The Nation Newspaper

Tag: deficit

  • How to bridge housing deficit, by Fed Govt, stakeholders

    How to bridge housing deficit, by Fed Govt, stakeholders

    The Federal Government may have found an answer to the housing problem. It is considering the Public-Private Partnership (PPP) model on the provision of affordable housing. OLUGBENGA ADANIKIN reports that the government is eyeing pension funds, dormant bank assets and unclaimed dividends to fund the sector.

    Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”

    The above is the acceptable minimum according Article 25 (1) of the Universal Declaration of Human Rights by the United Nations (UN).

    Nigeria, being a signatory to the declaration, recognizes housing as a basic right but the country has not been able to meet the housing needs of the citizenry. Uncomfortable with the situation, the President Muhammadu Bughari administration is leaving no stone unturned and it has taken the provision of affordable housing as a challenge.

    Some of the issues the government has to contend with are: access to land for sustainable and affordable housing delivery; access to capital market to finance the provision of housing units; granting of concessions and incentives as tools to galvanise the provision of affordable housing and the development of skills and technology.

    The Federal Government is giving priority to the housing sector as part of ways of creating job opportunities.

    Since his inauguration as Minister of Power, Works & Housing, Mr. Babatunde Fashola, has been trying to adopt a sustainable approach to tackling the nation’s housing challenges to reduce deficit.

    He has at different fora, stressed the importance of planning and research. Observers say Fashola is being cautious to guard against the pitfall of the past in which the various national housing policies failed to satisfy the needs of targeted beneficiaries.

    According to the minister, about N100 billion would be needed to develop a new housing strategy and that adequate attention must be paid to research and effective planning.

    Fashola said: “If we can spend N10 billion in each state and the Federal Capital Territory (FCT) on housing alone every year, subject to the capacity to raise the money and the capacity to utilise the funds, having regards to our current construction methods and the time it takes to complete construction, the ministry intends to change this by research and industrialisation of housing.”

    He assured Nigerians of an aggressive intervention to increase housing supply, by undertaking construction of public housing and formulating private sector participation-driven policies that will lead to and ownership of houses.

    But available statistics have shown that with an increasing population of about 180 million people, Nigeria has to upscale its efforts at providing cheap and available housing. It is believed that the country has a housing deficit ranging between 17 to 20 million.

    Experts, have however, disputed the figure, which they described as unreliable, demanding for an official statistics from the National Bureau of Statistics (NBS) to determine the nation’s exact housing dearth.

    The minister acknowledged this fact when he disclosed that the Federal government “was mindful of some figures about the size of housing deficit. Those figures need to be verified and we will undertake a process of scientific assessment to determine the accuracy of that data as well as the actual demand. But what those figures do for us, no matter how inaccurate they are, is that they define our journey for us.”

    Stakeholders wondered why the successive administrations had spurned their different proposals to offer a helping hand to actualise it vision.

    But the stakeholders may have used the just-concluded summit on affordable housing to convince the government on why everyone in the built industry must be brought on board in fashioning out a people-friendly policy.

    The all-inclusive plan involved engagement with German Development Cooperation (GIZ), alongside stakeholders such as Shelter Afrique, Trademore, Federal Mortgage Bank of Nigeria (FMBN), Federal Housing Authority (FHA) and Real Estate Developers Association of Nigeria (REDAN) among others in the housing sector.

    The focus of the summit was on the type of housing Nigerians will prefer, taking into cognisance their cultural diversities; the definition of affordability; which cadres of Nigerians actually need government-assisted housing, the starting point and the choice housing.

    In search of enduing solutions

    According to the minister, solving the summit’s focus would require extensive research and surveys, which he stated had commenced, the outcome of which would fast-track a reduction in the deficit.

    The expected policy would awaken the agencies under the ministry to their responsible on the provision of affordable shelter. The FMBN, which, hitherto, failed in its duty sourcing funds from insurance companies, banks into the National Housing Fund (NHF) will be alive to its role of providing affordable housing.

    FMBN’ mandate among others is to ensure constant loans’ provision to Nigerians for the purpose of building housing units.

    However, the performance of the mortgage banker has been anything but satisfactory. Hence, Federal Government has concluded plans recapitalise the FMBN for better efficiency.

    The provision of 40,000 housing units by the Federal Housing Authority (FHA) in 40 years has not been commensurate with Nigeria’s rising population. At the suumiit, stakeholders recommended the possibility of raising a special fund for housing sector just like the Petroleum Trust Development Fund (PTDF) and the Education Trust Fund (ETF), among others.

    It is believed that with a dedicated fund for the sector, developers could source finance to build affordable structures for the people.

    In his opening remarks at the summit, Fashola said: “We need to maintain the single digit interest rate in mortgage loan even if it requires subsidising for the low income earners; recapitalise the FMBN and enforcement of the NHF contribution as enshrined in the enabling Act; there is need for PENCOM to invest a sizeable part of the pension funds, dormant assets of banks and unclaimed dividends in Primary Mortgage Products (PMDs).

