The Nation Newspaper

Category: THE CEO

  • ‘Govt needs to address harmful regulations to enhance growth’

    ‘Govt needs to address harmful regulations to enhance growth’

    Mr. Antti Ritvonen is the Country Manager, Dizengoff Nigeria, a member of the United Kingdom (UK)-owned Balton CP Group. Dizengoff is one of the leading communication and agriculture companies in Nigeria, providing customers with the best innovative solutions in irrigation, greenhouses, tractor & implements, Agro-consumables, cyber-security, radio–communication, home land security, IT infrastructure and turnkey projects. Ritvonen, in this interview with DANIEL ESSIET, shares his opinion on several issues.

    With the economy technically out of recession, do you still see prospects for growth?

    I will speak from two perspectives. First, the environment is still tough for businesses to operate. I also think we are undergoing some massive growing pains at the moment, too.

    Operators have to work hard to achieve their goals. On the other hand, I see positive signs, especially with greater attention given to agriculture. That means a big opportunity for our agric business division. I think the government will likely get past these growing pains by focusing more on agriculture.

    Last year, regulation, skills, national debt, and taxes topped CEOs’ list of threats to business growth. None of these have been addressed this year. Do you still see over-regulation as a concern?

    At a sector level, there are a lot of regulations that are meant to guarantee food and human safety. This, not withstanding, I think it is wise to examine the possible effects of actions and the negative impact of over regulation on the market and the economy. The government needs to address harmful regulation in order to unleash economic growth.

    I am not saying there should be no regulation; I will appreciate a clearly definable reduction in the regulatory burden for the industry. For instance, agro chemicals are critical to improving food production.  As you know, agrochemicals and other crop protection products play a crucial role in increasing agricultural productivity. To meet the food requirements of the nation, agricultural productivity and its growth need to be further improved. This can be achieved, using agrochemicals to provide pre and post-harvest protection to crops and agricultural output.

    Activists are campaigning against increasing use of agro chemicals and pesticides by farmers because of long-term health and environmental effects. What is your view on this?

    I support regulations on pesticide with an aim to better protect human health and the environment, and to make agriculture more sustainable. There are a lot of fake agro chemicals. I support regulations to stop such manufacturers from operating in other to save human lives and protect the business of farmers.

    I support the government efforts to control the spread of hazardous chemicals, but there are reputable organisations such as ours that are determined to produce and supply quality agrochemicals to farmers, especially safe and effective pesticides. We are capable of advising governments on technical issues relating to manufacture, use and safety issues relating to pesticides.

    How favourable is the tax regime to your industry?

    I  think the government needs to exempt  thee industries from  a lot of taxes  that will affect inputs used in the farm such as seeds, fertilisers, pesticides, tractors etc. as it will contribute to increase in prices of farm output. Farm output prices are controlled by market forces and the farmer has little control. As the input price rises and output price remains stagnant, the farmer will have no option, but to absorb the cost, thus increasing his burden.

    With the economy under stress, farmers and agro businesses will be reeling under tremendous pressure from many ends and the increased burden of taxes will create a crater in their incomes. If somehow, the output prices increase, the nation will suffer as the food prices will go up, thus creating trouble for the common man. The way out will be for the government to exempt the industry from heavy taxation. This will have a positive impact across all agricultural inputs and reduce the encumbrance on farmers.

    What can the government do to enable agriculture play its role in the overall economic development of the country?

    The sector needs an enabling environment where farmers can  access affordable  credit. The absence of production loans is the biggest hurdle.  I believe agriculture is an important part of the economic future of Nigeria. There is enough evidence to show that agriculture can play a role in modernising economy. Much of economic development in Nigeria is going to be based on industrialising agriculture, introducing land reform and developing the manufacturing industry.

    Looking at the growth of Nigeria ’s real GDP per capita over the last 10 years, agriculture contribution to  GDP has been  low. Generally, the process of economic transformation is characterised by a decline in the agricultural GDP share in employment over time, as labour moves to higher productivity sectors.   While agriculture’s share in GDP has been declining in the last 10years, unfortunately also, labour and other resources that can boost industrialisation were absorbed into other more productive sectors. Some of the challenges that the agricultural sector has faced has been land, policy inconsistency. The level of domestic investment is an issue. Foreign Direct Investment (FDI) follows domestic investment; it does not lead domestic investment. The problem with Nigeria’s agriculture is that domestic investment has been too low, it is beginning  to pick and some silver lining coming from the current Foreign Direct Investment.

    I believe that the process of economic transformation is going to be driven by income growth, changes in demand and consumption patterns, technical change and increased productivity.

    What we are doing to support the government is to pursue a strategy focused on increased land productivity, accelerating agricultural growth for job creation with high value activities  across the value chain that  can raise incomes, employment and export opportunities. With the devaluation of the Naira seen by many as an opportunity for exports, cash crops and vegetables now comprise the largest exports in the sector.

    I believe the agric sector, is going to enjoy a period of strong success, but this will depend to a large extent on the implementation of  green alternative policy.

    How concerned are you with the policy, social and business threats to your organisation’s growth prospects?

    Government policies have big role to play in creating an enabling environment for foreign direct investment. Foreign companies are interested in investing under a favourable policy regime and robust business environment has ensured that foreign capital keeps flowing into the country.  I will suggest that the government does more to improve the ease of doing business in the country. Nigeria should be seen and felt as the most attractive emerging market for global businesses.

    FDI is often constrained by unfriendly regulations coupled with a generally unfriendly investment climate.  FDI is critical to enable Nigeria achieve food self-sufficiency.

    We are ready to work with the government to boost productivity by improving farm management practices.  To achieve this goal, we need to work within an environment where policies and regulations foster growth in the agriculture and food sectors, well-functioning markets, and where thriving agribusinesses will be supported to make more food available in rural and urban spaces.  I support regulations that ensure the safety and quality of agricultural goods and services without being costly or burdensome to the extent of discouraging individuals and organisations from investing in the sector.

     What types of technologies are you promoting to attain higher levels of productivity?

    We are doing a lot of things aimed at imparting new technologies or farmers to improve productivity.

    From drip irrigation to agro chemicals, quality inputs, we are promoting technologies and smart solutions for better agriculture. Our drip irrigation solutions are rapidly spreading nationwide.  Farmers  who  have  adopted our  technologies with improved  farming skills saw their production increased in many folds.

    Our experts regularly visit farmers and organise training sessions for them to increase their crop yields while using the appropriate  fertilizers and water optimally. We teach them ways to produce quality vegetables. We have demonstrated diverse technologies to the farmers. They can choose the technology that suits them best and maximise their yield and profits.

    We are providing tailor-made farm solutions to help producers grow vegetables.

    We educate farmers on when to plant, irrigate and harvest; and how to cope with drought; how to choose the crops best for their areas. The major production challenges faced by farmers include low yields, inadequate knowledge of improved varieties, limited skills and knowledge of recommended production technologies.

    When we sell our irrigation tools, we offer training to help benefitting farmers increase farm yields through the use of both improved varieties and accompanying crop management practices.

    Our greenhouse training, for instance, is a practical one.  In combination with discipline and determination, farmers exposed to new agricultural practices from our training can increase output from even one hectare. Our extension agents are trained on technologies to help farmers improve their yields.

    We are determined to empower smallholder farmers with the tools to meet the challenges ahead.

    They are also adopting more efficient water-management technologies, such as advanced drip irrigation.

    What is your approach to youth entrepreneurship?

    The future of Nigeria’s food security must rest with next generation of new young farmers.

    Our mission is to liberate the small scale subsistence farmer by providing a proven approach to become an agroprenuer, with a middle class income on a permanent sustainable basis, as well as bring fresh fruit and vegetables to the surrounding communities at affordable prices.

    We are determined to work with the government to support youths to increase crop yields, on a per hectare basis, by up to 75 times in gross weight harvested.  We want  to eliminate the current scandalous 60 per cent waste of the meagre quantities historically grown in the old fashioned ways, turned rotten by poor packing and long arduous transportation from the rural fields to the urban cities across the country.  We want to help youths produce quality produce at stable affordable prices across Nigeria. With the technologies we have acquired and working  through groups, we see big opportunities opening for young people and  the SMEs  to use technologies to produce food within limited  space to ordinary Nigerians.

    What is your partnership with Best  Foods Fresh  Farms Limited.

    We have  gone into partnership with Apel Capital and Best Foods Fresh Farms Ltd has gone for the establishment of an investment fund for modern greenhouse farming for investors in Lagos. As part of the project, Dizengoff delivers to Best Foods Farms Ltd 10 units of greenhouses to setup a demo/model farm at Igbodu in Epe, where it  already has a farm. Apel Capital will act as trustee for this investment fund. The Fund aims to achieve 35 per cent  return for investors, who are investing into this fund. The minimum investment required is N500,000.

    We are the  technical partner for the project and we will provide technical support on the project from installation, to training, to cultivation etc. We  will also provide trained agronomists to the farm and to greenhouses bought by the investment fund.

    We believe it is not enough to provide products alone, through our combined technical know-how, with do-how and quality inputs, we will perform consistently, day in and day out”. The partnership has different parties Best Foods Fresh Farm Limited – will play the role of the Fund Manager, while Apel Capital & Trust Limited will serve as the Trustee and Dizengoff Nigeria will operate as the Technical Partner in terms of production.

    What would you like people to understand about Dizengoff?

    We want to be reckoned with  as a private organisation that is providing  farmers with improved seeds that will yield more than 200 per cent  in comparison to the farmers’ varieties.

    For instance, we provide a  gravity-fed Family Drip System (FDS)  that can irrigate a crop throughout its entire cycle over a land area of up to 10,000m2. The vegetables cultivated under it with good crop management practices produce over 300 per cent more yields, than the rain-fed vegetables.

    Let me restate that mechanisation of crop production is the only sustainable means of reducing poverty among farmers. We are encouraging both corporate and individual farmers to use tractors; drip irrigation systems and greenhouses for fruits and vegetable production. Sustainable vegetable and crop production had been made easier with the use of modern and affordable farm equipment, kits and improved varieties of seeds. With greenhouse kits, a famer can  produce exotic tomatoes all-year-round even in the bacteria and wilt-infested areas. You can use green house  and plant tomatoes, cucumber, watermelon, potatoes, groundnuts, different vegetables profitably.

    Greenhouse limits the devastating effects of insects pests and diseases that ravage vegetables including tomatoes. With little amount of land space and water, you can  get a yield far higher than your traditional open field product

  • ‘Technology, retail market future of insurance brokerage’

    ‘Technology, retail market future of insurance brokerage’

    The rise in technology and various distribution channels introduced by the National Insurance Commission (NAICOM) to further deepen insurance sales and penetration is threatening the role and relevance of brokers in the industry. In this interview by Omobola Tolu-Kusimo, the Managing Director, SCIB Insurance Brokers Limited, Mr. Shola Tinubu, says brokers need to be creative to be part of the new business regime that will be created through retail business with the aid of technology,  amongst others. Tinubu is also the new President of the Nigerian Council of Registered Insurance Brokers (NCRIB). Excerpts:

    What is it like being the NCRIB President?

    I think it is an honour to be given this type of leadership role where one is able to better implement some of the ideas and concept that one has been incubating throughout one’s career. For me, this position is very clear. It is not like the executive president of Nigeria or the executive governor of any state. It is a non executive position. I do not expect that this is something I am going to do alone, I am going to do it with a team but it means a lot to me that at this point in time that I have actually reached this position.

    As the new President, what is your vision for NCRIB and the brokage fraternity?

    Essentially, the core vision that I have for NCRIB is the type that stands as a strong institution  that can stand side by side with many of itspeers nationwide and even internationally. The standards for us are standards that we have been able to see and view. We are associated to the British Insurance Brokers Association (BIBA) and many of the standards that they apply there are what we have continued to look at and imbibe bit by bit. If I were to explain it differently,it is for us to have a NCRIB that is in position whereby from year to year, presidents come in and go. But the institution itself will be there to talk to government on institutional and professional issues. It should be able to relate with government on the economy and all the affairs that affect our members because essentially that’s our focus.

    How do you intend to help your members maximise their potential towards achieving their set targets considering the role brokers play in the market?

    First of all, you must look at the future for broking; the future for broking is going to be strong in the corporate sector. However, retail is a big thing coming. Insurance penetration is going to be reaching its potentials for us in terms of retail. But you will find out that the broker is still relevant in corporate business anywhere in the world, no matter what. For instance, as big as Shell International is, they have a big insurance department with technical advisers on insurance, but they still use brokers and they will continue to use brokers in the future. They even have captive insurance companies they run by themselves, yet they still use brokers. Sometimes they use brokers to run their captives. We even have a situation where our Nigerian National Petroluem Corporation (NNPC) captive is run by a broker as at date. So the role for brokers in corporate sector will always be there. In the future, the growth of the corporate sector in Nigeria will only be limited to the growth of the economy itself. There’s a bit of saturation for the existing corporate sector and therefore it is only when that corporate sector grows with new companies springing up and the existing company doing better; that is when you’ll then see bigger roles for brokers. The role will always be there no matter what, but I suspect that role will be influenced by the speed in growth of other sectors which will be the retail business.  The retail business is coming around the corner and will be enhanced by the use of things like technology. What brokers need to look at is how they will remain relevant in the new market; that is going to explode because whether we like it or not, it is going to explode. It could be that it will be irrelevant in arranging technology platforms. Some entities that are not even brokers are arranging technology platforms for insurance. So why can’t brokers also be involved in doing so because we have an added advantage over them. They don’t know anything about insurance.

    What are the other developments to expect?

    Also you are going to see changes that you might not envisage because people love creativity. If you look back 15 or 20 years ago, you will find out that the market was playing a bit different especially with the advent of technology. So moving forward, we have to be prepared for the unknown and the organisations must be light on their feet. I also anticipate that there’s going to be the issue of regulation. Regulation is going to come and it is going to surprise us more and more because it is even trying to catch up with what is happening in the world. Presently, there is no regulation for doing internet insurance broking. But it will soon come out, otherwise we will have a space where people will do anything they like. So as things change, we are going to be seeing regulations role change as well. I believe that the future is extremely bright for brokers but there’s going to be effort that needs to be made in terms of creativity to be able to be part of the newly created business or those that will be created  in the years to come.

    How do you intend to re-direct your members to begin to take the retail business more seriously?

