paper currency starts from Y1000 up to Y10, 000. So for a train ticket, a passenger pays equivalent of N160 to N190 per ride in coins depending on the distance and only machine dispenses the ticket and change. Though many Japanese owns a car, yet few of them make use of it. They prefer to travel by train while some ride bicycles to and fro their places of work.

    Patriotic fervour

    Japanese are so proud of their currency that no transaction as little as it might be is done in US dollars. No shop accepts any foreign currency. A visitor is expected to change whatever foreign currency he brings into the country into Yen, the country’s currency, to pay for goods and services.

    Hard lessons for Nigeria

    Many of these analysts, hold the view, and very strongly too, that Nigeria stands to benefit from Japan’s socio-economic model.

    According to Dr Ayo Teriba, an economist, there is no basis for comparison between Nigeria and Japan but as far technological advancement is concerned, Nigeria sure has a lot to learn from the latter.

    “Nigeria and Japan are incomparable because what do we have to compare? Nothing. If we want to talk or compare with Japan, we missed that opportunity 50 years ago. Japan is the third richest country in the world. They are one of the world’s superpowers. If you talk about a developed country Japan has all the attributes you can think of. They have everything for themselves unlike us. It is like comparing lion and cat; you can see that is not going together. We still have a long way to go. But we can learn from them, adapt, if possible, useful lessons on building enduring socio-economic legacies,” he stressed.

    Echoing similar sentiments, Dr. Austen Nweze, a lecturer at Pan African University, while emphasising that Nigeria was at par with countries like Indonesia, South Korea, and Malaysia in the 60s, however, regretted that things have gone pretty bad.

    Nweze recalled that “Japan after the Second World War set out to remake their destiny with a clear focus on human capital development, infrastructure and technological revolution. But you can barely say the same for Nigeria. We were doing well in the 1980s but not anymore.”