    “The need to put in place the appropriate construction financing schemes including funding sources for multilateral schemes; and for stakeholders to join the ministry in liaising with the National Assembly to fast-track the amendment of the relevant laws already submitted such as foreclosure, mortgage and insurance laws.”

    Also recommended at the summit were the provision of houses for special members of the public such as People Living With HIV/Aids (PLWHA); the aged, motherless children as well as the less-privileged, who may not have the resources to own a shelter.

    As a way out, the minister identified the need to review some of the conventional ways of implementing the national housing policy, informing his audience that the Federal government has collapsed the existing 100 housing models into 12.

    According to the minister, the government has a plan to further streamline the 12 models to six to reflect the nation’s cultural diversity and market demand.

    The rationale behind this, he said, is not far-fetched from having a coordinated building plan for all developers in the country. They include one-bedroom, two-bedroom, three-bedroom flats, bungalows and condominiums that will represent the ‘Nigerian House’ which responds to our cultural diversity.

    Concerns over affordability

    Like two inseparable variables ‘affordability’ and ‘housing’ drew stakeholders’ attention at the summit. Should affordability be measured based on low income earners?; How can you make shelter actually affordable?; Considering the rising cost of building materials including tiles, cement, iron among others, can houses really be affordable? Is affordability the same thing as low-cost housing? These and many more were questions that brought the best out of participants at the summit.

    Key stakeholders came up with variety of definitions of affordable housing.

    To Dr. Joshua Egbagbe, “affordable housing from the off taker-driven perspective, is the home ownership capacity of an average Nigerian citizen: to build, buy, or rent, a cost-effective house; based on spending a total amount, inclusive of all related costs, of not more than one-third of the individual’s take home pay, calculated on an installment (monthly or annual basis), up to the average working age limit of 60 years”.

    Another participant, Prof. Layi Egunjobi, said: “Affordable housing is housing that a person or group can pay for with or without government assistance and according to the present and future socio-economic circumstances of the person or group in question.”

    Brig. Gen. PMO Reis defined it as “the provision of accessible and subsidised housing solutions on a sustainable basis through end-users driven initiatives”.

    Alhaji Kabiru Abdulallahi said described “affordable housing is a house with some incentives, flexibility that allows a citizen own a house without stress”.

    The Centre for Affordable Housing and UN-Habitat defined affordable housing as, “housing that is accessible, appropriate, and secure, for the needs of the low and moderate income households, and is priced so that these households are also able to meet their other basic living costs like health, education and feeding. This is usually estimated at about 30 per cent (or one-third) of gross household income.”

    Simon Gusah came up with a simpler definition when he stated that “affordable housing depends perhaps on if the Federal Government can provide houses for people within the income bracket of those on Level 10 to 15 and 16 in the public service and those in the private sector such as drivers, farmers, market men and women, artisans and so on.

    According to the minister, foreign experts have defined to him affordable housing as, “a 47 m², two-bedroom bungalow with external toilets, to be shared with others, at $5000 in Haiti (N1.4 million at an exchange rate of N280 to the dollar). He asked the participants: “Is this what we should do?

    “The other example was to prescribe a mortgage of at least 10 to 15 years, with single digit interest and to ensure that the beneficiary must not spend more than 30 per cent of his income on housing, so that he or she can meet other needs of dependents.”

    Stakeholders however agreed that if affordable housing could be defined relatively to reflect the current economic situation and reduce the biting deficit, they might have gotten it right.

    But aside from government’s commitment to build for the poor, it is imperative to indigenize the concept ‘affordable housing’ to really address the deficit.

    “Our housing policy must be tied to our income, which must be tied to our jobs. It is the way to create the credit that our housing industry desperately needs,” Fashola emphasised.

    PPP as the way to go

    If the Federal Government must succeed in the area of housing, it must partner the private sector. The Public- Private Partnership (PPP) model has become imperative to attain such feat.

    In developed nations, the PPP is a model that has worked and sustainable. Stakeholders were unequivocal that their active involvement will do a lot to reducing the current deficit.

    Buying into the PPP idea, the minister said the 4000 workers on the ministry’s payroll would be insufficient to deliver the required homes.

    At his maiden news conference, Fashola had unveiled a comprehensive housing plan that will involve the building of 12 flats per block and 480 flats per state and 17,760 flats nationwide. He promised to deliver about 40 blocks of housing units in each state and the FCT with partnership from state governors.

    He said: “This will mean at a minimum of 4 doors and 2 windows very conservatively per home; a demand for 71, 040 doors and 35,520 windows nationwide in a year, which we will encourage to be made in Nigeria.

    “These figures are only examples and not fixed in definition and they are subject first to budgetary approvals and availability of finance.”

    The stakeholders at summit concluded that segregation, stratification, classes of people and their income bracket must be put into consideration in the delivery of affordable housing units.