    At the national insurance conference this year, the speaker, Mr. Tony Elumelu, told us that capital goes to where it is welcomed. It’s very instructive and you can see it in many areas. If there is money in a particular area and people can see it, people will move into that business. If brokers are not moving into retail, its because they are not seeing money in it. Some of them are trying and burning their fingers. They are running around spending money to employ agents and they are not  getting enough money to be able to pay their expenses. So the real issue you are going to find is that if you have a medium that makes money, you’ll see people spend their time going there. But we haven’t even seen that. Even insurers have still not shown money coming out of retail. Many of them have tried; some of them have also burnt their fingers and stepped back a bit. Some  of the top five insurance companies have said they are not going to go that way no matter what anybody says. These are companies that have money to move in that direction. I think the real issue is creativity and innovation and I strongly believe that technology is going to be what will open one of the doors to that area. If you look at the success stories in Kenya or other countries, you will see technology playing a significant role. It is true that the regulator is looking for ways to deepen the industry and it’s not just looking for a way out on the broking side but the entire industry.  The regulator is looking at what can loss adjusters, insurers and brokers do to help that mission. I think it is their major mandate as NAICOM to try to do that.  What we want to do is to work hand in hand with the regulator to be able to see how the regulator can be a facilitator or a catalyst for this business to happen.  To be able to show  people where it makes sense in terms of making more money. No entity, whether insurance company or broker is going to move into a business just because they want to deepen insurance penetration in Nigeria. The business must make financial sense and that’s why we need to get a model that works and I think putting our heads together, some of those things will happen.

    What are the challenges brokers are facing?

    Brokers are not immune to the general problems in Nigeria- political, economic and the likes. More recently, the economic challenges that we had as a country has been a blessing. Sometimes if we don’t have the challenges or if your challenges are not too significant and abrupt, it is a tendency that does not breed creativity. For example, we have always known that we should be concentrating on agriculture but because of the challenges in the past few years that caused a change, people now say let’s look at agriculture better. The price of oil collapsed and everybody is now concentrating to look at things that have always been there. So it occurred to me that on the economic side, the challenges that the brokers have faced is diminishing market.  Many of our clients have started running into challenges. Some closed down, some were not even able to pay their premiums and many more issues. We started competing for the diminishing of the corporate market and therefore to address that we need to be able to open up on businesses like retail or the alternative market.  One of the things that brokers also need to do is product development. We need to key into product development. Insurers need to do it as a core for themselves but if they don’t do it definitely brokers should now wake up. We are only selling insurance products but when they refuse to develop new products then maybe we should develop those products for them. This does not necessarily mean creating a product that has never existed. It may be just putting together something that exists elsewhere but is relevant to the market here. We have people now thinking of cyber risk but we are not looking out selling cyber risk. But cyber risk insurance is there, it exists. Some part of it are inside the normal crime policy and money policies that we have but its about extending it to be able to do more and allay the fear of the market. So product development will do that. Our brokers are also looking at regulation. The cost of regulation, not just directly monetarily but in terms of the amount of time that is taken to be able to meet required and genuine regulation.  This is something that we need to address immediately but I also think that technology is something that would assist in that area and it is also something that we would be  looking at.

    Do you think insurers are doing enough to support market development?

    Well I don’t know any example of those kinds of areas. Most of what brokers want to sell are insurance products. It is true that we have some consultancy and risk management services but most of our products are sold through black market and they want their market to grow.  What I will do as the new president of the NCRIB is to work together along with our Executive Secretary, the new president of the Chartered Insurance Institute of Nigeria (CIIN), the chairman of the Nigeria Insurers Association (NIA), NIA Director General, NCRIB CEO and the Institute of Loss Adjusters. This time it will be with action in our spirit. We have had discussion in the past but we haven’t had a floor where we are operationally working together to move some of these industry objectives. The tendency is that when you talk and go back, you’ll concentrate on your core objectives  of your own group. Sometimes at the expense of the global objective and  except  you have a group working together  continuously looking at that, you will not achieve anything.  We have now made a commitment to work closely together and report back to all the bodies that we belong to.

    Insurance is evolving with technology. With the introduction of the new distribution channel by NAICOM, would you still say that brokers still have a job or would have a job in the future?

    Well, I understand where that thinking is coming from because I can see that there is a creation of a channel by the regulator that seems not to have encouraged the broker participation on that channel. This is one of the issues raised at the national insurance conference in Abuja where we had an open forum with all the parties there including the commissioner for insurance and the brokers were able to respond.  At the event, the commissioner made his point when he said that if it is true that this particular channel that has been created has not encouraged brokers on, it is not the only channel. He said we should get up and be creative, noting that we can create retail channel as well. I think that sometimes when you are pushed to the wall, you can decide to go on your own. So when the business begins to roll out of this channel more than even the channels that have been created, it may now be a situation where people begin to think and now come to your channel or continue to buy from both. This is because the insurance penetration is so low that you will find out that you are going to look for various ways of making the connection with the eventual client. So I try not to see things from negative perspective but I look at opportunity that rises from it. One of the things I said is if anyone has ever been at retreat, every time you are trying to do your SWOT analysis, 90 percent of what you see as threat also come up with opportunities. Some people see NAICOM as a threat and they are managing it as a threat. If you look at it from the other side, you will realise that there is an opportunity. We are going to build a good relationship with the regulator. Some people are saying this is difficult. I don’t agree because if you don’t understand what NAICOM wants to achieve, you may not be fully appreciative of the way they are going about their goals. But if you understand the way they want to go and alien with it, you will find them even aliening with you more because you are the one that is even getting them to their goal post better than they may be thinking they want to get on their own.

    Some industry observers have expressed worry on the issue of rate cutting. How are you going to help reduce or eliminate the menace?

    It came up at insurance forum at Abeokuta where we were discussing and we were actually challenged by the paper presenter who wasn’t an insurance person a technology person. He just couldn’t understand some of the things we were doing. Let it be clear which is part of one of the things the presenter said, it is first of all not the regulator’s job to manage rate. It is the opposite of their responsibility for a regulator to be looking at managing rate up. Their responsibility is to bring rate to the lowest possible position. Other regulators are doing it. For instance, telecom regulators are trying to make insurance telephoning cheaper. There is nothing like Glo’s rate is cheaper and they want to punish Glo. Their concern is that If Glo can do it cheaper why not MTN? This is what they do and that is the job of a regulator. It is not to protect the pricing of the large fat cat enterprises but to ensure that the insuring public gets value for money. So on the qualitative side, NAICOM has right to ensure that companies are solvent and are doing the right thing as well as ensure that they pay claims. If any company likes, it can sell insurance at zero premium but it must pay all claims at a point in time. Going back to the issues as you have presented it, in my own opinion, it is very rare for you to find anything called rate cutting. Meanwhile, you have to get the definitions of rate cutting, assuming that there is a specific rate you shouldn’t go below which has been signed off like a bible by the industry regulator. So the bible has come from heaven, this is the rate and anyone that goes below it is has engaged in rate cutting. But when there is no such bible or when there is no such rate, what can be done? The question also is, have you ever heard or seen any individual accused and punished for rate cutting? Why it can’t happen is because it is an emotional matter. it is not looking at something that is really cogent and until we now go back to our statistics and ensure that we can find out what appropriate rating is supposed to be, and advertise it, people will start moving towards the rate. This is because you have made them know what the scientific rate is supposed to be then us being to move as close as possible to it because if they go below that it will be a problem. So what we said at the conference is that, the same group of people are going to meet. The people are the new Director General of the Nigeria Insurers Association (NIA), Chairman of NIA , ILAN President and I as the new NCRIB President, NCRIB Executive Secretary. We are going to look at the issues properly and then come up with solutions to them.  I believe where it is going to end up is for us to understand what rating is supposed to be and move into trying to make people know what it is. I studied Actuarial Science in school and I thought I was coming to the industry to crack the numbers so that we can tell people exactly what the pricing is. During my youth service year, I went to various schools as part of my primary assignment to tell them about our vocation and what subject they need to choose to be able to study like insurance etc.

    Insurance industry has witnessed significant reforms geared towards improving customer services to enhance the image of the industry. What is your assessment of the reforms so far?

    If you take 2006-2007 as a base year, that was the time when things started happening, it was a good move by the powers that be at the NAICOM. It was always very difficult when claims are made, we find ways to avoid paying such claims without saying we would not pay. We had recapitalisation of the insurance companies and the entities became stronger. They were able to invest in their work and processes. They hired qualified staff and management to drive the company. We no longer have this bad stigma called small print in the industry. You cannot find any insurance company that would not respond positively to claims payment. It is no longer thug of war, it is getting better. Heavy claims that would not have been paid are now being paid without delay. You remember the Nigerian Bottling Company policy worth billions of naira, the industry rose up to their responsibilities and paid the claims.  The market has changed significantly because of the recapitalisation that took place in the industry. In terms of the recapitalisation, the commission was the driver of the process, they did it well and in the end, all the insurance companies that wanted to remain in business either funded it or form partnership and merged. There are quite a few of them that pulled their resources together and it was good for the industry. However, organisations should not be dictated to by the regulator on capitalisation, the practitioners and the company themselves know the type of risks they write and the funds that are required. Don’t forget they also have additional capacity, by way of reinsurance. When you insure and reinsure you are more or less buying additional capital from the reinsurers to add to the capital that you have on ground so that you are able to meet your claims obligations to the customer. If you know the risks you are writing, you should be able to know whether the capital that is available to you matched the risk, if that is the case you know how to seek for additional capital either by way of rights issues or any other form of raising capital. It should not be imposed by regulatory fiat, it should be that those running the business should be able to determine the level of capitalisation needed to enable them drive the process and market penetration.

  • ‘Foreign investors need incentives’

    ‘Foreign investors need incentives’

    The economy has been upbeat since the Central Bank of Nigeria (CBN) introduced the Investors’ & Exporters’ Forex Window. With improvement in forex inflow, investors who complained bitterly of not being able to repatriate their funds, except through the parallel market, now have a better deal. In this interview with COLLINS NWEZE, Managing Director, Afrinvest Asset Management Limited, Ola Belgore, says the market has responded positively to the change in policy, going up by over 36 per cent from what was negative in the first quarter. This is about 50 per cent growth within the last four months.

    The impact of foreign fxchange (forex) on the market has always been significant. What is your take on the current forex situation in the country?

    In January 2017, Afrinvest published our economic outlook clearly indicating the need for reforms. Fortunately, the Central Bank of Nigeria (CBN) came up with the Investors’ & Exporters’ (I&E) FX Window which made it easier for foreign investors to repatriate their funds. Prior to its launch in April, investors complained bitterly that after liquidating their investments, funds was repatriated through the parallel market where the dollar was sourced leading to great loss in value.

    Since April, the foreign portfolio investment has increased and there has been positive impact on the market. A clear indication of this impact is the growth in the Nigeria Stock Exchange (NSE) market capitalisation to close to N13 trillion.

    Do you believe that the market now enjoys enough liquidity?

    When the I&E FX Window was introduced, many investors cautiously tested the market to ensure it would work. Now, we have more investors coming on board because they have had a better experience repatriating their profits. We must, however, recognise that improvement is a gradual process, and today, portfolio investors are more confident. With the right – and stable – government policies, I believe investors will get even more confident to come in, especially when there is an assurance that the rules will not change in the middle of the game.

    Our observation on the stock market shows that there has not been new capital rising by local companies in recent months. Can we attribute this to the recession?

    Activities in the investment environment largely depend on whether you are raising equity or debt. For debt, the environment is rather stiff, and with Monetary Policy Rate (MPR) currently at 14 per cent, this may not change soon. There have, however, been one or two bond issuances, including the recent Lagos State Government bond issued at 16.5 per cent which was competing against Federal Government’s Treasury Bills at 18 per cent.

    Regardless, we must give foreign investors incentives to invest in the economy. The average rate for Treasury Bills is 18.5 per cent. However, once you mark it up with risk premium, you are approaching 20 to 22 per cent, which is a challenge within the operating environment, especially when you consider what cost manufacturers will borrow.

    When you look at equities, in the first quarter of 2017, the market was at 16.5 per cent negative, which naturally affected investors’ appetite, with many of them losing huge sums of money. Consequently – and as expected – that was not the right time to introduce fresh offers.

    However, the market has responded positively to change in policy and has gone up by over 36 per cent from what was negative in first quarter of 2017, implying that there has been about 50 per cent growth within the last four months.

    Fortunately, the growth will likely be sustained because corporate earnings are coming up strong, and with most of the stocks trading below their book value, the market evidently shows potential to sustain the growth. We can then expect a boost in investors’ interest in new offerings. For instance, Guinness and Unilever just concluded their rights issues which they would have been hard-pressed to do in the past. If they are successful as we expect, it will encourage others to test the waters and ultimately boost market performance.

    Can you tell us about Afrinvest West Africa Plc?

    Afrinvest West Africa Plc (Afrinvest) is an independent investment banking firm, focusing on the four principal areas of investment banking, securities trading, asset management and investment research. It has been in existence for 22 years, and is the parent body to two subsidiaries: Afrinvest Securities Limited and Afrinvest Asset Management.

    We see ourselves as a ‘financial supermarket’ of sorts, considering that we are licensed by the Securities and Exchange Commission (SEC) to operate as an issuing house and underwriter as Afrinvest West Africa; a broker-dealer as Afrinvest Securities Limited; and a portfolio manager as Afrinvest Asset Management. Underlying these services is in-depth research, innovation and a passion to deliver invaluable financial solutions.

    Could you tell us more about Afrinvest Asset Management?

    Afrinvest Asset Management – under my leadership – manages two listed mutual funds. The Afrinvest Equity Fund (AEF), which invests in shares of blue chips listed on the Nigerian Stock Exchange (NSE) and the Nigeria International Debt Fund (NIDF), which invests in Federal and State Government bonds. The NIDF – which started out as a closed-ended fund till it was restructured in 2010 as an open-ended fund – was created 19 years ago.

    It has consistently paid dividend to investors twice annually. As you may be aware, we just paid the 2017 interim dividend of the fund making it the 39th dividend in the history of the NIDF.

    What exactly is NIDF? Is it a Federal Government instrument and does it target only high net-worth Individuals (HNIs)?

    The issue of the NIDF’s primary target audience is one that has been consistently raised over time. Before now, one would be correct to say the NIDF was for the high net-worth investors as new a subscriber would require about a minimum of N1 million to meet the minimum units of 500.

    With a record of consistent payout and superior performance, we were inundated with requests to make the fund more accessible to the retail investors. These requests inspired us to review this amount downwards in a 10 to one stock split in 2016.

    That way, we are able to accommodate more retail investors without losing the core focus of the fund. Today, the NIDF is no longer exclusive to any singular class, and investors with a little over N100, 000 can gain easy entry.

    How easy is it to liquidate the fund and how could this be done?

    Any investor can liquidate his funds easily at any time, and it will take a maximum of five days. To liquidate, you simply complete and submit the redemption form, which can be downloaded on our website. Once this is done, your signature is verified by the registrar, and investment proceed is paid to your bank account on record.