  • Oyo seeks understanding over N29b wage deficit

    •’N14.1b Fed Govt loan is staggered’  

    Oyo State Government has sought the understanding of workers and pensioners over the N29 billion wage deficit representing five-month salary arrears, which it blamed on dwindling allocation to the state from the Federation Account and paltry internally generated revenue.

    The state made the plea at a news conference addressed by the Commissioner for Finance and Budget, Mr. Bimbo Adekanmbi and the Special Adviser to the Governor on Communication and Strategy, Mr. Yomi Layinka, where they shed light on the financial status of the state, in Ibadan.

    The forum also provided opportunity for the government representatives to explain the rationale behind the decision of the state to apply for N14.1 billion from the latest financial sustainability plan of the Federal Government.

    He clarified that the N14.1 billion would be used to pay salaries, stressing that it would not be paid to the state in bulk, but in tranches of N1.3 billion monthly for the first three months and N1.1 billion monthly for the next nine months.

    The commissioner said the delay in the payment of salaries and pensions to workers and pensioners in the past five months was not a deliberate action as being rumoured in some quarters but due to non-availability of fund.

    As against the N84 billion being bandied around as the amount the state got from the Federation Account between May 2015 and May 2016, he clarified that only N37.48 billion accrued to the state coffers within the period after statutory deductions from source and irrevocable commitments.

    Within the same period, however, he said N40.48 billion was paid directly to the local government as its share of allocation, part of which was being used to cater for the salaries of primary school teachers and local government employees.

  • Nigeria records 108% foreign portfolio deficit

    •Domestic investors regain confidence

    For every dollar brought into Nigeria this year, more than $2 has been taken out according to a report on foreign portfolio investment (FPI).

    A year-to-date report on FPI obtained at the weekend, indicated that Nigeria suffered a net deficit of 108 per cent in the first two months of the year.

    The FPI outflow worsened in February, as uncertainties persisted over Nigeria’s foreign exchange management.

    The report, coordinated by the Nigerian Stock Exchange (NSE), showed that FP outflow outpaced inflow by 108 per cent. The two-month report showed that foreign outflow totalled N58.20 billion as against foreign inflow of N27.95 billion.

    Total foreign transactions of N86.15 billion represented 42.8 per cent.

    Domestic investors, however, appeared to be stepping in to fill the gap left by the foreign investors. They invested N115.22 billion, representing 57.22 per cent of the total transactions, during the period.

    Monthly analysis showed that FP outflow totaled N31.84 billion as against inflow of N10.94 billion. In the same period last year, foreign outflow was N81.60 billion while inflow was N52.35 billion.

    In January, FPI report showed that foreign inflow stood at N17.01 billion as against outflow of N26.36 billion, representing a deficit of N9.35 billion.

    Total foreign transactions thus were N43.37 billion. Nigerian investors accounted for N40.73 billion or 48.43 per cent of the total turnover of N84.10 billion recorded during the period.

    In the comparable period of January last year, foreign investors appeared less edgy and there were more appetite for Nigerian equities, though the tinge of deficit was also evident then. Foreign inflow was N48.03 billion in January 2015 as against outflow of N51.08 billion. Total foreign transactions stood at N99.11 billion or 52.24 per cent of total turnover of N189.72 billion during the period. Domestic investors accounted for N90.61 billion or 47.76 per cent of total transactions.

    The FPI report further highlighted the downtrend that had marked foreign portfolio investments since 2014.

    The FPI report uses two key indicators-inflows and outflow to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.

    The NSE report is regarded as a credible gauge of FP’s investments in Nigeria as it coordinates data from nearly all active and major investment bankers, stockbrokers, custodians and other capital market operators.

    Foreign portfolio investment outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE.

    The 12-month foreign portfolio investment report for 2014 shown that foreign portfolio outflow was N846.53 billion as against inflow of N692.39 billion in 2014, representing a net deficit of N154.14 billion.

    In 2013, total foreign inflow was N531.26 trillion compared with outflow of N510.78 trillion, leaving a positive balance of N20.48 billion.

    In earlier preview for the investment market in the year, the NSE had noted that uncertainty and volatility dominate forecast for the New Year and beyond as Nigeria struggles with commodity price shocks and the resultant impact on the Naira.

    “The downturn from 2015 has already continued into the New Year. Accordingly, we anticipate 2016 to be a challenging year for the capital market and the domestic economy,” NSE stated.

  • NSE ready to fund N1.8tr budget deficit

    NSE ready to fund N1.8tr budget deficit

    • Investors assured on outlook

    The capital market has the depth to finance the national budget deficit and drive investments in key national infrastructure, the management of the Nigerian Stock Exchange (NSE) has said.

    Addressing journalists at the NSE in Lagos yesterday, Nigerian Stock Exchange (NSE), Chief Executive Officer, Mr. Oscar Onyema said the sovereign debt market has been on the rise in spite of the current downtrend in the equities market.

    He said capital market has the capacity to fund the 2016 budget deficit, which is estimated at N1.8 trillion and to further support the realisation of the Medium Term Expenditure Framework of the government.