    Subscribing to the NIDF is just as easy.  You simply complete the subscription form, provide your Know Your Customer (KYC) requirements – identity card and address, inclusive – make payment into the account, and you are all set. You can also track the performance of your investment by monitoring NIDF prices we circulate to all investors daily.

    What do you think accounts for the success of the NIDF and its consistent coupon payment over the last 19 years?

    For any mutual fund, you have what is called the trust deed which clearly states how the fund would be managed and what assets it can invest in. So, what we do is actively following market trend and strategizing to meet fund objective per time. We distribute 25 per cent of the income, while the rest is re-invested in the fund, making it easy for us to pay coupon.

    Tell us more about the Afrinvest Equity Fund.

    As earlier stated, the AEF tracks stocks quoted on the Nigerian Stock Exchange. With a minimum initial subscription of N50,000 and subsequent investments of N10,000, investors can subscribe to the AEF with returns greatly affected by the returns on the stock market. Regardless, the AEF has enjoyed impressive performance over the years due to our superior mix of service, research and management.

    Another recent trend in the market is the banks’ move to substitute costly assets out of their balance sheets in preference for cheaper deposits to reduce their cost of fund. What could be responsible for this move?

    It becomes increasingly clear that retail is the future. In many countries of the world – including Nigeria – about 50 per cent of the population is unbanked, with a lot of cash in the informal sector. From our own experience, we have seen people test the markets with smaller amounts of money to ascertain that they will not lose out, before introducing the more substantial sums. For instance, we had a subscriber to one of our mutual funds who invested less than N200,000 in the AEF.

    After a time of consistent performance, he made a move to withdraw his funds, to test our promise of easy entry and exit. Based on his success in dealing with us, he made the move to entrust us with over N20 million, simply because he trusts us to give value. The importance investors place on liquidity and confidence building, therefore, has a significant impact on designing products and services for the market.

    In line with this experience, players have recognised a need to widen the client base, with even the Federal Government going for cheaper funds, with the Federal Government of Nigeria (FGN) Savings Bond offering less than 14 per cent to investors, as against Treasury Bills rate of around 18.5 per cent.

    Currently, we have what is called investor apathy. When we design a mutual fund, we approach a group of people and encourage them to invest. At the same time, Bank ‘A’ conducts a Public Offer, targeting the same group of people. It gets rather tiresome. However, with retail customers all players can market different products comfortably, and because the market is so huge, we can both take a market share that is completely exclusive.

    More so, with retail, the sustainability of the funds is more stable. If the bank has a balance sheet built by a select few, a withdrawal of funds by any singular client will have a significant effect. Conversely, if there are 100,000 customers each depositing N10,000 you will still have N1 billion, but if 10 of them decide to move their funds, the impact is greatly reduced.

    The banks also have the resources to support the retail end of the market with the advent of Financial Technology (FinTech). Today, a customer can open an account with his mobile phone, and go ahead to handle virtually all transactions without physically visiting the bank.

    Are there other difficulties faced in managing HNIs?

    Many banks have realised that HNIs require more resources to manage. For instance, with deposits as high as N300 million, you have customers demanding 18 to 20 per cent interest rate on their funds, whereas, the retail customer will accept five per cent happily. With more retail accounts, the banks can, therefore, lend cheaper and make higher profits.  When you put this side by side the manpower required to service HNIs who typically demand one-on-one service, the retail customer generally seems more attractive. I would, however, state that HNIs should be highly valued and should receive the deserved attention, while technology is deployed to capture the millions of unbanked in the society.

    Another factor that boosts confidence is ‘rating’. What is significant about an investment being rated?

    The significance of credit rating is the credibility it shows to the investor. When there are multiple players asking for your money, you must decide who you will trust sometimes with no prior experience. The rating, therefore, becomes significant because it basically says, from our own experience as fund managers and our valuation of company ‘A’, we believe this is its expected performance and the level of guarantee we can provide on a return, as opposed to company ‘B’ with a lower credit rating.

    The credit rating is mostly premised on the track record of its borrowing and debt instruments, and there are several recognised organisations that provide this stamp of confidence including Fitch, GCR and Agusto, to name a few.

    Based on the above, would you say the NIDF rating is better than the sovereign rating of the country?

    This is an argument that has existed over time: should an entity within a sovereign nation have a higher rating than the sovereign itself? The fact is, investors are looking for credibility. If Lagos State issues a bond at the exact time the Federal Government issues same, investors will go after the body that has shown higher credibility over time. However, we must remember that there are several factors that can affect the payback of such debt, ranging from economic, to social, and to political issues.

    In determining the credit rating of the NIDF, it is recognised that it has not defaulted in its obligations for several years and has consistently met its dividend payment. These have certainly contributed to its credit rating today.

  • Why govt is unable to finance LNG project

    Why govt is unable to finance LNG project

    Getting foreign direct investment (FDI) for Liquefied Natural Gas (LNG) trains is a problem confronting the gas sector. Trains are vehicles for processing and exporting gas to offshor markets. A former Managing Director, Nigerian Liquefied and Natural Gas (NLNG), Mr. Godswill Ihetu, says the government needs billions of dollars to do this. Ihetu, also Energy Resources Limited Chief Executive Officer, in this interview with AKINOLA AJIBADE, speaks on why Brass LNG and Olokola LNG have failed to take-off, despite the government’s avowed commitment to the two projects, collocation of oil and gas pipelines, shortage of gas, problems in the Liquefied Petroleum Gas (LPG) sub-sector, power problems and other sundry issues.

    What is the global market share of Nigerian gas?

    The country is controlling 10 per cent of the global gas market. The market size is growing, a development, which would encourage economic growth in the country. The more Nigerian gas exported the better for the country. Just as crude oil and its derivatives, such as Petroleum Motoring Spirit (PMS), Diesel, and Kerosene, are sold to customers from different segments of the economy so also is natural gas compressed for the use of automobiles, liquefied for domestic cooking, transfered into turbines for electricity generation and sent as exports to markets in Asia and other parts of the world. The gas that is produced in the Niger Delta region is piped all the way to Lagos for use in Omotoso Power Plant; Papalanto Power Plant; Geregu Power Plant, Ugbelli and other plants. While many of the power plants are government-owned, others are not. For instance, the Federal Government owns the Nigerian Gas Company (NGC), which sells gas to different companies. Also, we have Escravos gas pipeline, which is serving as a major artery into Lagos.

    What are the factors responsible for the delay in using gas for domestic and exports in Nigeria?

    They are many. They include funding, withdrawal of major parties from the Liquefied Gas Project, and inability of the Federal Government to decide on what to do with natural gas in time. It is on record that Nigeria discovered oil in Oloibiri in 1956, and exported it through Shell in 1958. By mid-60s, Shell started thinking about exporting gas to the United Kingdom (UK) and there came the issue of North Sea Gas. This eventually stopped the preparation by the government to export gas to the UK. Despite this, some International Oil Companies (IOCs) tried to resuscitate the idea of exporting gas in the 1970s. The firms are Chevron, formerly known as Gulf Oil, Mobil and others. To achieve this goal, the companies wanted to site a gas plant in Bonny. But the government, at that time, kicked against the idea. The government insisted that the gas plants must be two, instead of one. It suggested that a gas plant must be located on the side of Bonny River (also known as Peterside), while another one must be sited on the Bonny Island itself. That also delayed usage of gas for both domestic and export purposes. Another one is marketing. Gas processing is a project which requires huge marketing efforts. It is a business that once a company starts it, it cannot stop halfway. The company must continue to process gas. In the gas business, there is what we called “Take and Pay scheme”. This means that the company must pay for gas, once it is taken. Even, when a firm refuses to take the gas, it still has to pay for the product. A firm must be able to produce gas, re-gasfied it and market it. This is aside the fact that it requires a longer period of time to consolidate the gas market.

    What are the other factors hindering development of natural gas?

    The inability of the government to get the required funding has hindered investment in gas. Gas project is ambitious and, therefore, requires proper funding. The first gas project is Bonny Liquefied Natural Gas (BLNG). The project needs six trains at a goal, 18 big ships. The vessels are huge and cost several millions of dollars. Phillips, an American company, was appointed as the operator of Bonny LNG, while the Federal Government has participation in the project.  A lot of marketing efforts have gone into the project. But there was no funding. The then administration of President Shehu Shagari said it does not have money to fund such a multi-billion dollars project. Oil price dropped during the period. The government was dilly-dallying on the project. This made Phillips, the project’s coordinator and other firms to pull out. That marked the end of Bonny LNG.

    How was the idea of NLNG Plant resuscitated in Nigeria?

    The regime of Major-General Muham-madu Buhari (rtd) played a key role in reviving the idea of establishing the Nigerian Liquefied and Natural Gas (NLNG). The regime set up the LNG Working Committee between 1983 and 1985. The Committee later transformed in May 1989 into NLNG, of which I became its second Managing Director. The NLNG’s pioneer Managing Director, Dr Onya, retired two months after, due to some disputes between the firm and the Federal Government. Thereafter, Shell provided an acting Managing Director for the firm, and I later came in April 1990, as the firm’s substantive Managing Director.

    Why is it that Nigeria is not leveraging its huge gas potential to cushion the effects of the fall in the international prices of oil?

    The government wanted to capitalise on the huge gas reserves to record some economic gains, but it was unable to do so, due to lack of enough funds. For instance, the government has set up two gas projects – the Brass Liquefied Natural Gas (BLNG) and Olokola Liquefied Natural Gas (OkLNG) – but funds stalled the take-off of the two projects. The projects have not been able to come on stream, due to poor funding. The government does not have money to invest in the projects. The funds are not just there. The projects are unable to take off, due to absence of Final Investment Decision (FIDs). Neither Brass nor Olokola LNG has reached the level of signing Final Investment Decisions. Final Investment Destinations can only be in place after the two firms have started selling gas, signed Special Agreements to support them, and are awarding contracts. When this happens, they would need money to pay the contractors, as the work on the projects progresses. Until those three elements are present, there cannot be FIDs. However, for some reasons, I do not want to go into details of having FIDs on the Olokola and Brass LNG.

    But will the government make up for the money spent on the project?

    Two factors should be considered, when siting a plant for the processing of Liquefied Natural Gas. The investment is huge and also needs a long gestation. It is not the kind of investment one does today and expects dividends tomorrow. One has to wait for some time for the investment to mature. Mind you the government has other projects in its sleeve and may not want to wait for long, before it recoups its investment on gas.

    Is NLNG not strong enough to support economic growth?

    The firm has been playing a role in this regard. It has demonstrated the capacity to grow the economy. The company has the opportunities, experience and infrastructure to grow gas both at the domestic  and exports levels. This is the major reason the company is planning to expand its investment frontiers, by building Train 7 & 8. The firm is strategically planning for the projects. NLNG cannot do it alone. The company needs the approval of the Federal Government on the project, since its owns 49 per cent shareholdings in NLNG, through the Nigerian National Petroleum Corporation (NNPC), while the International Oil Companies, such as Shell, Agip and Total own the remaining 51 per cent stakes. NLNG must carry all the Joint Venture partners along to achieve its desire results of boosting gas exports in the country. The firm impresses it on the Federal Government to give it approval and allow Trains 7 and 8 get to the level of Final Investment Decision (FIDs) first. Once Trains 7 and 8 get to that level, the partners would be able to access enough funds, as they must have gone to the International Financial Markets for the fund or explore other sources for money.

    The Federal Government seems to have got the biggest chunk of $32 billion dividends, which NLNG has declared so far, despite its limited stakes. Why?

    The answer is simple. The government has 49 per cent stakes in NLNG, implying that the government is the single largest investor in the company. As a result, the government is able to get the huge dividends. The other partners; that is, Shell, Agip and Total have fragmented shares, which when they add them together, give a total of 51 per cent. Each firm gets its own dividends as well, and there is no way it can equal that of the government. Mind you, the firms are investors in NLNG and not a consortium, a development, which made it difficult to get dividends higher than that of the Federal Government. Prior to this period, we proposed that the government through NNPC should have 60 per cent, while the three oil majors have a combined shares of 40 per cent, when I was the Managing Director of NLNG. The idea worked. But the fears that the government may not be able to borrow from the international financial markets, if that happens, resulted in reduction of its shares to 49 per cent. Another reason is that the idea would confer more powers on the government, which means that the government would not only be calling the shot, but can also sack any of its partners, whose conduct runs contrary to the goals and the objectives of the organisations.

    A lot has been said and done on the amendment of the Act that set up NLNG. What is your take on it?

    The Petroleum Club (PC) of which I’m the chairman has written a letter to the committees on Gas in the Senate; The club, also sent copies of the letter to the Senate President, Dr Bukola Saraki; the Speaker, House of Representatives, Hon. Yakubu Dogara and the Vice President, Prof Yemi Osinbajo. In the letter, we stated that the issue of amendment of NLNG’s Act will be sending a wrong signal to the foreign investors, that the parliament can wake up one day and change the law, after they have signed a Memorandum of Understanding (MoU) to do business in Nigeria. What we are saying is that if there is any need to amend the Article of Association of a normal company, the Senate can do it. Our argument in the case of NLNG is that it was set up under a special arrangement. It was during my tenure that a decree was promulgated; it was not just left for the company. It was the Inter-Ministerial Committee that drafted that Guarantees and Assurances of NLNG. Those guarantees and assurances say that we are going to give you pioneer status; that NLNG would not be paying tax for many years. But the company has started paying taxes, which implies that the pioneer status given to NLNG has changed.

    What is the main thrust of the amendment of NLNG Act?

    The main thrust of the amendment is the payment of the per- centage of the NLNG’s revenue to the Niger Delta Development Commission (NDDC). That three per cent would come from no other source than the dividends that would have gone to the Federal Government and other owners of NLNG. In fact, the larger percentage would be coming from the government. That is why we are saying that the issue of amendment of the Act that set up NLNG is wrong. It does not make sense if the three percentages is coming from one government’s agency to another government’s agency. If NLNG gives three per cent of its dividends to NDDC, that is a huge sum of money. The law guiding the operation of NDDC says oil and gas producing companies in the Niger Delta, must pay NDCC three per cent of their earnings. Mind you, NLNG is a gas processing company, and not a gas producing company. Already, the IOCs, namely Shell, Agip, Total and NNPC, are producing the gas and selling it to NLNG, of which they are owners. Now, the law is saying that the owners of NLNG, which incidentally are producers of gas in the country, should be paying three per cent to NNDC. This is wrong. That is the reason  the matter is being delayed in the Court.

    If NLNG is paying three per cent of its dividends to NDDC, coupled with the fact that the firm is allocating huge sums of money for Corporate Social Responsibility (CSR) for the area.