    While the equities market was in the red in 2015, the NSE bond market rose by a third. Market capitalization for the debt market jumped by 32.7 per cent to N7.14 trillion. The Federal and State Governments raised N76.5 billion and N35.8 billion in debt capital, respectively. Companies also took to the debt market to raise a total of N112 in seven new listings.

    According   to him, apart from the federal government raising debt capital directly from the market, other government agencies could be unbundled and made to access the capital market for funds so as to free some cash for the government to fund other areas of development.

    He said the Nigerian National Petroleum Corporation is already looking in that direction and urged others to consider the same option.

    “The capital market has an opportunity to effectively finance the FGN’s proposed budget deficit for 2016 and the implementation of its Medium Term Expenditure Framework (MTEF). With greater clarity on policy direction, we anticipate the return of investors who had remained on the sidelines throughout 2015,” Onyema said.

    He said the Exchange would continue its collaborative efforts with the Federal Government and other private sector players to create a framework for financing the nation’s infrastructure and capital requirements.

    “The NSE will focus on executing its strategy in order to continue to provide a credible platform for financing the economy. To this end, we intend to intensify our engagement with the Federal Government,” Onyema said.

  • NIESV’s recipe for housing deficit

    The Nigerian Institution of Estate Valuers (NIESV)’s Faculty of Housing, has announced the fourth edition of its annual summit. The theme for this year’s summit, which holds on November 19, at the Nigerian Air Force (NAF) Conference Center & Suites, Abuja is “Effective housing delivery models through community development.”

    The 2015 Conference chairman, Elder Biodun Odeleye, explained that the NIESV’s Faculty of Housing strategically chose the theme because its research and practical experience on housing problems, which have brought to the fore potent and effective methods to tackle the problems militating against effective housing delivery in Nigeria.

    The fourth edition, according to the chairman, promises to bring to the fore, for the benefit of the general public and the government, realistic models, which shall be affordable and provide a veritable tool for reducing the deficit in the housing sector in Nigeria. The World Bank has put the deficit at 17 million.

    The lead paper at the summit, titled: “Effective Housing Delivery Models through Community Development Concept”, will be delivered by Professor Olumide Olusanya of the Department of Architecture, University of Lagos. Other papers to be presented include: “Affordability for Informal Housing Clusters” by Mr. Bode Afolayan, the immediate past president, Real Estate Developers Association of Nigeria (REDAN); “Arresting Urban Decay through Effective Housing Management Strategies”, to be presented by Mr. Darlington Uzu, CEO, Crown Estate Limited, Lekki, Lagos.

    Lead discussants at the summit include NIESV’s second Vice President, Rowland Abonta; Professor Timothy Nubi of the Faculty of Environmental Sciences, University of Lagos; and Mr. Akin Olawore, principal consultant, Akin Olawore & Co, Lagos.

  • Vitapur’s prefab gets nod to tackle housing deficit

    Oyo State government and the Lagos State Chapter of the Nigerian Institute of Builders have endorsed the new pre-fabricated building by Vitapur Nigeria Limited, a subsidiary of Vitafoam Nigeria Plc. Besides, they praised Vitafoam on its Corporate Social Responsibility (CSR) policy, which aims at addressing fundamental needs of humanity despite the ‘harsh’ operating environment.

    Speaking during the commisioning of the two pre-fabricated buildings donated by  Vitafoam Group to Government College, Ibadan, Oyo State, Governor Abiola Ajimobi, represented by the Permanent Secretary, Oyo State  Ministry of Education, Mrs. Aderonke Makanjuola, described the firm’s gesture as a strategic way  to take care of one of the basic needs of the people.

    The governor explained that Corporate Social Responsibility (CSR) was the hallmark of sacrifice that  organisations could give back to the society that had done well for them.

    While recommending the pre-fabricated buildings to everyone, he said: “I would like to say a big thank you to the Board, management and staff of the Vitafoam Group for donating these two Pre- fabricated buildings constructed by Vitapur Nigeria Limited along with full furniture such as Sofas, Kitchen cabinets, Ward robes Mattresses and Pillows supplied by other Vitafoam subsidiaries to complement the edifices donated to the Government College Ibadan.”

    In what also amounted to an endorsement by all  builders, the chairman, Lagos State Institute of Builders, Mr. Ashimiyu Bashir declared that pre-fabricated buildings were of interest to all builders in globally.

    At the same occasion,  the former governor of Kano State, Senator Musa Rabiu Kwankwanso also commended Vitapur Nigeria Limited for the innovative pre-fabricated buildings and explained that it would be an option to the Federal Government in its efforts to address housing deficit in Nigeria

    The Managing Director, Vitafoam Group, Mr. Taiwo Adeniyi, explained that Vitapur Nigeria Limited had blazed the trail by acquiring a new state-of-the-art sandwich panel production line, which can produce a maximum length of 14.7 metre with varying thickness, the first of its kind in West Africa.

    According to him, Vitapur Sandwich panels can be used for constructing pre-fabricated structures; cold rooms; equipment shelters; quick shelter development; office partitioning; shopping malls; drop temp ceilings and others. Commenting on the benefits of rigid insulation board, Adeniyi said: “Vitapur Polyurethane Rigid Insulation board comes in various facings depending on intended application. These Insulation boards can be used as wall, floor and roof insulation. For new buildings, boards are usually used over the purlin before the roofing sheets while Vitapur spray foam application is preferred for existing roofs.”

    Adeniyi, who described Vitafoam as an integrated system, said all its subsidiaries are contributing effectively to the innovative products. He further stated that the inherent adaptability and durability of Vitapur’s prefabricated building units’ means that buildings can be developed to fulfill the needs of even the most demanding or obscure applications, creating functional buildings that are time and cost efficient, durable, adaptable and sustainable.

    Vitafoam Chairman, Dr. Dele Makanjuola explained that the project was borne out of the Corporate Social Responsibility that Vitafoam had got accustomed to and also to showcase another arm of the company’s business.

    Makanjuola noted that the company’s foam products are faster, easier and more efficient to mass housing construction in Nigeria.

    According to him, it has also proved that mass housing for our beloved country and Nigerians can be achieved faster, cheaper and with more effective and efficient means. He emphasised the uniqueness of prefabricated building in the area of insulation and stated that Vitapur had gone commercial in the production of panels for constructing pre-fabricated buildings.

    “Pre-fabricated buildings are light weight and they are in vogue in America and many other countries. We are already operating at commercial level and we are willing to partner with the government at all tiers to make housing available to all Nigerians,” he said.

  • FHA’s Social Housing Scheme to transform sector’s deficit

    FHA’s Social Housing Scheme to transform sector’s deficit

    • 800 Co-operative Societies embrace scheme

    As the housing shortage in the country persists, and home ownership becoming more difficult especially with the high cost of construction, more Nigerians are now keying into home ownership through the mortgage system. And to make the process easier, especially for people in the informal sector or those not captured under the National Housing Fund (NHF), Nigerians are now taking advantage of the window of opportunity now made possible by the Federal Housing Authority (FHA), through its Social and Co-operative housing programme. This scheme allows the informal sector, especially artisans and traders, to form themselves into cooperative societies, through which they can apply for mortgage financing or support from the authority. Through this scheme, financially weak members of cooperative societies could latch on to the strength of the group to make real their home ownership dreams.

    As at the end of last week, about 800 Co-operative societies nationwide, with no fewer than 50,000 members, have indicated interest in the Social and Co-operative housing programme of the FHA, says the Managing Director/Chief Executive of the Authority, Professor Mohammed Al-Amin. Many of the cooperative societies, he disclosed, approached the FHA on their own prompting having heard of the social and cooperative housing scheme of the authority, adding that the authority is deliberately cultivating cooperatives in various parts of the country so as to strengthen them to tap into the programme.

    Al-Amin said the authority was focusing on housing delivery for the most vulnerable groups in the society comprising the no-income, low-income and middle low-income earners. To that end, he said the authority had developed special packages for collaboration with non-governmental, faith-based and community-based organisations.The FHA is also working with research institutes for the development of local materials for the construction of houses to make building construction cheaper.

    The FHA boss also hinted that the authority was initiating a savers scheme which would enable workers in the formal and non-formal sectors of the economy own their houses. Also, he said the FHA was working with state governments towards the implementation of a rent-to-own housing scheme which would convert rents paid by tenants for the eventual ownership of such houses. Al-Amin said the preference of many Nigerians for bogus housing designs was one of the major impediments to home ownership, adding that the authority would embark on a campaign to get people to moderate such tastes. He identified lack of housing finance for off-takers, poor conceptualisation and haphazard land acquisition processes as the major causes of the collapse of the National Housing Programmes of the former President Sheu Shagari and the late General Sani Abacha administrations. The FHA, Al-Amin explained, is conscious of these problems, and mobilising all stakeholders to ensure the success of its housing programmes.

    Al-Amin, who was part of the Management Team of the Federal Ministry of Lands, Housing and Urban Development (FMLHUD) that briefed President Muhammadu Buhari on the state of affairs in the housing sector, said the President was passionate about the delivery of affordable mass housing for Nigerians and the rehabilitation of houses destroyed in the on-going insurgency in the North East.

    The President’s interest, he explained, made him request for a viable road map for the implementation of Social Housing for the masses, adding that Buhari was emphatic that an efficient and effective social housing would, among others, make Nigerians benefit from governance.

  • Auditors doubt Multiverse’s status over N1.7b deficit

    External auditors have raised concerns over the ability of Multiverse Plc to meet its obligations as a going concern.

    But the directors of the mining company said it would pull through the hard times, despite its N1.75 billion deficit.

    In its latest audit report obtained at the weekend, external auditors to Multiverse, Sola Oyetayo & Co, said there is material uncertainty that casts doubts on the ability of the firm to continue as a going concern. The report was on the company’s latest financial statement for the period ended December 31, 2014.