    Cuts in: From all indications that idea amounts to a duplication of efforts. Besides, such an idea would reduce the contributions of the NLNG to Nigeria. Already, NLNG is funding projects in six of the Federal universities in the country. The company is spending a lot of money on engineering projects in those schools, coupled with other projects it is financing in the region.

    What is the level of LPG consumption in Nigeria?

    The usage of Liquefied Petroleum Gas (LPG) is growing in Nigeria, though still very low compared to countries, such as Benin Republic, and Ghana . For instance, LPG per capita income is higher in Ghana, Benin Republic and Ivory Coast, when compared to Nigeria. Though NLNG has increased the supply of LPG, also known as cooking gas from 150,000 metric tonnes per year in 2007 to 250,000 metric tonnes and later 350,000 metric tonnes in 2016, the figure is still far. NLNG has the right to provide enough gas for the country and I believe the firm is looking in that direction. But there are bottlenecks. First, is the issue of lack of enough reception facility. The jetties for the supply of LPG are not enough; so also the farm tanks and other facilities needed to ensure seamless distribution of the product in the country.

    What role can the government play in this?

    I understand that NLNG is providing some form of supports to the operators, to make LPG accessible to users. Also, associations that operate under the umbrella of LPG in the country should help in providing infrastructure in the sub-sector. The downstream operators such as Oando, Conoil, Nipco, Techno Oil and others are also trying to improve the operation of the sub-sector.

    But cylinders manufacturing companies in Nigeria are moribound?

    Though I do not have detailed information about the LPG sub-sector, I know for sure that Nigerians have started manufacturing cylinders. For instance, Techno Oil has invested a lot in cylinder manufacturing. The company is producing small cylinders to make the product affordable in the country. The company produces cylinders of 5 kilogramme, 10 kilogrammes and others, which most Nigerians can afford. The cleanest fuel in the country now is cooking fuel. It is friendly, because it’s reduces environmental and health hazards such as smoke unlike firewood and kerosene.

    What is your take on collocation, known as citing of oil and gas pipelines close to areas where they are needed in the industry?

    Collocation is good and come with its own merits of providing seamless distribution of oil and gas in the country. But the idea cannot check pipeline vandalism and its dire consequence on the nation’s oil and gas and electricity sector. We saw what happened in Ibafo, Ogun State weeks ago, when militants, who claimed to be guiding the pipelines are allegedly breaking the facility in order to steal fuel. NLNG cannot collocate, in view of its corporate responsibility of processing gas. There is a limit to the supervision or monitoring of collocated pipelines, by the security agencies, such as army, navy and the police.

    What does Energy Resources Limited do?

    The firm is a privately owned company. It was set up to promote the growth of the oil and gas sector, by advocating proper utilisation of the products to move the sector forward.

     

  • ‘How to move power sector forward‘

    ‘How to move power sector forward‘

    Despite everything thrown into it, including its privatisation, the power sector remains a challenge. Nigeria can only generate 4000megawatt (Mw), which are inadequate for its huge population and industrial concerns. To the Group Chief Executive Officer of Oilserv, Mr Emeka Okwuosa, power generation, transmission and distribution must align to get the sector running. In this interview with EMEKA UGWUANYI, he says there is need for a robust local content to boost indigenous capacity and skills development to move the sector forward.

    What are the opportunities in the oil and gas industry?

    The opportunities are immense. Although there are challenges, the challenges go with opportunities as opportunities go with challenges. The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has enumerated all of these opportunities. He mentioned the Seven-big wins, which was launched a couple of months ago. So, you can see that huge opportunities exist across the value chain – from the upstream, to midstream and to downstream. If you take the midstream, particularly gas development, the opportunities are immense – from gas processing facilities to production and distribution of liquefied petroleum gas (LPG); production of lean gas and pushing it out for power generation and industries. That is a huge industry on its own. You can go on and on. The Minister had also talked about modular refineries. These are opportunities are meant to address known challenges.

    How did your firm key into these opportunities? What is the update on the East-West pipeline; that is, the Obiafu, Obrikom and Oben (OB3) gas pipeline project in which your company is involved?

    Oilserv has always been proactive. That’s why we moved from being just a construction company in 1995 to being one that has activities across the value chain. Today, it is a group of companies comprising six different companies, which addresses pipeline construction, engineering construction commissioning and maintenance, down to full engineering from feasibility study, front end engineering, detail engineering. We have a different company called Frazimex Engineering Limited, which addresses engineering. We have Fraz Power Limited for gas and power development, Fraz Oil Exploration and Production (E&P) Limited, for oil and gas exploration. I am mentioning these firms to address your question that we have been proactive in looking out for these opportunities and taking advantage of them. Today, when you talk of refining, we are positioned to take advantage of that because we have already moved ahead of that.You may wish to know that one thing that goes for us clearly is that we did not set up bearing in mind that there will be local content law. Oilserv has built capacity prior to that purely by continuing to invest and develop resources including human resource base. So, the point is that we are very well prepared to take advantage across the value chain.

    The OB3 project is nearing completion. What we are doing now is terminal station. For the pipeline construction, we have finished pipeline, we are going through pre-commissioning of the pipeline. Now terminal stations pose their own challenge because we have to realise that these stations are huge. For you to build a gas metering system for a 48-inch diametre pipeline, a lot of people don’t understand what it means. This is a pipeline that will have a throughput of two billion standard cubic feet of gas per day (bscf/d). That means for you to build a metering system to take this, in engineering parlance, you cannot build a single system. We are to have four streams of 500 million standard cubic feet per day (mmscf/d) each.That pipeline will have four different streams that will have all the gamut of metering and conditioning systems to take and utilise it. That’s what we are doing. We believe that by end of this year, that will be finished.

    The Federal Government adopted some  incentives for prospective investors in the sector. What incentives do you think should be given to those interested in modular refineries?

    It depends on the model. From what I have heard so far, the model is not yet out. It is only when they come up with a model that we will see what that model says. Will the model help in the financing? How will it guarantee feedstock (crude oil)? How do you make sure that off-take is also guaranteed? All these will come into the model we are expecting to hear from the government. What we have heard so far is a policy statement, so when they come up with that blueprint, we will be able to comment. For now, it is premature to comment.

    At what point will Oilserv participate in the gas-to-power project? Will you build a power plant or do you intend to go into distribution?

    We have a company called Fraz Power Limited. It’s a gas-to-power company, partly for gas development and for power generation. But the power we are talking about is not the power system, the huge system that is connected to the mains (the grid). We are involved in the distributed off-grid power systems where we develop the gas transportation system.Where there is no pipeline, we do a virtual pipeline system where we can use compressed natural gas (CNG) or we use micro-ornano liquefied natural gas (LNG) system. The clear thing is that we target end-users. We install the power plant, run it and supply the gas. That’s our model. Our model is not that one that will be embedded in a grid system because that is not what we see to be our business.

    Has your company done any project in the power business?

    We are at a stage where we are developing and working with operators in the oil mining lease (OML) 56, which include about five companies. We are at a stage where we are trying to collect the gas, process and utilise, that’s the first step. We already have Nano technology system, which we are working on with an Argentine company. This is a process, from the day you have your strategy and you decide and sign in, it takes you at least two years to put it on the ground. Let’s be clear, this is real work and not talk. First you have to sign a gas-purchase agreement with gas owner – an exploration and production company; you build the processing system. From the processing system you take the lean gas and install the Nano energy and then you now deliver. The power plant is the simplest thing because you buy the power plant, and you install but the process of getting the gas there is the most difficult in terms of time. So, we are working on it. It is not plug and play. It is like building a gas pipeline that takes years – from the day you conceptualised it, design and build it. It is not off the shelf, so it is a process.

    What’s the prospect of this technology?

    It is huge. For example, if you go to Anambra State, you have various industries but no access to power. You cannot even imagine the number of industries you have in Onitsha, Anambra State and they have no access to power. Their cost of power production is so huge that it becomes impossible to run their business profitably. If you go there, you see several diesel generators scattered all over the place, some leaking oil and others breaking down. They are not able to operate profitably because the power from the grid is not accessible. If you see what is going on today in Eastern Nigeria, it is a disaster from power supply point of view. The distribution company there is a disaster. They are not able to give power to anybody, so industries are dying and the only way to bridge that gap is to make sure that power is available because power changes everything. If you go to Nnewi in Anambra State, it’s the same story. These two clusters alone can take more than 10mmscf/d.

    Which is more expensive, the CNG or LNG power plant?

    It depends on the model. The model is determined by distance. At the end of it all LNG is more feasible because CNG is compressed, put into a bottle under high pressure. The problem here is, with our weather, you cannot transport for more than a maximum of two hours on the road, otherwise, it starts to lose the pressure and by the time you get to your destination, you have lost most of the gas. It has to bleed off as it heats up. But LNG is liquid because you liquefy it, so you can actually keep it in a liquid form for the next one year. You can transport it to 300-500km. The only problem we had originally was that there was no technology to put it in micro form, but we call it ‘nano’ because we can now actually make it small enough to be able put it in a small truck-mounted system and move it. Normally before, LNG systems are huge in nature so that’s technology innovation and change.

    At last year’s Offshore Technology Conference, there were complaints by Petroleum Technology Association of Nigeria (PETAN) about lack of access to Nigeria Content Fund (NCF). One year after, what has changed?

    What has changed is that we have an Executive Secretary, Simbi Wabote, an engineer, who took over that position, and who is very interested and keen in addressing that issue. He has said it, and he’s doing something about it because every day, the fund keeps building up. The primary aim of that fund should be capacity building. So, how do you deploy that capacity building? It can be done in many ways. You can take part of it to provide funding at affordable rate for Nigerian companies that are investing. This is not money to be thrown away, it has to be repaid. You can also have the Nigerian Content Development Monitoring Board (NCDMB) decide that it can be involved in key investments. Wabote also talked about the development of a pipe and steel mills. The money is there and if you look at the gamut of investments that will cost you say $100 million, all you need is a counterpart funding from there of about 20 percent and investors will bring the remaining. The point here is that it can be deployed smartly in a way that can build capacity. What Wabote has said, he meant it because I can see him walking the talk.

    Are you comfortable with the fund’s lack of transparency?

    We have to bear something in mind that we should not over criticise. I believe there are records and these are available because this money accumulates based on records. Do not forget that NCDMB is also a young entity that is learning and developing its system. We have to give them time to do that. What is important is that NCDMB is managed by very competent and educated people with experience. Wabote for example spent all his working life with Shell before coming to NCDMB, so he has good knowledge of international practice and the same thing with people around him. Of course, you cannot compare NCDMB with NNPC. NNPC has been there for many years and NCDMB is only seven years. I believe that we need to give them time because I believe they are doing the right things.

    The Federal Government said it is establishing Project 100, where it will help companies that have capacity to source for fund abroad. What are PETAN members doing to key into this project?

    Project 100 was mentioned by the Minister of State for Petroleum Resources. I can give it to him. He is a visionary person and knows issues that plague the industry. Project 100 is a very good idea because some of us have been saying this in different ways in the past years. Some of us that have built capacity over the years have to be sure that the capacity will be utilised. If I have equipment of $100 million lying there that I maintain, and I’m employing people and don’t have jobs for them, how does it work? There has to be a process of guaranteeing jobs for companies that have invested. It is not only Oilserv, there are quite a few other companies in PETAN and outside PETAN who have invested and taken the risks. It is important that going forward, there would be guaranteed jobs, instead of trying to give contracts or opportunity to briefcase contractors. Project 100 concept will help address that because they will look at few companies with capacity and help them raise funds for business and this will enable us employ more people. But don’t forget, as we get the details, we know how to move into them.

    Power supply hasn’t improved. What do you think are the major problems confronting the power sector and what’s the way out?

    Anywhere in the world, power issue isn’t an easy situation to deal with but it requires proper strategy, execution and management. All these come with discipline. We lack discipline in Nigeria. We also lack continuity. This government comes, says a thing, another government comes says another thing. You have to be ahead of the curve, and you have to keep developing. When the U.S. started its power industry, it was just like Nigeria. It was owned by big government entities but overtime, they have a way to privatise in a way that it works. The problem we have in Nigeria is that we say it but we don’t do it. The capacity to improve power means you have to align the generation to transmission to distribution. But all you hear is that distribution companies collect money but they don’t remit. If you do not remit it to the aggregator, how do you have the transmission company to get paid? The whole system breaks down. If you are able to generate power and you are not able to transmit it through the transmission system, then you are constrained. My issue is that this is still being run in a government way to regulate and control. If these issues are not addressed, it will be discouraging. The biggest problem in any business idea is execution. Talk is easy, but execution is key. If we don’t execute properly, it’s not going to work and we have that problem with power sector.

    The Local Content policy is seven years old. Assess it?

    A lot has been achieved. The first is the setting up of an agency to manage the policy and this is the NCDMB. You will agree with me that it takes time to build. But I believe that with time they will settle very well. They have the capacity to certify companies to ensure they comply with the law. They have resources in place to encourage companies to be compliant with the local content policy. They have many other processes in place to encourage training. My assessment is that they have achieved quite well, but there is enough room for development. That’s why I mentioned that I’m one of those that believe that NCDMB has come a long way and they are moving, not gotten to their target, but still have a long way to go. It makes a difference to have strong leadership who will make a difference. Listening to the executive secretary, not just what he says but what he does, I will say I’m encouraged. The Local content management is going in the right direction.

    There have been concerns about Nigeria’s lengthy tendering. What do you think the government can do to ensure we are at par with other countries of the world?

    I’m not sure that it is the government. I think it has to do with owners of the projects. Whether it is the NNPC or the IOCs, which in this case you have NAPIMS being the major partner that controls things, it’s about making a conscious effort to put up a process that fits for purpose. When you start a tender and the process goes beyond six months, you are in a different territory. You have a situation where inflation may have changed, prices may have changed. Some tendering take up to 18 months. That should end, it requires concerted efforts. You have heard NAPIMS saying that they will look at that and correct it. You have also heard clearly the Minister of State saying that it has to end. There should be a need to fashion out concerted efforts to streamline the  tendering to make sure that it is within a shorter time and that requires directive from the minister, then drives it down, but it is a process.

    Low oil price has exceeded two years in a stretch. What has been the impact?

    On low crude oil price, what is important is that oil price never remains the same. It goes up and down and driven by market forces, which is basically demand and supply and in some cases, geopolitical forces come in. What is most important is cost of production. In Nigeria, when cost of production goes beyond $20 per barrel, it becomes a problem. Compare this with Saudi Arabia where in some of their engagements is about $8 per barrel. When crude oil price is $15 per barrel, they are still making profit. In Nigeria, at that price you cannot but to shut down. You can’t spend more than you are getting. The main problem is cost of production. Oil price at $40 per barrel depending on how your industry works, can still manage well. If it is at $80 per barrel, it is a plus but it comes with a caveat because the higher the cost of crude, the higher the cost of production because there is this tendency that when oil price is $100 per barrel, exploration and production (E&P) companies will take more risks. Embark on expensive projects because there is money.