    The report indicated that Multiverse has a huge deficit of N1.75 billion by the end of the year. The report noted that it recorded a net loss of N552.41 million last year, adding that it had lost N549.33 million in 2013.

    The report showed that by December last year, the company’s current liabilities exceeded its current assets by N1.75 billion, a worse position than N1.13 billion deficit recorded the year before.

    “These conditions together with other matters as explained in Note 27 indicate the existence of a material uncertainty which cast doubt on the company’s ability to continue as a going concern,” the external auditors noted.

    Directors of Multiverse, however, assured that the company would continue as a going concern, citing business partnerships, foreign capital investments and ongoing turnaround initiatives.

    Key extracts of the audited report and accounts of Multiverse for the year ended December 31, 2014 indicated that turnover declined from N286.18 million in 2013 to N49.17 million in 2014. The company recorded gross loss of N91.49 million in 2014 as against gross profit of N183.76 million in 2013. Operating loss stood at N336.36 million in 2014 compared with N438.53 million in 2013. Loss before tax stood at N580.01 million in 2014 as against N612.73 million in 2013. Loss after tax meanwhile increased from N549.33 million to N552.41 million.

    Further analysis showed a worsening precarious balance sheet position. Total assets had dropped consecutively from N5.49 billion in 2012 to N4.99 billion in 2013 and closed 2014 at N4.77 billion.

    Shareholders’ funds also declined from N2.70 billion in 2013 to N2.15 billion and N1.60 billion in 2013 and 2014 respectively.

    The Board of the company, however, explained that its net current liability was due to backlog of trade and other liabilities and current portion of long-term borrowings which were unpaid over years.

    According to the board, the accumulated losses, which rose from N1.22 billion in 2013 to N1.77 billion, were primarily caused by no production and sales during the year as well as massive finance costs of N243.65 million in 2014 and N174.21 million in 2013, arising from non-payment of overdue long-term borrowings and poor performance of the company over years.

    “During the reporting year, the company has undertaken a thorough review of its financial position and its business strategy to improve the position in near future. The directors believe that the business will be able to renegotiate and reschedule all matured borrowings to cushioning the effect of long-term obligations as they fall due,” the board stated.

    Directors of the company noted that the company had signed a partnership agreement with Anhui Huishang Metal Company of China, which plans to invest $111 million over five years in the company’s Abuni Lead/Zinc mine while extensive exploration had been carried out by the mining technical partner that confirmed the availability of Lead/Zinc Ore in commercial quantity.

    The Board added that with the receipt of a written confirmation that production will commence at the Abuni mine site before the end of 2015 and the quarry joint operation with Sinotrust Partners Limited that have started full operation, the fortune of the company will change significantly.

    “The company has also reviewed its business model from being a mining operation company to mining investment company; this will translate to attraction of foreign investments and technical partners to develop its vast mining resources. As a result, the directors believe the company will continue as a going concern,” the board assured.

    The company said it hopes to retain its leading role in granite production in South Western Nigeria, a situation that will improve its cash flows significantly.

     

  • ‘Buhari inherited deficit economy’

    A group, Grassroots Mobilisation for Muhammadu Buhari (GMMB), has said the Muhammadu Buhari-led administration has inherited a nation living in great deficits.

    Its National Coordinator, Remi Oyebamiji, in a statement said Buhari should urgently present an inventory assessment of the state of the nation.

    “The nation has in abundance human and material resources that can be mobilised for a New Nigeria.

    “Buhari is not a novice as he has been everything anyone may aspire to be in public office. An average Nigerian is ready to sacrifice more for a better Nigeria.

    “We advise the President to present a work plan and road map for the citizens.”

  • Bridging infrastructure deficit at a time like this

    Bridging infrastructure deficit at a time like this

    In less than a month, Nigerians will elect their President. The election is coming at a time the country groans under dearth of the critical infrastructure needed to develop its economy. Fears are rife that with  consistent poor budgetary allocation to capital projects and little attention on Public Private Partnership (PPP), turning the tide will remain a mirage, writes Assistant Editor OLUKOREDE YISHAU

    The last few months have been bad for crude oil. The price has kept dropping as though forces higher than it are pushing it down. This development has created a problem for the Federal Government. Aside the fact that it has reduced what is available to government for spending; it has also made difficult the benchmark to be used for this year’s budget.

    The Senate is considering using $40 per barrel as the benchmark, though the Federal Government made a proposal in the budget estimate pending before the National Assembly for approval.  Nigeria has changed its benchmark twice in the last few weeks, from $78 to $73 and lately to $65.

    The fall in revenue, which has led to austerity measures being introduced, is comint at a time the country has been unable to rein in the oil thieves– a big drain on financial inflow.

    Significantly, in the face of this dwindling revenue, the dearth of critical infrastructure cannot be in dispute. It is a problem Nigerians contend with daily.  The poor power situation, the deplorable condition of poor the roads, and others are demons the people deal with. Users of some of the terrible roads, such as the Lagos-Abeokuta Expressway have horrendous experience navigating one bad portion or the other.