    How is the delay in passing the Petroleum Industry Bill (PIB) affecting the sector?

    Our distinguished Senators say they will pass the entire Bill very soon. I’m not a politician but a businessman. I made it clear that without the passage of PIB, Nigeria oil and gas industry will remain stagnant. We have no control over that; it has to come from legislature. There must be deliberate efforts that will integrate our Senate and House of Representatives and come down to the Executives. For it to be passed, it depends on the Senate and I believe they are patriotic enough to know that this is important. But so far that we have not passed the PIB, there have been deferred investment and Nigeria will continue to lose values because some of the tax regimes, especially for offshore production, it is no more representative. If you hear we are producing one billion barrels offshore today, Nigeria is making little or no money from it. Because that was the regime that was set up in the 1970s to encourage offshore production and we have since gone from there to a stage where we should be getting something but we cannot get something because most of the laws governing the production sharing contracts (PSCs) are outdated.

    Another marginal bid will soon commence. Will your firm participate?

    Once the opportunity is there, we shall participate definitively. We have the capacity not only to acquire that block but the capacity to develop it. Developing that also, we are talking about going the value chain from the E&P activity to the mainstream of setting up the refinery to use the crude. Or if it makes sense, we will develop the gas facility. There can never be a better company than Oilserv Group today because all it takes is within the group to utilise.

     

  • ‘We met decayed port infrastructure that required renewal’

    ‘We met decayed port infrastructure that required renewal’

    The Managing Director of the Nigerian Ports Authority (NPA), Hadiza Bala Usman, in this interview with reporters in Lagos, spoke about the NPA she met, what she is doing to change it and so on. SUNDAY OMONIYI was there.

    It has been one year that you were appointed as Managing Director of the Nigerian Ports Authority (NPA). Give us an idea of your first thoughts about the enormity of the responsibility.

    My first thought was that it was going to be very challenging and an incredible new experience. The fact that I was not deeply involved in ports activity before and had no ties in the industry actually worked in my favour. I approached my new role with enthusiasm and confidence having spent most of my working life in the public sector.

    And on arrival to resume duties at the NPA, what situation did you meet on ground, did it align with your expectations?

    When I arrived I met a well-trained personnel needing motivation.  We had to deal with issues such as revenue leakages, indebtedness towards third parties, etc. We also had to handle the challenge of concession agreements that did not quite place a demand on all parties to fulfill their own part.

    We met decayed port infrastructure that required renewal and ports that weren’t operating at an optimum level in linewith  best practices.  So, in a nutshell, what we met on ground did not align with our expectations considering that we are operating in one of the largest economies in Africa.

    Now, it is 12 months after you took over, in what significant ways would you say your administration of the NPA has impacted on the authority and industry as a whole?

    In our 12 months, we have made considerable progress and the efforts cut across both our operational and administrative endeavours.

    We have inaugurated the Command & Control, Communication and Intelligence Centre for NPA. This facility will serve as surveillance point for all activities and as an information network centre for security agencies at the ports. In June 2017, we launched the provisional, final billing and customer portal module of Revenue Invoice Management System aimed at improving our service offering, partner relationship, create efficient payment method, maximise revenue and eradicate loss associated with fraud and revenue leakage.

    To further improve operational efficiency, we recently acquired and inaugurated four new tug boats namely MT Daura, MT Ubima, MT Uromi and MT Majiya.  Most importantly we have begun the process of the review of concession agreements to ensure seamless collaboration for a sustained development of the Maritime industry. This, we believe, will introduce a new dimension in our operations.

    The Nigerian Ports Authority had even before the Executive Order, developed a Standard Operating Procedure (SOP), establishing a dedicated terminal to handle exports aimed at diversifying the economy and improving earnings in line with the mandate of the Federal Government.

    The dedicated terminals include Ikorodu Lighter Terminal for Lagos, Shoreline logistics terminal for Calabar Port, Bua Ports and Terminal (warehouse measuring 2.896sqm and Port and Terminal operators Limited (Warehouse ‘A’ measuring 2.760sqm for Rivers Port. All terminals have been mandated to establish dedicated desks that will handle all documentations on export, receipt of consignment and the loading of vessels.

    For a long time, the challenge of bad port access road which has continually caused untold hardship to both port users and residents of Apapa has been a recurring decimal. To address this, the authority is conducting a full assessment of all port access roads across the country. Our partnership with the Federal Ministry of Power, Works and Housing resulted, in the first instance, in the MoU with the FMWH, Dangote Group and Flour Mills for the reconstruction of the Wharf Road in Apapa. The project cost is put at N4.34 billion out of which the Nigerian Ports Authority is contributing the sum of N1.829 billion.

    To address the challenge of bureaucratic and chaotic clearance of cargoes,   we have, in collaboration with Nigeria Customs Service and Nigeria Sovereign Investment Authority developed the operational framework of establishing the National Single Window, Ports Community System and Scanning services. This is aimed at simplifying and harmonising formalities, procedures and the related exchange of information and documents between the various partakers in the port operations value chain.

    Our effort in restoring investor’s confidence in the port industry has also started yielding the desired result with the China Harbour Engineering Company planning to take up 15 per cent shareholding in the Lekki Deep Seaport project. Dubai Port World is negotiating a partnership agreement with Josepdam Port Services while the Tanger Med Port of Morocco is also indicating willingness to develop a green field terminal logistic base.

    We are confident that these initiatives will result in a more efficient port sector that will favourably compete and ensure we achieve our vision of being the leading port in Africa.

    The industry you operate in is very volatile. In the past one year for instance, we have had some workers unions or stake holders at the ports giving ultimatums indicating a down of tools and all sorts. How have you been able to weather these storms and is there a chance that there would be a permanent end to such misunderstandings?

    It is important to point out that there are different unions operating in the port industry. The Nap’s house unions which oversee the interest. We have had the ports shut down for only one day over the proposed ports and harbours bill. It was called off on the first day of the strike. The unions had concerns over certain aspects of the bill as it relates to retrenchment of staff and harbour operations being seeded to the private sector. We have drawn their attention to the fact that the bill will not in any way bring about retrenchment or retirement of staff. The assets and liabilities of Nigerian Ports Authority will be transferred to the new   Ports and Harbor Authority. The bill will grant permission to the Authority to concession some aspects of its operations but it does not stipulate that harbor operation would be handed over to private company.

    We have also explained to the unions that they will have an opportunity to make their submissions during the public hearing. We encourage them to do that, NPA  as an entity has made submissions during the public hearing and we would make additional submission  to ensure that all areas that are of a  concern to us are addressed.

    By and large we have put in place a system of constant dialogue that will ensure that we do not have unresolved issues with the unions.

    On the other hand, we have had some industrial actions organised by the truck operators and freight forwarders which are not a direct result of any fault of the authority. Their agitations bother on port access roads (which are under the direct supervision of the FMWH) and cargo clearance procedure.

    However, I have said it in several fora that the authority recognises that all agencies are one and under the same Federal Government and so we will collaborate   and lend our weight on any effort that will solve the lingering challenge. This is because all these issues if not resolved will have an impact in our operations as a port authority.

    In addition to unions, there are also a lot of conflicting business interests in the sector, it is evident that your reform initiatives have ruffled some feathers, what is the ultimate goal of your reform and how are you going to be able to accommodate all these interest to the overall benefit of the NPA and Nigeria?

    Nigerian ports are a gateway to the country and they are key to growing our economy. The ultimate goal of the reform is to strengthen the position of Nigeria’s ports and make them competitive. One of the two approaches to achieve this is to have a competitive pricing and tariff regime.  We are therefore conducting a study to determine respective tariffs and pricing regimes across the region. We will review our tariff regimes once the study is complete.  We also need to be operationally efficient, which means ensuring that we are ready for vessels, that our channels are free of wrecks, and that any ship that is coming to berth in Nigeria has access to the necessary infrastructure and equipment.  We are also reviewing our concession agreements after 10 years.  Within that review, there will be critical issues around equipment deployment, infrastructure deployment, ensuring that our terminals are operationally efficient and able to provide the service required. We have identified gaps in our infrastructure, and have allocated budget so that funds can be deployed to improve our set-up over 2017. We are going to accommodate all interest as long as the overall benefit of the authority and Nigeria is not compromised by any means.

    Let us talk specifically about the attempt to democratise business and break all forms of monopoly at the ports. Nigerians have had a lot of conflicting positions about this, can you clarify?

    Government has continually made efforts to re-position the maritime industry in line with global trends and in order to enhance the growth of the nation’s economy, the Federal Government  embarked on a comprehensive port reform initiative. The desire was to build a robust and responsive economy that will have the private sector as its back bone. This review will ensure that all parties operate within the boundaries of the agreement and achieve the goal of encouraging healthy competition and a level playing field for all operators.

    Upon assumption of duty we were confronted with protests by some terminal operators over the designation of only one terminal operator as exclusive handlers of oil and gas cargoes.We found this absurd and against the spirit of port reforms.

    As a Ports Authority, we are modelling all our operations in line with global best practices which only recognise three broad classes namely bulk, container and multipurpose cargo. This is the practice globally. There is no special recognition or designation for oil and gas anywhere in the world! But the point should also be made that even Nigeria did not contemplate this categorisation at the point of concessioning in 2005. The agreements signed with concessionaires categorised the ports into the three classes I mentioned earlier and nothing more. So all importers were free to choose any terminal or port for the discharge of their cargoes, subject to the presence of all requisite regulatory agencies at such ports as required by extant regulations and in line with the policy of promoting competition and value for money.

    So, this oil and gas designation is a misnomer that has been corrected by a presidential approval which has mandated that we go back to the three broad classes of bulk, container and multipurpose cargo. Consequently, the NPA and the BPE are to streamline the payment of shipping and other fees based on cargo type rather than on the basis of designation of terminals to ensure that there is no loss of revenue to the Federal Government of Nigeria based on terminals that importers choose to bring cargoes into the country.

    Can you explain the initiatives you have put in place to enhance transparency at the NPA, the MoU you signed with BudgIT and other steps you have taken?

    Apart from making our budget open to the public, we also observed that tariffs of ports all over Africa was not open for customers to access and know how much they will pay for services. In Nigerian Ports Authority, we have changed that and our tariffs are accessible anywhere in the world because it has been published on our website. We have also directed all terminal operators to do same.

    The NPA has also been reported to be at logger heads with some Federal Government agencies operating in the ports over the exclusion of some of these agencies from physical presence on site. How does this enhance efficiency at the ports and how do you hope to retain the co-operation of these sister agencies?

    The Authority is not at logger heads with any Federal Government agencies operating in the port over exclusion of some of these agencies from physical presence on site. The Authority is only enforcing the directive of the government vide a letter received from the office of the Honourable Minister of Finance in August 2011 which specifically stated that only eight government agencies namely Nigerian Ports Authority, Nigeria Customs Service, Port Health, Directorate of State Security, Nigerian Police, Nigerian Immigration Service NIMASA and NDLEA are allowed to reside in the port. This still subsist.

    However, there is need to clarify this directive. It does not stop any Federal Government agencies from coming to the port to perform its statutory functions. This can only be done on invitation and immediately after performing their duties, agencies not covered by that letter are to go back to their offices outside the port.

    This directive will not affect the relationship between the Authority and other sister agencies because the reason for this directive is to reduce the bottleneck usually experienced in our Port on delivery procedures and this will actually fast-track delivery and documentation in the port.

    Your activities have shown a passion for collaboration with people and organisations from the public and private sectors. Recently, you visited the Nigerian Navy, what drive these moves?

    Shipping is an international business which requires information sharing and close collaboration. In consideration of this we have identified the need to constantly engage all stakeholders in the maritime industry in order to synergise and pull our collective resources together both human and material to achieve our desire to establish a virile port industry. For example we need to ensure that our waterways are secured, hence we need to support the Navy in carrying out its functions. In so doing, we donated three boats to help them forestall the operations of illegal activities in our channel.

    This synergy will also see the NPA link its command, control and intelligence centre with the Falcon Eye of the Navy. This will ensure sharing of information and intelligence reports aimed at securing our waters.

    You were reported to have recovered huge sums of money that was going into private accounts prior to your assignment to NPA, you have not spoken much about these. Can you give us some insights into these recoveries and what you have done to ensure that such malfeasances do not happen again?

    The funds involved were Cargo tracking Notes in the sum of €6,606,016.07 (six millions, six hundred and six thousand sixteen euro and seven cents), domiciled in First City Monument Bank. (FCMB). As at the time the new management came in, the fund was still in the commercial bank as against the directive of the Federal Government to transfer all funds to TSA.

    On assumption of office, we sought for necessary approval from relevant authorities and pursued it and ensure that a Euro denominated bank account was approved for the funds to be transferred into CBN.

    In a related development, it was observed that the revenue collected by Heritage bank in the sum of $24,370,061 was not being swept to CBN in line with the TSA policy. This was revenue collection made between the period of September 2015 and July 2016. Upon discovery of the failure of Heritage bank to sweep funds to CBN, the authority suspended the bank from further revenue collections.

    Spirited efforts had been made through the Central Bank of Nigeria and the Office of  the Accountant General of the Federation to get the money back but only $4m has been paid so far. Following several letters and a series of meetings with the CBN to mandate Heritage Bank to pay these funds, the CBN had in January, indicated that they will guarantee the funds but we are yet to receive confirmation. As at today, the authority has an outstanding refund of $21 million with Heritage Bank. We have expressed our dissatisfaction and frustration to the CBN and the OAGF over the non-remittance and have sought for sanctioning of the bank.

    The Acting President recently issued an executive order which mandated 24 hours operations at the ports, what efforts are on to ensure that this is sustainable, without undue risk to lives, given our peculiar security  challenges in the country?

    The Federal Government in a letter dated May 16, 2017, issued an Executive Order on Promotion of transparency and efficiency in the business environment and sequel to this order, the Nigerian Ports Authority commenced immediate implementation of some of the directives applicable to the ports. One of the executive orders mandated 24 hours operations at the Apapa Ports and the Authority had already commenced 24 hours port operations some of the actions already taken include: Provision of Marine Services (Pilotage and Berthing of Vessels) on 24-hour basis.  For instance our records showed that from June 18, 2017 when the Order took off, our Harbours Department handled 20 vessels after 19.00 hours at Lagos Port in the first two weeks of the commencement of 24 hours operator.

    Also, I had immediately upon the issuance of the executive orders by the Acting President called all stakeholders to meetings to discuss how each agency should position itself to fulfill its mandate. The security agencies have promised to ensure that they will provide round the clock security needed for operations.