    The Lagos-Abeokuta Expressway has been awarded to the Chinese Civil Engineering Construction Company (CCECC), but the failure of the Federal Government to properly fund the project has forced the company out of site. Unfortunately, at the receiving end are commuters, who face the harrowing experience to cross the six-lane road because the pedestrian bridges that are supposed to mitigate their pains have been abandoned.

    The 27.5-kilometre Apapa-Oshodi Expressway has suffered the same fate in the last four years. The repair contracts awarded to Julius Berger and Borini Prono in 2010 have been stalled due to paucity of funds, forcing the contractors in-and-out of their apportioned sites.

    The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has proposed the Public-Private-Partnership (PPP) arrangement to the rescue.

    Speaking at a training programme organised by the African Development Bank (AfDB) in Abuja on PPP, the minister said the PPP remained the way to go.

    Her words: “To fund infrastructure, Nigerian needs about $14 billion every year out of which $10 billion should come from the federal level and currently the country’s spending on infrastructure is about $6 billion. So, there is a big gap that needs to be filled. That is why PPPs are very important to Nigeria at the moment.”

    Dr. Okonjo-Iweala added that the PPP model should be improved to ensure that “it suits the country’s needs, delivers clear benefits without leaving us with difficult problems.”

    She has an ally in the Director-General, Bureau of Public Procurement (BPP), Mr. Emeka Ezeh, who saw the PPP as vital to addressing the country’s huge infrastructural gap.

    Ezeh, who spoke at a roundtable on infrastructure delivery, said:  “We need to build strong infrastructure without any compromise for it to work. We cannot keep building and repairing the same roads over and over again.

    “For the country to progress from where it is in terms of the economy, we must put in place the right infrastructure in the transport, agriculture, technology, mining and housing sector.”

     

    The PPP question

     

    From time to time, governments at all levels have used the PPP approach to address the challenge. One of such projects is the domestic wing of the Murtala Mohammed International Airport (MM2). The facility redeveloped under the Build-Operate-Transfer (BOT) model, was recently rated as the most functional airport in the country. The Infrastructure Concession Regulatory Commission (ICRC) has described it as a legacy project.

    A project management consultant, Aderanti Dairo, said: “MMA2 is a very good example of a PPP arrangement that has worked and has shown that if the government is serious about closing the infrastructure deficit, PPP is the way to go. It has really been a resounding success, which no one can deny. PPP is sure the way to go.”

    State governments, such as Lagos, Rivers and Cross River states, have also used the PPP.  In Lagos, the Lekki-Epe Expressway was built through the PPP. The Eko Atlantic project, which is sitting on what used to be known as the Bar Beach, is being implemented through the PPP. The Lekki-Ikoyi suspended bridge was also built through PPP. A new sea port and airport around Lekki are also being worked out through a PPP arrangement.

    The Rivers State has used the PPP to carry out social facilities, such as the ClinoRiv Hospital, transportation, housing, entertainment and some other city development projects.

    A report by Brookings, a United States-based non-profit research organisation, said: “One approach frequently offered to potentially break the logjam is to use contractual agreements between governments at all levels and the private sector to design, build, operate, maintain and/or finance infrastructure.

    “Whether repairing, upgrading, or augmenting an existing asset or building new, the intent is to leverage private sector financial resources and expertise, improve project delivery and to better share responsibilities and costs between the public and private sector.”

     

    Hurdles to cross

     

    But, there are hurdles to cross for PPP to work. Experts have blamed government’s inconsistency for the slow progress of PPP in the country. Government agencies, according to them, do not respect agreements. Court orders are also not obeyed.

    The Chief Executive Officer, Cowry Asset Management, Johnson Chukwu, explained that “to incentivise the private sector to go into PPP arrangements, the government has to ensure that contract terms are respected and policies are consistently implemented.”

    He added: “The greatest disincentive to private sector involvement in PPP schemes is inconsistency of policy implementation and the lack of respect for contracts. The other source of encouragement would be in the provision of critical monopoly resource at discounted rate to the private sector partners in the PPP scheme. Such resource could include land, exclusive rights, etc.”

    A public affairs commentator, Godfrey Ekanem, said the Federal Government has not encouraged the PPP to thrive with its inconsistency.

    He said: “The way the Federal Government has carried on so far does not engender confidence. It needs to demonstrate seriousness and commitment. I was disappointed at the way the PPP on the Lagos-Ibadan Expressway was handled. The report of the ICRC shows clearly that Bi-Courtney has no fault in the delayed execution of the job. Yet, government terminated it and did nothing to mitigate its losses. This kind of development will make investors shy away from PPP deals.”