    Fallout of such meetings was a joint implementation committee comprising of all approved agencies working in the port. They have submitted their report and implementation expectations have been outlined. I also visited the port in the midnight to have an on the spot assessment of how prepared all agencies are in achieving the 24 hour operation.

    In the past couple of weeks, the Senate Committee Customs, Excise and Tariff, has accused the NPA of complicity in the alleged disappearance of 282 vessels which berthed in Nigeria between 2010 and 2016, what are the issues surrounding this?

    We issued a statement recently to clarify our position. The Senate committee sent two sets of documents to us to back up the allegations that these vessels were missing. We have looked through the documents without being able to substantiate the claim.

    Now, without prejudice to the information at the disposal of members of the committee, we discovered that out of the 29 items in the first set of documents we got, we could only identify five vessels. There was a list of 29 alright but 24 of them were repetitions of the five vessels that were identified.

    There was a second document of 10 volumes of items numbering 1-1252 that was passed on to us through the Nigerian Shippers Council. We couldn’t even review these documents because it did not give us most of the information necessary for the verification. We discovered that no vessel names were provided, no dates of arrival of the vessels were given, no port of call and name of terminal where vessel berthed were provided and no rotation number of vessels was supplied. Without these information it would be impossible for us to investigate these allegations.  So, we have conveyed these observations to the Senate Committee and look forward to receiving the required information that will enable full investigation.

    What we can assure the Senate and indeed all Nigerians of is that this administration of the NPA is committed to transparency and will always work in the best interest of the country.

    When you eventually leave office as MD of NPA, what legacy would you want to leave behind?

    I would like to leave behind a motivated workforce that can match their counterparts in most developed countries. I would like to achieve the desired level of operational efficiency expected from the largest growing economy in the world. I would like to leave behind a competitive port industry that will serve as a hub in the West and Central Africa. Most importantly, I would love to have instituted a transparent and seamless system which will ensure that the country’s resources do not get frittered away and that Nigerians have the benefit of national endowment.

  • ‘Why local insurers can’t underwrite aviation risks‘

    ‘Why local insurers can’t underwrite aviation risks‘

    It is not cheap to insure an aircraft. For this reason insurers can only underwrite about 30 per cent of aircraft registered in the country. To take up such huge business, they have to team up with foreign partners. But, the Group Managing Director, Standard Alliance Insurance Plc, Bode Akinboye, believes with the right pricing, more insurance firms can participate in airline business. In this interview with KELVIN OSA OKUNBOR, he speaks on the factors that determine the cost of aircraft insurance and sundry issues.  

    Why do local insurance firms lack capacity to carry the risks of airlines?

    It is not true because capacity is relative. Insurance is an international business, so if I approach you today, I have reinsurance companies behind me, which have retrocession-aires (reinsurance companies,which reinsure reinsurers) behind them. It is a long chain. So, every business you take from Nigeria can find its way to the United States, United Kingdom (UK), Russia and even find its way back into Nigeria. This is the result of collaboration with foreign reinsurance companies.

    What really is the problem? 

    The truth of the matter is that there is no capacity to handle airlines, the capacity can be put in place and there are laws that enable the insurance companies through our regulators to put the necessary capacity in place. Insurance is a game of large number and unless you get the large number, it is impossible to get the large pool of fund to handle those heavy claims. Another factor is pricing. The public wants top quality services from the insurance companies, but they do not want to pay the right price. You cannot get what you don’t pay for. Nigeria is one of the few markets where you can get the cheapest form of insurance. In UK, US and Canada, average premium you pay as a first time driver is about 25 percent of the value of your car. In Nigeria the premium can be as low as 3.5 per cent. This needs to be monitored and controlled otherwise quality service delivery in insurance industry will be difficult to sustain.

    Why do local and foreign insurance companies share the risks to insure aircraft in Nigeria?

    Most aircraft in Nigeria are on lease, so the lessors have global insurance covers with their international insurance companies, but  to comply with the Nigerian laws, airlines still have to pass it through a local insurance company. Any insurance company that takes up a business knows that we are in business of risks management. You have to look at your balance sheet and know how much of those risks you can retain and bring other insurance companies to join hands with you. If they cannot carry it, you take it to the international market. The truth is that there is no business that is too big for the insurance world to take-up and as long as you give it to an insurance company that knows its onions, they will know how to place that business in the global market. This is because  it is a global network and that is where the strength of insurance is. Every business you take, you have to find a formula where you take the portion you can absorb and give the rest out to others both locally and abroad. With that, there is no business that you cannot place with insurance companies.

    Why is the cost of insuring an aircraft so high in Nigeria?

    This is because of claim experience. There have been a series of aircraft accidents in Nigeria and the environment is also not safe. These are what drive rates. We look at different factors before we know how much we want to charge. The rates are not determined by us, the rates are determined by foreign reinsurers who take the bulk of the risks. For most aircraft in Nigeria, we retain maybe 20 to 30 per cent risks; the remaining  is insured abroad. That is how the market is because aviation is a specialised risk. It is not just for anybody. Inside the aircraft, we have complex equipment and these are not as straight forward as insuring a motor vehicle. There are special risks that need to be handled by experts. As long as we are still developing the know-how in Nigeria, we still have a lot to learn from our counterparts abroad. We just have to take the one we can absorb and give the rest to the international market.

    Why do Nigerian airlines do monthly insurance?

    Every sector is looking for survival and aviation has its own challenges. So, in an attempt to save costs and manage liquidity, they want to buy insurance in the right size so that they can use and pay, but the requirements for aviation is very strong that you must have insurance throughout the year, non-stop otherwise you cannot fly that aircraft. So, even if they pay monthly, there must be a structure to make sure that their insurance is on-going. So, I believe the monthly payment is just about cash-flow and liquidity management not the cover. The cover has to be 24 hours every day for a year.

    Compared to more developed markets, the insurance industry in Nigeria is yet to attain full potential. What do you think is responsible for this?

    The reason our insurance industry is not making the needed impact compared to those in other countries, is as a result of improper application of law and order. It is about seriousness of the government to get the different sectors of the economy to work. When the government was serious about telecoms, it worked. The government had to privatise the sector and gave it rules such as licencing rules, compliance rules, setting up of Nigerian Communications Commission (NCC) and enforcement of those rules. Today, we can buy phones; you can port at any time. The same thing goes for insurance. Compulsory insurance is the start-up of insurance and what has been used elsewhere and in developed countries to drive insurance penetration. So, the lack of political will and structures to ensure and monitor compliance are some of the major problems preventing the insurance industry from making the right impact in Nigeria. On the back of compulsory insurance is where we are supposed to have innovation, new products and services. Today, I do not think Nigeria is getting  up to 10 percent of the potential in compulsory insurance. It is not my responsibility, as an underwriting firm, to implement; it is the duty of government.

    What is your take on the drive to promote local content in the insurance sector?

    There are some risks that some companies should not take. I think that is one of the elements of risk-based supervision that NAICOM is talking about. Even at that, I believe that this industry is ripe on innovation in terms of creating capacity, especially on oil and gas because with what we are doing today, we claim to be participating in oil and gas but the bulk of it still goes abroad because for the average premium for every oil and gas risk you take, the reinsurance premium is about 50 per cent. If I make $1 million revenue in oil and gas, half of it is used to pay reinsurance and I am still carrying the risk and my retention is such that I still pay most of the claims. So, it is not really working the way NAICOM intended but we all need to join hands with NAICOM and come up with innovation on how to create capacity. It is time for us to innovate, so that the real capacity can begin to be created locally.

    Prior to now, you see companies carrying humongous outstanding premium in their books. You see 50 to 60 per cent being carried as outstanding premium, it doesn’t make sense. There is a reason the government decides to make some policies compulsory. It is not just because they want people to buy the insurance. Compulsory insuranceis one of the reasons the government has instituted compulsory insurance in the preservation of national assets as well as personal assets because they are meant to be protected. Also, for protection of liability, people can cause damage to one another; there should be a mechanism to restore people back to where they were before injuries occur. But most importantly, compulsory insurance was instituted to encourage long term savings.

    And any economy that is not encouraging long term savings will never survive. It will find it difficult to mobilise long term fund and to have first class infrastructure. Everybody needs good road, hospitals, good educational system, and all these are not going to happen by word of mouth. We have to take some deliberate steps to create liquidity which can be leveraged on to create more funding for infrastructure development and compulsory insurance is one of those elements. So if as practitioners, we are now granting those insurance at one per cent or two per cent of the regulated price, then you will see that there is a problem in the industry. That is an area I believe the regulator is looking at and they should do it on time. They should instill discipline in the market. But compulsory insurance should be sold at the price instituted by government and it should be strictly monitored. If we do that, we will generate quite a lot of revenue in investment fund for the industry and the economy generally. See what has happened to pension fund. If the government did not specify the percentage for pension fund and pension fund companies have to go and be negotiating what percentage to charge, they are not going to have the kind of asset under management that they have now. Let’s do the same thing for insurance. So, we are looking at our regulator and the industry to come together to champion and reverse that negative trend.

    Recently, the policy of ‘no premium, no cover’ was introduced, is it working?

    It is working and it is in the interest of the industry that we do ‘no premium, no cover’.      

    The insurance industry is transiting into a ‘Risk Based Supervision’ sector, how prepared is standard Alliance for this? 

    The truth is that the risk-based supervision has started long ago. I think what the regulator is trying to do is to reinforce some certain aspects. Right now, if you want to take any business from Shell or LNG, it will be based on the size of your balance sheet and you cannot take more than a certain percentage. The best practice is five per cent maximum of your shareholders fund. But where NAICOM is going is that there could be other higher risks which are highly risky, hence, you need to do proper risk assessment more than ever before in an organised manner before accepting the risk. The higher the totality of risk you are assuming, the more capital you also need to deploy because of solvency issue. All these must be considered at any point in time in taking on new risks. So, as an institution we are prepared, we have complied with NAICOM guideline on the board structure and the composition of different committees particularly the enterprise risk committee that needs to look at every aspect of the risk inherent in our business because we are risk carriers. So, we must pay attention to every aspect of risk that may affect our operation. As a company, we are very ready to comply with that procedure going forward. NAICOM recently mandated insurers to exhaust local capacity before ceding any risk abroad. Are insurers complying with this directive? To a large extent all dollar-denominated businesses apart from multinationals are subject to NAICOM approval in principle, especially aviation and oil and gas risks. Insurers must go to NAICOM to get it approved. But what NAICOM is trying to do is to ensure that the bulk of the risks insurable in Nigeria are kept in Nigeria. However, some companies may choose not to take some certain risks that they are not comfortable with. If you have X cover for example and you are trying to place it locally and only four or five companies say they want to take it, whatever that is left, you will have no option than to go and present your case to NAICOM and secure approval to place it abroad. You can’t force other companies to take the risks, even as much as NAICOM is trying to encourage local content.

    Your company has merged its life and its non-life sections, what informed this decision?

    First, the two businesses are complementary. So, in the context of the operating environment in Nigeria, given the complexity of our operating environment, all the approval that I talked about, the cost of running business, getting approval here and there, it is only expedient that the two businesses should be run as one. That is the model that is running very well in Nigeria today. We have no business doing otherwise, if we want to succeed. If you look at the top five companies in Nigeria, the majority of them are composite. So, we decided that coming together will create economy of scale, it will save cost, it will enable us to cross-sell our products, have a unified staff that market both life and non-life products, providing more opportunity for our staff to succeed out there because they can now market all the products across the line. It will enable us to have only one board of directors, saving cost of executive management and related time for meetings and coordination, getting approval for accounts because it is now one account. So, it is meant to unlock more values for our shareholders. And that is the reason why we have gone ahead to do the merger.

    What does Standard Alliance Insurance Plc stand for?

    Standard Alliance Insurance is a composite underwriting firm. We just merged our life and non-life businesses. We have gotten all regulatory approvals. We have our licence reissued by the National Insurance Commission, (NAICOM). We have obtained Securities and Exchange Commission approval. We have obtained the approval of the Nigerian Stock Exchange. We underwrite both life and non-life insurance. Our vision is to be the preferred insurance company in Africa in terms of products innovation, customer service, profitability to our shareholders and corporate social responsibility. We pride ourselves as an innovative insurance company because we have been a leader in terms of introducing new ideas and new products into the insurance market. We just launched the Salary Protection Insurance Scheme to further buttress this. We are doing quite a lot of work on new products and will soon come out with new initiatives on agriculture insurance and health insurance, amongst others.

    What services can you offer to airlines different from other insurance companies?

    What we can offer to airlines are flexibility, access to the London market, which is the standard for placement of insurance risk and we will not play with their requirements in terms of where to place the risks and get the necessary approvals prior to placing such risks. Apart from that, we are developing passenger insurance to complement the mandatory cover whereby every passenger flying from one airport to another can also have extra insurance benefit to complement what they have in case there are any accidents. So, it is more of speed, quality of engagement with them and placing their risks in the Lloyd’s of London market, which is the standard for placing such risks.

  • ‘How to win war against fake drugs’

    ‘How to win war against fake drugs’

    How can the battle against fake and substandard products be won? With the support of all, says Standards Organisation of Nigeria (SON) Director-General, Osita Aboloma. In this interview with Okwy Iroegbu-Chikezie, he argues that standardisation and quality assurance are critical to economic prosperity.

    What is the percentage of substandard products imported into the country?

    That question is a bit difficult to answer since we do not have data on total imports. We can only speak for those that we participate in the examination at the sea ports and land borders. As for products in the market from our surveillance activities, we can say five out of every 10 products or 50 per cent that is entering the country.

    SON is equipped more than ever to fight the menace especially with the implementation of SON Act 14, 2015 which empowers us to prosecute any offender.  We are in the 36 states of the federation including Abuja. There are over 41 life threatening items that are in the prohibition list which we have the mandate to seize where ever they are found within 24 hours

    How far can the Act go in tackling fake products menace?

    The Act  is one of the good things that have happened to the agency. It gave us powers to deal with sub-standardisation and counterfeiting of goods imported or manufactured locally. It empowers us to prosecute offenders within 24 hours of apprehending them. I must tell Nigerians that we have been taking advantage of this law to sanitise the nation and ensure that unwholesome goods and products are not found in the country. Our mandate is to safeguard the lives of the citizens and ensure that products coming into the country meet the nation’s minimum acceptable standards.

    The Act also enables us to stop further distribution of unwholesome products by giving us the mandate to inspect warehouses, shops, houses where we suspect that substandard goods may have been hidden or stored and confiscate them.

    Furthermore, our new Act No. 14 of 2015 has enabled us to initiate prosecution on infractions related to substandard products importation, storage and distribution. Penalties are relative to the offences unlike in the past when cases drag in the law courts and offenders revel in the illegal business of importing or manufacturing fake and counterfeit goods. It is now common knowledge that we no longer bark but bite.

    What is the relationship between standardisation and the nation’s economic prosperity?

    There cannot be economic prosperity without standardisation and quality assurance. It saves cost, ensures value for money, promotes repeated purchase thus increasing capacity utilisation and creating employment. Standardisation ensures market confidence for the manufacturer, importer and consumers.

    What is SON doing about the high level of imported fake and substandard products such as tyres, cables and steel?

    We are constantly retooling our off-shore Conformity Assessment Programme (SONCAP) to checkmate imported substandard products. Our state offices are out daily to do market surveillance, while our enforcement teams are on alert for information to act 24/7. At the moment we have a task force on steel monitoring going round the nation to assure the quality of local production. There’s a marking scheme for both locally manufactured and imported steel products for traceability. This enables us to trace any steel product in the market just in case there is failure in construction or anything related to it. The company that has its name on any product that fails  will be made to answer questions; it also heighten producers interest to ensure they produce quality products and monitor it too in the market place.

    What impact will SON’s presence at the ports have on the economy?

    The impact will be huge as we will in collaboration with sister agencies stop the influx of substandard products at entry points. Under the new Executive Order by the Presidency, the one-stop-shop for goods clearance will positively impact the economy by preventing unfair competition occasioned by substandard products.

    It has been observed that most locally manufactured products are not into the Mandatory Conformity Assessment Programme (MANCAP) scheme. What is SON doing about this?

    We are daily on the road through our state offices locating new factories and product outlets to bring them under the MANCAP scheme. We are also working with Small and Medium Enterprises (SMEs) groups such as the National Association of Small and Medium Enterprises (NASME) and National Association of Small Scale Industrialists (NASSI). We are actively involved in the ongoing nationwide SME Clinics being coordinated by the Office of the Vice President. We are determined to encourage the growth of Micro Small Medium Enterprises (MSMEs) especially those that are not in the MANCAP and are yet to bring their product up to the Nigeria Industrial Standard (NIS).

    The programme is tailored towards their size of business where they are given reasonable rates to enable them go through the process of standardising their products while they are also granted waivers in vehicle importation to mechanise their production processes.

    Can consumers get refund for the purchase of poorly manufactured and fake products?

    We have a consumer complaints  desk in all our state offices coordinated from our operational headquarters in Lagos. We have just recently commenced capacity building in Alternative Dispute Resolution (ADR). We assist consumers get redress when they complain to us. We advise that consumers obtain receipts for purchases and take the trouble to complain. Depending on the situation, we insist on remedy, change or outright replacement of the offending product.

    We are strengthening our internal mechanisms to combat substandard products head on . I urge  all Nigerians to join hands with SON in order to create greater opportunities for genuine and certified locally manufactured products to thrive.

    How can ADR curb the  influx of fake and sub-standard goods?

    ADR will help in saving costs and mitigating the suspension of economic activities that may arise from enforcing our statutory regulatory functions against importers of sub-standard goods to the country. Although the general provisions in the new SON Act empowered the agency to prosecute perpetrators of substandard products manufacture, importation and distribution while also providing stiffer penalties for convictions including jail terms. We are thinking in the direction of exploring ADR measures at resolving conflicts without wasting resources or stalling economic activities.

    We have empowered our personnel by organising training to empower them with skills to handle conflicts that may arise from complaints handling, market survey and stakeholder engagement.

    The move became necessary in order to enhance service delivery by the agency as well as enhance stakeholders’ adoption and compliance to stipulated standards. Communication is key in mediation and reconciliation if goals will be achieved.

    We are committed to protecting the lives and properties of Nigerians as well as the economy using the instruments of standardisation and quality assurance.

    We realised that a lot of civil cases in the courts linger for too long because a party has chosen to uphold its ego when such cases could have been addressed using alternative measures.

    ADR provides relief to frustration litigant’s face when resolving civil disputes using traditional methods. It helps to address delay, prohibitive costs, case congestion, restrictive single option, unsatisfactory determination of cases, ruined relationships and reduction in foreign investments.

    Have you secured conviction of any fake and substandard goods importer?

    Not recently but we are prosecuting over 10 infractions in Lagos, Akure and Awka and we’ll see that justice is done. Those are in addition to seizures of the substandard products and possible destruction if they cannot be rectified.  The Attorney General of the Federation,  Mr. Abubakar Malami (SAN) in support of our activities, has deployed four senior lawyers to help in building up our legal team. Besides, our new Act provides for stiffer penalties in relation to the volume of substandard products discovered including jail term.

    What is your relationship with other agencies in the fight against fake and substandard goods?

    We have a very robust collaboration with sister regulatory and security agencies. Recent seizures of stuffed tyres were a result of collaboration in addition to the seizure of substandard cables and the discovery of several flats in Lagos filled with expired products. The collaboration with sister agencies has added fillip to the success of our operations across the nation.

    What is the scope of SON’s surveillance of the states and markets nationwide?

    Market surveillance is a key activity of every state office on which they make reports monthly. When we identify a counterfeit product we do market intelligence to isolate it and prosecute the importer or manufacturer.

    What are the standards you have for products and how do you arrive at the standards?

    The Nigeria Industrial Standard (NIS) is the benchmark for quality of products and services in Nigeria like BSI standards in UK and ANSI in America.  Standards are consensus documents on minimum requirements agreed by stakeholders and interested parties at technical committee meetings. The agreed drafts are then approved by the Standards Council for use as National Standards. SON only acts as secretariat.

    These standards are products of the global village now. The Codex standards on Garri was originally developed in Nigeria and adopted for the world. Conversely, NIS includes adopted and adapted standards from other nations and international standardisation bodies such as the International Standards Organisation (ISO).

    Do we have Nigerian standards?

    Yes, we have NIS which is not independent of international standards. We have thousands of standards for every product imaginable. This is done with active participation of the relevant stakeholders. Standardisation include weight and measures.

    In terms of surveillance and compliance, what are your achievements?

    We have made tremendous achievements, particularly with regard to stakeholders support through classified information. Another pillar is the  SON Act that has widened our regulatory and prosecutorial powers

    It is beleived that the destruction of imported fake and sub standard goods is the destruction of the nation’s commonwealth. What is your take on this?

    We destroy substandard products only when they cannot be rectified or are dangers to lives and property. Destruction is the least alternative as far we are concerned because we know that the monies used to either manufacture or import them could have been put into good use. But even at that, we cannot mortgage the lives of our citizens. We must realise that substan-dardisation is a clear and present danger.

     What level of support have you received from the government in the area of advocacy?

    Government is already doing that through the new Act of 2015, and through annual appropriation and support from sister regulatory and security agencies. What we require is other stakeholders support through information and collaboration. If you see something, say something, that is all we ask from the public.

     What are you doing in terms of staff training to get them up to speed with latest technology and standards?

    The government is already doing that with a new Act that gives us broader powers to fight the menace of substandard products. The Federal Government is also supporting the fight against fake and substandard products with yearly appropriation and other logistics support such as security and intelligence. The area that needs significant improvement is the support of other stakeholders and the consuming public in general. If you see something unwholesome, say something to SON. We need all Nigerians as quality vanguards to win the war against the menace of substandard products in Nigeria.

     

     

  • ‘How Nigeria can fix power sector’

    ‘How Nigeria can fix power sector’

    How can Nigeria’s endemic power problem be resolved? By increased investment in renewable energy, gas pipelines, power plants and transmission network, among others, says Green Elec President Marcel Hochet, in this interview with AKINOLA AJIBADE. He also speaks on the plans by five states to build solar-powered mini-grids.

    How can Nigeria tackle the perennial problems of shortage of gas and poor power supply?

    To address the problems, stakeholders including the Federal Government must try and invest in key infrastructure such as gas pipelines, equipment used in the distribution, generation and transmission of electricity, and other facilities.

    Of note is the use of obsolete equipment such as transformers, feeders, sub-stations and others, that need to be replaced with new ones by power distribution companies (DisCos) to adequately supply power to the consumers. Since the operators are not having enough money to play around with, they need to bring in more investors into the industry to provide the fund needed to move the sector forward.

    By so doing, stakeholders are helping in accelerating the growth of the industry, and also by reducing problems such as pipeline vandalism, poor generation and supply of power, which have resulted in low activities in the sector. When this happens, gas producers and suppliers and the power generation companies (GenCos) would be able to increase their output.

    What is the problem facing the national grid?

    The national grid is old, a development, which has resulted in the incessant collapse of the grid and inability of some parts of the country to get light. Successive administrations have spent a lot of money on the sector. Former Presidents Olusegun Obasanjo, Umaru Musa Yar’Adua and Goodluck Jonathan have launched many projects in areas such as power generation, distribution and transmission. Many of the projects have not been completed due to funds and lack of coordination among the stakeholders.

    Where in particular do DisCos require investment?

    The energy distribution firms need to upgrade their facilities by acquiring the latest technology in order to encourage growth. The firms must phase out analog meters, and in turn, provide their customers with pre-paid meters and smart meters. By scaling up investment in the area of meters, the firms would increase their earnings while at the same time blocking loopholes that were brought about by lack of enough meters in the sector.

    The loopholes are evident in the use of pre-paid meters for criminal activities such as meter tampering and its subsequent manipulation of volume of energy consumed by customers. Smart meters would be of help in this regard. The reason is because with smart meters power firms would be able to monitor criminal activities on the meters and promptly block them.

    What should power firms do to overcome their huge debt burdens?

    The answer is simple. The power firms must meter their customers with a view to monitoring their consumption pattern and collecting bills. The problem in the sector is poor liquidity caused by inability of consumers to pay their bills. Once meters are issued to customers, they would pay their bills, and the revenues of the firms would increase as well.

    What is your assessment of privatisation of the power sector?

    The unbundling of the assets of the Power Holding Company of Nigeria (PHCN) and the subsequent sale of the assets to private investors in 2013 is a good achievement. However, the privatisation is yet to achieve the desired results as power situation gets worsened by the day. Virtually, the operators are not finding it easy. The DisCos are struggling to survive due to huge debts.

    But the Federal Government has given DisCos a N700 billion lifeline.

    Though the Federal Government has given the firms N700billion, mind you the money was not given to them free. The money was given to the firms in form of short-term loan to help them improve their activities.  Power distribution firms are in a terrible financial situation. The firms are unable to pay for electricity they collected from the Nigerian Bulk Electricity Trading (NBET). On the other hand, NBET is also unable to pay the power generation companies, which are also unable to pay for the gas they bought to generate power. The DisCos should leverage the widening metering gap in the industry to make money and further improve their operation instead of trying to survive on the back of the N700 billion loans offered by the government.

    What should be done to boost electricity supply in the country?

    The industry requires a combination of different sources of power to grow. It is not enough to rely solely on the traditional methods of generating power such as gas and hydro. Though they are veritable energy sources as seen in countries across the world that use them to provide power, the use of renewable energy sources such as solar, wind, biomass and coal, is also important. A combina-tion of off-grid and on-grid sources of generating power would help in improving power supply in Nigeria.

    How many megawatts (Mw) of electricity does Nigeria needs to achieve energy sufficiency?

    Nigeria requires 40,000 Mw of power to meet the energy needs of its over 170 million population. The country cannot achieve much with 20,000 Mw of electricity in view of its growing population. France and other developed economies are combining various energy sources together to improve generation. France generates over 500,000 megawatts (Mw) of electricity for its 60 million populations. Also, South Africa generates 40,000 (Mw) for its 48 million population people. The country should use varied sources of generating electricity. Nigeria should take a cue from France and South Africa by using different sources to generate power. For instance, solar would help in boosting power generation in Nigeria in view of the county being located in the tropical region where there is high intensity of the sun – a raw material needed to provide solar energy.

    How many megawatts of power have solar generated in Nigeria?

    The country has so far generated 50 Mw of power. In the next five years, the country would provide 500 Mw of power. The world is evolving and new technology is coming up to aid the production of electricity through solar means. Already, new investments in solar energy are coming up in the country. Many international companies are interested in investing in solar energy in Nigeria and beyond.

    Like I discussed with you, for the communities that have not gotten power, this is a tremendous change for them. This is not immediate, but a long-term, in the next 10 years or 20 years. It is possible to provide 500 or 1,000 Mw of solar power, once there is a right operating environment. We have other renewable energy sources in Nigeria, which can be used to generate power. Nigeria is blessed with natural and human resources. What remains is the ability to use those resources for the production of electricity.

    You are in the vanguard of advocating the use of solar energy in Nigeria. What is the level of involvement of states in the initiative?

    The response of the state governments to provide power with solar energy is impressive. Five state governments drawn from three of the six geo-political zones have indicated interest in building solar-powered mini-grids for their communities that are not connected to the national grid with a view to provide solar power for them. The states that have partnered with Green Elec for provision of solar powered mini-grids include Kaduna, Imo, Delta, Rivers and Ogun states.

    How many solar-powered mini-grids are needed in each of the communities?

    Provision of mini-grids depends on the available resources on ground. However, we are going to build two mini-grids for 1000 homes. In a community, we have 1,000 homes and when divided into two, we are going to have 500 homes. This implies that 500 homes will be using one mini-grid. A home boasts of five people and that gives us a total of 5,000 people, when multiplying 1000 homes by five people.

    Has your organisation carried out pilot studies in those states?

    We have carried out a pilot study for the provision of street light in Owerri, Imo State and Port Harcourt in Rivers State. A pilot study on street light has taken place in Delta state, while discussions are ongoing for pilot study on the use of mini-grids. In Ogun State, we are providing solar power stations for the use of medical centres that are located in six Local Government Areas (LGAs) in the state. That of Kaduna took place few weeks ago. It is almost a year that we have been holding discussions and negotiating for the building of mini-grids in the state.

    Why the take-off of the project in Kaduna State?

    The project is starting in Kaduna State for obvious reason.  Kaduna is one of the key states in the Northern part of Nigeria, which is in dire need of electricity. We are leveraging Kaduna in order to reach other states in the North that also need power for survival.  Findings have shown that Northern states are in need of electricity than the states in the South-South and South-West regions, and there is the need to make solar power available for them through the mini-grids.  Also, climate is another reason for commencing the project in Kaduna or better put, the North. The intensity of the sun in the Northern parts of the country is very high and that is what is needed to generate solar power.

    Is partnership evolving between your firm and Lagos State government soon?

    For now, there is no partnership between Lagos and Green Elec on the issue of providing solar power for the state, regarded as the commercial nerve centre of Nigeria.

    Why is it so?

    The state government is not convinced that solar energy is as effective as people are made to believe. Whenever you meet any of the officials of the government, and you are discussing the issue of using solar energy system, the first question they ask is: Does the solar power system you are bringing have a lasting value? They are asking this question because they have experimented solar power system in the past and they discovered that its batteries do not last. The batteries usually run down six months after installing them. It would take some time before the state government buys into the idea of using solar power fully.  However, we have made them to understand that the street lights that we provide do last 10 years.