    The Lagos-Ibadan Expressway is the country’s economic artery. After last year’s termination of the deal with Bi-Courtney Highway Services Limited, which is owned by Dr. Wale Babalakin, the Federal Government awarded the 127.8 kilometre road to Julius Berger and Reynolds Construction Company (RCC). While awarding the Lagos-Ibadan road contract last year, government assured that for the over the 48-month duration for the job, its funding would be included in the annual budget.  The N5 billion allocated to the rehabilitation of the Lagos–Sagamu section of the road in last year’s budget was just a drop in the ocean. The infrastructure bank is now raising money for the project to be seen through.

    In a report presented to President Goodluck Jonathan by former Head of State, Chief Ernest Shonekan, who heads the ICRC, Bi-Courtney was exonerated of blames in the bungled Lagos-Ibadan Expressway project. The commission noted that the project’s implementation was delayed due to various issues that were not addressed, prior to the execution of the contract. The ICRC identified some of the issues as approval for the design of the road, securing the Right of Way (RoW), financial model and environmental impact and social impact assessment.

    In line with Bi-Courtney’s claim, the report said that approval for a final design was granted on May 10, 2011, two years after the concession agreement was signed.

    The report noted: “It is evident that the scope of the work was not fully documented and outline design provided before the concession was awarded.

    “Without an agreed design and scope of works based on the grantor’s performance and output standards, there cannot be an agreed fixed cost for the project.

    “Without a financial model setting out the expected project costs and revenues, financing costs cannot be determined.

    “The cost of the project as included in the concession agreement was not based on the necessary studies (e.g. traffic forecast) required for the implementation of a road project through Develop-Build-Operate-and Transfer (DBOT) model.”

    A lawyer and public affairs commentator, Obiora Akabogu, said:  “The idea of PPP is welcome in an economy like Nigeria, where the government is presently handicapped because of the falling oil prices. The private investors are the people with the money that the government can leverage on to build infrastructure for the economy to move and for the people to enjoy, but the private investors must get the assurance that they are dealing with the right partner.

    “Every investment needs an enabling environment. The condition for an ideal PPP is consistency. The government must be able to live up to expectation with its contractual partner as part of that enabling environment.

    “Also, the local court must be able to dispense justice within a reasonable time where there are disputes. There must be standard and government can’t just double deal by terminating contract anyhow without recourse to the rules guiding such contracts, otherwise PPP will not be a success. You’ll only end up scaring away your brides, the investors.”

     

    The gaping holes

     

    The Vice President (West), African Association of Quantity Surveyors (AAQS), Obafemi Onashile, in a paper he presented at a workshop organized by the Nigerian Institute of Quantity Surveyors (NIQS), said the country has fallen well behind international benchmarks in infrastructure development.

    With an estimated total road length of 193,200 kilometers (paved 65,000 km and unpaved 128,200 km) comprising 34,123 km federal roads, 30,500 km state roads, and 129,577 km local government roads, Onashile said the cost of neglect of these roads implies a loss of network value of N80 billion per year and additional operating costs of N35 billion per year.

    In 2013, former Minister of Education, Mrs. Oby Ezekwesili, sounded a note of warning on the dangers of the poor state of infrastructure. She said over the next 10 years, about $14.2 billion must be spent on infrastructure.

    Mrs Ezekwesili said: “Indirect costs borne by firms to fill infrastructure gap in Nigeria amount to 15 per cent, whereas in China, it is five per cent; India 10 per cent and in Turkey which ranks 19th in the rating for major economies in the world, it is two per cent.

    “Little wonder stakeholders refer to infrastructure as the life blood of any economy, considering that no economy can grow and develop without a reasonable stock of critical infrastructure. Therefore, this presupposes that where infrastructure is inadequate or lacking, growth is affected and people’s standard of living is negatively impacted.”

    Minister of Works, Mr. Mike Onolemenen comment corroborate the large deficit claim.

    He said: “The infrastructure deficit is large and affects every sector. Investment in the road sector alone requires at least construction of 14,000-kilometre of new roads annually for the next seven years, apart from maintaining and rehabilitating the existing network as a matter of routine, which will require the average annual expenditure on roads to increase seven fold to nearly N750 billion.”

    Onolemenmen believes government alone cannot fund this huge portfolio due to the limited financial resources, adding that government is exploring

     

    PPP to bridge the gap

     

    The Chief Executive Officer/Group Managing Director (CEO/GMD, Flour Mills Nigeria Plc, Mr. Paul Miyonmide Gbededo, told The Nation in a chat last year that basic amenities and infrastructure must be improved on.

    “We must be able to fix our power sector and the transportation sector as a whole. Our infrastructure level must be dynamic and functional to move goods around and help people create wealth. That is very important,” he said.

     

    Jonathan/ Buhari

     

    The All Progressives Congress (APC) presidential candidate, Gen. Muhammadu Buhari, last week promised to fix critical infrastructure in the country, saying that “electricity, good roads and standard education must be provided as quickly as humanly possible.”

    His Peoples Democratic Party (PDP) candidate, Jonathan, has also promised to fix the deficit.

    Whichever way the pendulum swings, analysts believe the PPP question cannot be wished away and that when it is being done, government agencies must learn to keep to agreements.