    How are you leveraging Lagos for growth in future?

    We want to leverage the commercial prospects of Lagos for growth. We would like to provide solar power for banks, hospitals, schools, oil and gas facilities, factories, and other commercial entities.

    What led to the formation of Green Elec?

    The desire to explore opportunities in solar power, maximise its potential for the benefit of people who never believed that they can power their homes and offices with solar power and generate electricity for people living in urban and rural areas, especially those not connected to the national grid, informed my decision to set up a solar energy firm known as Green Elec.

    When did the firm start operation?

    The company was registered in Nigeria and France in July 2015. Prior to this period, I had worked with a French power company, Schneider Electric, for two decades. I came to Nigeria to set up a subsidiary of Schneider Electric in 2004 through which the firm was  able to work with the Federal Ministry of Power and other stakeholders. Altogether, I have spent 12 years in Nigeria, a development, which enables me to know the energy gap in the country and what can be done to bridge the gap.

    Who are your target consumers in Nigeria?

    Basically, we are targeting two markets in the country. The first is the rural market, through which we would provide solar powered mini-grids for communities that are not connected to the national grid. The second market is urban centres, where we would be providing solar energy for banks, hospitals, schools, factories, oil and gas facilities, and other commercially-driven institutions. There are bigger companies like Nestle Nigeria Plc, Nigerian Breweries and others that would need solar energy to power some of their operations. These companies are powered by generators due to irregular power supply in the country. This has eaten deep into their cost of operation and we want to help them reduce the cost of energy by advising them to use solar energy during daytime. When the sun declines, they switch to the national grid by using electricity that is provided by power firms. When there is power failure, they are expected to use generators as the last resort.

    Why did you set up the firm in Nigeria?

    Nigeria is one of the countries with serious energy needs. This is evident in the inability of larger percentage of the 170 million population to get regular power supply.

     

  • ‘Skilled manpower development vital to national development’

    ‘Skilled manpower development vital to national development’

    The Director–General/Chief Executive, Industrial Training Fund (ITF), Sir Joseph Ntung Ari, says the fund is now waking from its long slumber. Ari explained that unlike in the past, the organisation is being repositioned to contribute to the manpower and technical needs of the country. In this interview with TOBA AGBOOLA, he speaks on the strategies the organisation will deploy to boost manpower development, reduce unemployment and poverty.

    Industrial Training Fund
    has been bedeviled with
    myriad of challenges. One of this is failure of the organisation to reimburse some organisations. How are you addressing this?

    As you may be aware, our Act requires us to reimburse organisations that had contributed to the tune of 50 per cent of what was contributed if the organisations meet all necessary criteria for such reimbursement. For most of 2014/2015, these reimbursements were either delayed or not paid at all, which adversely affected our activities particularly in revenue generation. I am happy to inform you today that almost all organisations that have pending claims and have met the necessary requirements have been reimbursed. As of today, 277 of the 295 companies that filed their reimbursement claims have been fully reimbursed to the tune of N2.3 billion; fourteen companies, whose claims are still being processed, will be paid soon. Our commitment is to ensure speedy reimbursement of companies henceforth.

    There has also been complaints about the issue of unpaid Students’ Industrial Work Experience Scheme (SIWES). What is your plan on this?

    The Students Industrial Work Experience Scheme (SIWES) is a brain child of the ITF. Regrettably, however, it has become a dead weight and an albatross that has had negative implications for the image of the Fund, through no fault of ours. Initiated in 1974, it was designed to bridge the gap between theory imparted to students of Technical, Engineering and Allied disciplines. Over the years, while the numbers of participants and accredited disciplines have grown exponentially, funding, which is the sole responsibility of the Federal Government, has continued to dwindle, owing perhaps in part to fiscal challenges being experienced by the Federal Government. Consistent under-appropriations and non-release of such appropriations has occasioned a situation where the Fund has accumulated billions in unpaid supervisory and students’ allowances. However, within two months of assumption of duty, we disbursed a total of N960 million as allowances to 42,877 students of 73 tertiary institutions that participated in the Students Industrial Work Experience Scheme (SIWES) between 2011 and 2014. All participants that are being owed will be paid when the Federal Government releases monies for such payments. But the sustainable solution to this problem is for the Federal Government to create a separate budgetary sub-head for SIWES just as it was created for the NYSC when it encountered similar problems.

    Is there any plan to expand your services, especially to MSMEs?

    To ensure that all Nigerians, particularly the Micro, Small and Medium Enterprises, benefit from our services, Management has approved the establishment of four new Area Offices in Bwari in the Federal Capital Territory, Rumuokuta in Rivers State, Badagry in Lagos  State and Owerri in Imo State.  Similarly, in order to expand access for the numerous Nigerians that are willing to acquire new technical skills but are currently denied because of limited placement openings, the ITF will also establish vocational training wings in all its Area offices across the country. We believe that any effort to tackle unemployment without any serious commitment to skills acquisition programmes that will equip Nigerians with skills for employability will not succeed. And for more Nigerians to acquire such skills, the necessary infrastructures have to be in place to accept willing trainees.

    Many industries have closed due to inconducive environment. In your own capacity, how do you intend to address this?

    One of the major challenges facing the country today is the incidence of companies closing shop thereby leading to massive job loss and depletion of existing investments. To redress this ugly situation, the Fund shall conduct process and performance improvement surveys and use findings to carry out interventions at subsidised rates. As part of our obligation towards the realisation of the Federal Government economic diversification and industrialisation programmes, we shall expand the provision of advisory services to Micro, Small and Medium Enterprises (MSMEs) and equally create a forum where industries shall network and cross fertilise ideas on operational and marketing strategies. It is also our desire to organise regular business mentorship using trail-blasers in specific industries. To mitigate further inciden-ces of closure or wind-up of businesses, the Fund shall conduct safety and environmental updates for industries as well as monitor adherence to quality management standards. In this vein, all the Fund’s area offices shall be provided with vocational/skills training hubs. This way, we shall be in a better position to synergise with a view to providing prompt interventions to industries.

    Can you shed light on the National Industrial Skills Development Programme (NISDP)?

    Yes, through the NISDP, we have commenced the three-month training of 9,000 youths from 18 states in select training centres across the country. The first phase commenced in March. The trainees would undergo a three-month intensive skills acquisition training in over 30 trades and crafts including tailoring and fashion design, paint making, bead making, plumbing and pipe fitting, farming, confectionery, welding and fabrication, ICT, electrical installation, carpentry and wood work, cosmetology, GSM repairs and Plaster of Paris or pop among others. The trade areas were chosen based on their projected value addition to citizens and their potential to provide sustainable means of livelihood for the youths in their respective states. The trainees would also be provided hands-on vocational and entrepreneurial skills, as well as modalities for business financing.The training programme is under a tripartite arrangement between the Industrial Training Fund, ITF, Small and Medium Enterprises Development Agency of Nigeria, SMEDAN and Bank of Industry (BoI). The NISDP was inaugurated in 2012 as a key enabler of the Nigeria Industrial Revolution Plan (NIRP) which is supervised by the Federal Ministry of Industry, Trade and Investment (FMITI). And let me tell that since 2012, over 84,000 Nigerians have been trained in diverse trade and craft. In 2016 alone, the NISDP trained 10,100 Nigerians in various skills acquisition initiatives, including 1,100 Internally Displaced Persons (IDPs) in Maiduguri, Borno State.

    What about your partnership with other organisation such as NECA, most especially in the area of manpower development?

    Yes, we are in partnership with Nigeria Employers consultative Council (NECA) to train Nigerian youths in acquiring skills for the purpose of generating gainful employment. The partnership would go a long way to promote entrepreneurship and industries that have closed shops on account of technical issues. The workable partnership had become necessary in the wake of the skills that various categories of workers, industries and organisations need in order to carry out their day-to-day activity. You will agree with me that the event is coming at the time Nigeria is at a point where she is trying to take a leap into industrialisation based on the economic diversification and industry policy of the present administration. We are ready to take the industrialisation policy of the Muhammadu Buhari administration to greater heights. Policy of economic diversification and industrialisation is the direction to go in Nigeria because it is a direction that has given some leverage and premium to all the developed nations of the world. The main policy direction of the Fund is to partner with the organised private sector that are key and critical to the mandate of the organisation just as he also stated that the MoU will strengthen technical competence of Nigerians.

    As the Director-General of ITF, what are your plans and vision for the fund?

    I was appointed the Director-General of the Industrial Training Fund (ITF) on September 26, 2016. Some people may be familiar with the state of affairs in the fund when I assumed duty. But for those who may not be as familiar, I dare say the actions or inactions of some functionaries of the organisation had occasioned a situation whereby a once vibrant organisation could not effectively discharge its onerous mandate. The ITF was established on October 8, 1971 by Decree No. 47 of 1971 (as amended up to date) and vested with the mandate of providing, promoting and encouraging the acquisition of skills in industry and commerce. It is also mandated to generate a pool of locally trained manpower sufficient to meet the needs of the private and public sectors of the economy; providing training for skills in management for technical and entrepreneurial development in the public and private sectors of the economy; setting training standards in all sectors of the economy and monitor adherence; evaluating and certifying vocational skills acquired by apprentices, craftsmen and technicians in collaboration with relevant organisations, and, managing and administering the Students’ Industrial Work Experience Scheme (SIWES) on behalf of the government. For most of its 45 years of existence, the fund discharged this mandate remarkably by equipping over 14 million Nigerians with skills for employability and entrepreneurship. But in the years immediately preceding my appointment, it retrogressed and lost focus, leading to disenchantment and dissatisfaction by both our internal and external stakeholders. The challenge on assumption therefore, was to refocus the organisation and put it on the path of growth, restore harmony and regain the confidence of all our stakeholders. Some of the initiatives that I embarked upon include, unveiling of the ITF Reviewed Vision: Strategies for Mandate Actualisation, Reimbursement and the Students’ Industrial Work Experience Scheme (SIWES amongst others

    How do you intend to actualise these plans and vision?

    A study of all organisations that have gone under in Nigeria will reveal a common strand: a failure to plan. The ITF is different in this regard and owes its longevity to well developed and executed plans that ensured it stayed above water even when other organisations were floundering. Within the last 10 years, the ITF has implemented several plans, all of which positively impacted the effective discharge of its mandate. These include the ITF Blueprint, the 10-Year Strategic Plan, and the four-Year Road Map amongst others. But the plan conceived by Management on my assumption of duty is perhaps the most ambitious and comprehensive since the establishment of the fund. Its scope and breath was premised on the firm belief that the success of most key government programmes and recovery from the prevailing recession rested on organisations such as ours fully actualising their mandates.

    Can you elaborate on this?

    The plan, which is tagged: ITF Reviewed Vision: Strategies for Mandate Actualisation, is a four-year plan that is targeted at addressing service challenges, infrastructure deficits, revenue and a gamut of other strictures impinging the actualisation of the Fund’s mandate. It is compartmentalised into three-quick wins, medium and long term goals – with strategies and firm timelines for their achievement.

    Under the quick wins, the ITF intends to implement strategies that will boost job creation, reduce poverty and create wealth. In the area of agriculture, which is a major pre-occupation of most Nigerians and a key component of the economic diversification agenda, the Fund intends to develop the capacity of Nigerian farmers along the agricultural value chain. Specific areas targeted by the plan include fish farming, poultry production, crop production, agric-mechanisation, agric-business and post-harvest management, manure production, technology and farm management, and water resource management. To actualise this, the Fund began  in January, 2017, the training of 17,000 farmers, using its Industrial Skills Training Centre (ISTC) in Kano; the Centre for Excellence in Jos and undeveloped lands owned by the ITF in states for the establishment of demonstration farms. This is even as efforts will be stepped up to acquire land in eight states – Anambra, Benue, Kano, Plateau, Gombe, Oyo, Ogun and Niger for the same purpose. The fund will actively seek collaboration with states, Ministries of Agriculture, existing local farmers, farmers’ association such as Fadama for farm equipment, seedlings and capacity building and also explore the possibility of financial grants from International and Local Agencies including Food and Agriculture Organisation (FAO), Central Bank of Nigeria (CBN) and Bank of Industry amongst others. The emphasis of the plan on agriculture is premised on the conviction that to achieve food security and conserve the huge foreign reserve that is currently expended on the importation of food items, the requisite capacity of Nigerians in this area must be developed.

    In addition, in view of soaring unemployment, especially among the youth; a situation that has been made worse recently by the global economic recession, the ITF plans to implement strategies that will directly lead to job creation. Our disposition is informed by the fact that even in the face of this seeming lack of jobs, several surveys including  those conducted by the ITF have indicated that vacancies still exist in certain sectors that are being filled by people other than Nigerians, because we lack the required technical skills. To this end, the Fund intends to develop the skills of Nigerians in the construction sector and the services industry. These particular sectors have been targeted in view of the obvious skills gaps and their potential for job creation. In the construction sector, the Fund intends to equip Nigerians with skills in these areas: welding and fabrication, reinforcing metal works, domestic electrical installation, carpentry and joinery, tiling, masonry, block and brick making, plumbing and pipe fitting and Plaster of Paris (PoP) making. According to the plan, in 2017 alone, the ITF will train 18,500 Nigerians in the aforementioned trade and craft areas using ITF Industrial Skills Training Centres and selected satellite centres. To ensure achievement of this ambition, the Fund will enter into collaboration with agencies and organisations like Cement Technology Institute of Nigeria (CTIN), Nigerian Institute of Builders (NIOB), Julius Berger Plc and SETRACO, among others,  for technical and financial assistance.

    How will you handle the services industry?

    For the Services industry, the ITF will build the capacity of Nigerians in 17 trade and craft areas including; GSM repairs, generator repairs, computer hardware repairs, software installation, marketing, catering services, event management, automobile and tri-cycle maintenance and repairs, autotronics, tailoring, air conditining and refrigeration maintenance and repairs, ICT web design, satellite dish installation and maintenance, facility maintenance and repairs and interior decoration. In all, 9,250 Nigerians will be equipped with these skills between January and December this year. In the medium and long term, efforts will be stepped up for the formal commissioning of the Lokoja ISTC, even as plans will be accelerated towards the establishment of 36 Industrial Skills Training Centres in the 36 states of the Federation and the Federal Capital Territory (FCT), three Automotive Parts Production and Training Centres will also be established in Badagary, Nnewi and Kaduna and six Centres of Advanced Skills Training for Employment (CASTE) that will be sited in the six geo-political zones of the country. In addition, three specialised Centres in Oil and Gas will also be established. All these projects will be completed between 2018 and 2020.